March 2019
The sale of virtual currencies should be taxed as capital gains and losses on sales also become tax deductible
The Finnish Supreme Administrative Court (SAC) issued a decision on 29th of March 2019 according to which provisions on the taxation of profits from the sales of assets are applied to the trading virtual currencies with official currencies (e.g. with euros).
The SAC decision changes the current tax practice that was also outlined in the Tax Administration's guidelines and, according to which, trading in virtual currencies is based on an agreement between the seller and the buyer. Thus, the Finnish Income Tax Act's provisions regulating the taxation of profits from the sales of assets have not been applied to the realized increase in the value of virtual currencies. As a result of this, the so-called deemed acquisition cost, which is 20% for assets held for less than 10 years and 40% for assets held for 10 years or longer, has not been applied in the tax practice to trading in virtual currencies. Any decreases in value in connection of trading virtual currencies have either not been treated as a tax deductible loss.
In the SAC case a private individual planned to sell ether virtual currency in exchange for euros or US dollars. The Central Tax Board initially stipulated in its ruling, valid for the period 1st of January 2017 - 31st of December 2017, that the profit should be deemed as other capital income, not profit from the sale of property. However, the SAC overruled the Central Tax Board's decision and found that virtual currency is the kind of property that would have been classified as taxable property under the interpretation of the Property Tax Act. Therefore, it should not be excluded from the concept of property as determined in the Income Tax Act. Likewise, any profit received for trading ether virtual currency in exchange for euros or US dollars should be regulated by the Income Tax Act's provisions on the taxation of profits from the sales of assets.
The SAC decision changes the current tax practice that was also outlined in the Tax Administration's guidelines and, according to which, trading in virtual currencies is based on an agreement between the seller and the buyer. Thus, the Finnish Income Tax Act's provisions regulating the taxation of profits from the sales of assets have not been applied to the realized increase in the value of virtual currencies. As a result of this, the so-called deemed acquisition cost, which is 20% for assets held for less than 10 years and 40% for assets held for 10 years or longer, has not been applied in the tax practice to trading in virtual currencies. Any decreases in value in connection of trading virtual currencies have either not been treated as a tax deductible loss.
In the SAC case a private individual planned to sell ether virtual currency in exchange for euros or US dollars. The Central Tax Board initially stipulated in its ruling, valid for the period 1st of January 2017 - 31st of December 2017, that the profit should be deemed as other capital income, not profit from the sale of property. However, the SAC overruled the Central Tax Board's decision and found that virtual currency is the kind of property that would have been classified as taxable property under the interpretation of the Property Tax Act. Therefore, it should not be excluded from the concept of property as determined in the Income Tax Act. Likewise, any profit received for trading ether virtual currency in exchange for euros or US dollars should be regulated by the Income Tax Act's provisions on the taxation of profits from the sales of assets.
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The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
