Guide to declaring crypto taxes in Denmark (2022)

This article aims to serve as a complete guide on calculating and paying taxes on cryptocurrency (for example, Bitcoin and Ethereum) for individuals in Denmark. Whether it’s your first time declaring taxes on cryptocurrencies or you are an experienced crypto evangelist, you should find this guide useful. In this guide, we will be covering:

• Important Dates

• How cryptocurrencies are taxed

• Detailed information about different transaction types

• How to submit your tax report to Skat.dk

This guide will be updated and maintained regularly to account for changes made by the local tax authority (Skattestyrelsen) and for new types of transactions. If you find any errors or outdated information, it is greatly appreciated that you let us know by sending an email to [email protected] or via our support chat at the bottom right corner of our website.

Any tax-related information provided by us is not tax advice, financial advice, accounting advice or legal advice and cannot be used by you or any other party for the purpose of avoiding tax penalties. You should seek the advice of a tax professional regarding your particular circumstances. We make no claims, promises, or warranties about the accuracy of the information provided herein. Everything included herein is our opinion and not a statement of fact.

Important dates 2022

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Mid-March 2022 - Starting in mid-march, you can access and update your tax information via E-tax.

1 May 2022 - The deadline for updating and submitting your tax return if you are subject to full or limited tax liability.

1 July 2022 - The deadline for updating and submitting your tax return for any Non-danish income. Failure to adhere to the deadline can result in a daily fine of DKK 200.

November 2022 - You will receive a preliminary income assessment for the following year, available via E-tax. The tax year runs from 1 January to 31 December.

How cryptocurrencies are taxed in Denmark

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In Denmark, cryptocurrencies are subject to income tax. Any gains or losses on cryptocurrencies must be reported. Any income sources such as airdrops, and mining are also subject to income tax. After accounting for your tax-free amount and labor market contributions you’ll have to pay a bottom-bracket tax of %12.10 and municipal tax of ~25%. For income over DKK 552,500, you pay an additional 15% tax.

An increase in the value of an asset is not taxed in Denmark unless it is part of an individual’s business or is owned for speculative purposes. In general cryptocurrency, holdings are seen as speculative assets and so the profits and losses are taxable. It is generally sufficient that the intention of speculation was not insignificant at the time of acquisition. If you are unsure whether you own crypto for speculative reasons the Danish tax agency can make an overall assessment for you considering details such as the following:

• What cryptocurrency did you buy?

• What can it be used for?

• Is the cryptocurrency suited for speculation?

• Is it possible to sell the cryptocurrency at a profit?

• Are you the owner of the cryptocurrency?

Even if the original intention was not to hold a cryptocurrency for speculative purposes this does not preclude the profit motive of the asset. See for example SKM2021.569.SR regarding purchasing Dogecoin for the humorous elements involved.

If you are still unsure if you’ve purchased cryptocurrency for speculative intent you can have an assessment made for you here.

Income Tax

If you have earned crypto for some form of work or effort, you need to pay typical income taxes, just as you would have if you were paid in your local currency. You’ll be liable for tax on your salary and other income, including interest income.

You also need to pay income taxes on any profits or losses incurred when you sell them. The cost basis, in this case, would be equivalent to the value at the time you received the tokens.

You may have to take into account multiple types of income tax. Income taxes are generally applied to your income after your tax-free amount and labor market contributions (LMC) of 8% tax rate have been deducted. Your personal allowance will depend on your situation but starts at DKK 46,700 for adults. You will have to pay state taxes on your income in the form of bottom-bracket tax and potentially top-bracket tax. You will also be subject to a municipal tax. Notably, most crypto income will not be taxed for the 8% labor market contribution unless it comes from income received from work, as discussed further below.

Bottom-Bracket Tax

Bottom-bracket tax is payable by anyone with an income. Bottom-bracket tax is levied on what is referred to as your personal income, including positive net income from capital. In 2022 this tax rate is 12.10%. Bottom-bracket tax is levied after an 8% labor market contribution, and your personal allowance are accounted for.

Top-Bracket Tax

Top-bracket tax is a 15% tax on income over DKK 552,500 in 2022 (DKK 544,800 in 2021) after labor market contributions.

Municipal Tax

Municipal tax varies based on your municipality, but the average municipal tax rate in 2021 was 25%.

Tax Ceiling

The sum of your bottom-bracket tax, top-bracket tax, and municipal taxes cannot exceed 52.06% of your income. Take into account that this does not include church tax or labor market contributions.

So, for example, if you have an income of DKK 600,543, then you pay labor market contributions of 8% on this amount, leaving you with DKK 552,500. From this, you would subtract your personal allowance of DKK 46,700 before calculating applicable taxes. The table below shows your tax rate after applying the labor market contributions.

Income after LMC (DKK)	Tax Rate Without LMC	Effective Tax Rate Without LMC	Effective Tax Rate Including LMC
0-46700	0%	0%	8%
46700-552500	37.1%, Lower Bracket Tax(12.1%)+Municipal Tax (~25%)	~0%-31.2%	~8%-39.2%
552500+	52.1%, Lower Bracket Tax (12.1%)+Top Bracket Tax (15%)+Municipal Tax (~25%)	~31.2%-52.06%	39.2%+

Calculations are done based on a 25% municipal tax.

