The new system would tax cryptocurrency holders annually based on their holdings’ market value, regardless of whether the assets are sold, starting from 2026.
Denmark is poised to implement a 42% tax on unrealized cryptocurrency gains, with a legislative proposal expected to be introduced at the start of 2025. The Danish Tax Law Council recommended this approach in a recent report, indicating a major change in how the nation handles digital assets within its taxation framework.
During a Wednesday briefing, the Council clarified the proposal seeks to address existing disparities in taxing crypto asset gains and losses. Consequently, under the new system, cryptocurrency holders would be taxed annually according to their holdings’ market value, irrespective of asset sales. Moreover, the mark-to-market approach extends to all digital currencies obtained since Bitcoin’s launch in January 2009.
New Crypto Tax Rules Deferred to 2026
The Tax Law Council has acknowledged the difficulty of taxing digital assets, which typically lack oversight from central authorities such as governments or central banks. In response, they suggest that new taxation guidelines should only be implemented starting January 1, 2026.
This postponement will provide both investors and the market enough time to adapt to the upcoming rules, which will require crypto service providers to report client transactions. Denmark’s approach seeks to improve transparency and boost compliance among the estimated 300,000 crypto investors in the country.
Mads Eberhardt, a senior crypto analyst at Steno Research, voiced his concerns on X, calling the policy a “war on crypto”. He argued that imposing taxes on unrealized gains at such high levels is an aggressive and unprecedented approach, likely to have serious consequences for all digital currency holders, including early adopters.
BREAKING: Denmark becomes the first country in the world to tax unrealized capital gains on crypto, starting January 1, 2026. The tax on unrealized capital gains is 42%.
— Mads Eberhardt (@MadsEberhardt) October 23, 2024
This will affect not only crypto acquired from that date but also crypto obtained as far back as the genesis…
In a related development, Italy has announced an increase in its cryptocurrency capital gains tax, raising it from 26% to 42%. This move aligns with a broader European effort to create more effective taxation systems for digital assets, which have often been linked to tax evasion and regulatory challenges.
Denmark’s 2027 Crypto Tax Reforms
In addition to adjusting the taxation framework, Denmark plans to start exchanging information on crypto investors with international bodies starting in 2027. This initiative will further Denmark’s efforts to clamp down on tax evasion and ensure a fair taxation environment.
Furthermore, the proposed legislation will allow investors to offset losses from one cryptocurrency against the gains of another, including gains from financial contracts. This adjustment seeks to correct what the Tax Law Council describes as a “heavy asymmetry” in the current tax system that overly burdens investors with taxes on gains.
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