Reporting Profits and Losses Using FIFO and Handling Exceptions

To report profits and losses on cryptocurrency transactions, you should use the FIFO (First-in-First-Out) method for calculating the cost basis. The FIFO method implies that the first coin sold is the first coin bought. This allows you to determine your profits and losses for each trade individually. You must then report your gains for each transaction in Box 20 and losses in Box 58. Divly can use the FIFO method for all of your transactions.

Example Say Jenny buys 1 Bitcoin for DKK 300,000 and then another Bitcoin for DKK 330,000. She proceeds to sell half a Bitcoin for DKK 170,000. She uses the selling price minus the acquisition cost to calculate her profit or loss. The cost basis she uses is DKK 150,000 because this corresponds to the acquisition price of the first Bitcoin bought. Therefore, she has made a profit of DKK 20,000, which she reports in Box 20.

It is important to note that you should not calculate the net gains or losses on sales from cryptocurrencies bought in multiple transactions. Instead, you should report the gain or loss on each sale separately. However, there is an exception. If you bought one coin and sold it over multiple transactions, you may calculate those sales' net gain or loss. This is because you can determine exactly which coin you are selling and its cost basis.

Example Say Michael buys one Bitcoin for DKK 300,000. He sells this bitcoin over two transactions. On his first sale, he makes a profit of DKK 20,000, and on the second sale, he loses DKK 10,000. Then he may calculate the net gain to be DKK 10,000 and can enter this profit in Box 20 on his tax return. If instead, he made a loss, he should report this in Box 58.

If you purchase another of the same cryptocurrency in between your sales transactions, it becomes unclear which cryptocurrency coins you are selling. In this case, you may no longer calculate future transactions' net gains or losses. You must revert to using the FIFO method.

Please keep in mind that if you are using Divly's services, Divly does not currently group gains/losses in this way. Divly will still provide you with the Box 20 and Box 58 figures but will use the FIFO method exclusively.

Additionally, you should not calculate the net profit between different cryptocurrencies' transactions. For example, if you have a gain on Ethereum and a loss on Bitcoin, you must record each transaction's gain or loss separately.

Losses can result in a tax deduction of 30%, while profits are taxed based on your personal income. Consequently, it may be possible to pay more taxes than you've earned in profits.

Example Say Michael has made a profit of DKK 1000 on an Ethereum trade and a loss of DK 900 on an Ethereum trade. Therefore he has made a profit of DKK 100. His gains are taxed at his income tax rate of 50%. Thus, Michael pays a tax of DKK 500 on his gains. He can deduct 30% of his losses of DKK 900, which amounts to DKK 270. Therefore he pays a DKK 230 tax on a profit of DKK 100.

Detailed information on different transaction types

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Certain transactions trigger the taxation rules differently. Below is a master list for your reference. We will go through each in detail in this guide. Each transaction has an associated tax classification and the corresponding label in Divly for those using our service to automate their tax reporting.

Transaction Type	Tax Classification	Divly Label
Buy crypto	None	Buy
Sell crypto	Income Tax	Sell
Trade crypto for crypto	Income Tax	Traded crypto
Initial Coin Offering (ICO)	Income Tax	Traded crypto
Purchase goods & services with crypto	Income Tax	Goods/Services
Pay trading fee with crypto	Income Tax	*Fee Included in Trade
Pay transfer fee with crypto	Income Tax	*Fee Included in Transfer
Transfer crypto between your own wallets	None*	Transfer
Lost or stolen crypto	None	Lost/Stolen
Give crypto as a gift	Gift Tax*	Gifted Away
Receive crypto as a gift	Income Tax*	Received Gift
Donate crypto	None	Donation
Airdrop	Income Tax	Airdrop
Hard Fork	None	Fork
Mining	Income Tax	Mining
Staking	Income Tax	Staking Reward
Income (e.g. freelancing, salary)	Income Tax	Income
Lend out Crypto	Income Tax	Interest Received
Borrowing Crypto	Income Tax	Interest Paid
Reward (e.g. referral)	Income Tax	Reward
Margin Trading	Income Tax*	Realized Profit/Loss
Futures / Derivatives Trading	Income Tax*	Realized Profit/Loss

Buy Crypto / Buy Crypto with Fiat

There are no taxes involved when buying crypto. However, you need to ensure that you keep track of the price you paid for it for your cost basis calculation. If you purchased the crypto in a foreign currency (e.g., USD or EUR), make sure to convert it to the value in local currency on that day.

You can add the trading fee to the cost basis when buying crypto. Doing this will help reduce your taxes. For example, if you purchase 1 ETH for DKK 10,000 and pay a trading fee of DKK 100. Your cost basis for 1 ETH is DKK 10,000 + DKK 100 = DKK 10,100.

Sell Crypto / Sell Crypto for Fiat

Selling cryptocurrency will always require you to declare your profits and losses. Once again, it’s essential to calculate the selling price in local currency at the time of sale.

You can subtract the trading fee from the sale price when selling crypto. Doing this will help reduce your taxes again. Let’s continue with the previous example from above, where we now sell 1 ETH for DKK 20,000 and pay a trading fee of 300 DKK. The profit for 1 ETH is 20,000 - 10,100 - 300 = DKK 9,600 . If you are using Divly, all the fees are automated in the calculations.

Trade Crypto for Crypto

In Denmark, trading crypto for crypto is a personal income tax event. You must pay tax on the cryptocurrency you sold. The sale is valued as the market price of the cryptocurrency you traded for in your local currency. For example, if you sold 1 BTC for 10 ETH, then the selling price is the value of 10 ETH in DKK.

Finally, you need to account for the cost basis of the Ethereum that you purchased. This is the same as the value above, 10 ETH in DKK.

Initial Coin Offering (ICO)

An ICO is when you invest your crypto (usually Ethereum) in a new project that, in turn, provides you a token that represents that project.

According to SKM2021.291.SR, ICOs must be considered assets and taxed according to the State Tax Act. By The State Tax Act, speculative assets are taxed as income. In our opinion, this implies that you have to declare your gains and losses on ICO investments. Therefore, your gains are taxed as income, not subject to labor market contributions, and your losses are deductible. From a taxation point of view, it functions the same as a crypto to crypto trade. Essentially, you send cryptocurrency in exchange for a token from a new project.

You follow the same principle where you sell your crypto for the value of the ICO token in local currency.

Purchase Goods & Services with Crypto

When you purchase a good (e.g., new computer, amazon gift card) or pay for a service online (e.g., VPN service), you must pay income tax on the crypto you spent. This works the same as selling crypto for fiat. The selling price is the good or service costs in your local currency.

Pay Trading Fees in Crypto

Typically, when you trade crypto for crypto, the trading fee will be in crypto on some exchanges. In these cases, you need to convert the crypto you used to pay for the trading fee into your local currency and then pay income tax on it.

Trading fees also contribute to the cost basis for the purchased cryptocurrency.

Pay Transfer Fees in Crypto

When you pay transfer fees in crypto, you have to pay income tax on the crypto used to pay the fees.

Transfer Crypto Between Your Own Wallets

Transferring crypto between your wallets is not a taxable event (this includes sending crypto to your account on an exchange). You must track these transfers properly to avoid paying unnecessary taxes!

Lost or Stolen Crypto

Suppose you lose access to your crypto wallets. In that case, this does not allow for a tax deduction, according to the Danish Tax Authority’s ruling in SKM2018.104.SR. Having lost access to the wallet key does not imply a loss of ownership over the asset, so it is not tax-deductible. It may, however, be possible to deduct a loss on stolen crypto. You can apply for a binding assessment here if you want clarification or believe that your situation is different.

Give Crypto as a Gift / Receive Crypto as a Gift

There is a precedent that a crypto gift can be completely tax-free as in SKM2019.78.SR where the gift was considered non-speculative and of low value. However, in many situations, you will have to end up paying taxes on your gifts.

Gifts can be tax-free up to a value of DKK 69,500 for 2022 or DKK 68,700 for 2021 to the following persons

• Offspring, stepchildren and their offspring

• Parents

• The surviving spouse of the deceased child or stepchild

• Foster children who have lived with the gifter for 5+ years

• Stepparents & grandchildren

• Persons who have been jointly resident with the donor for the last 2 years prior to receipt of the gift.

The tax-free amount for gifts to daughters-in-law and sons-in-law is DKK 24,000 (2022) or DKK 23500 (2021).

You have to pay 15% in tax for any value above this amount. For gifts of that value, the donor and recipient must submit a notification of the gift and its taxable value to the customs and tax administration no later than 1 May of the following year. The value of the gift is determined by its market value when the recipient receives the gift.

Ordinary gifts that you receive of modest value from people not on the list above can be tax-free for special occasions such as Christmas or birthdays. There are no precise rules for what constitutes a modest value, however. But if the value is greater than generally acceptable, you must fill in the value of your gift in box 20 (field 250 on the advance statement). If you are unsure about your situation, you should contact the Danish Tax Authority. Their number is located in the How to submit your tax report to Skat.dk section below.

You can read more about the gift tax here. There you can calculate exactly how much gift tax you owe. You will also find a digital form that you should use when paying gift taxes.

Donate Crypto

You can get a tax deduction for donations to a Danish Tax Agency approved charity. You can deduct maximally DKK 17,200 in 2022 and DKK 17,000 in 2021. The deduction is 26%.

The approved association must report your gift to the Danish Tax Agency. So make sure to provide them with your civil registration number (cpr-nr). You should then automatically receive a deduction.

Airdrop

There are no concrete regulations on airdrops at the moment. Until the Danish Tax Authority publishes more information or rulings on airdrops, we can only make assumptions regarding the characteristics of airdrops and how they relate to taxation. An airdrop is typically considered as a gift from the token holder or blockchain. Airdrops are usually a very small or negligible amount. Usually, these are given as a promotional tool for new currencies. Promotional gifts are liable for income taxes if their value is not negligible. However, there is no clear information on when the value is negligible.

Hardfork

A hard fork is typically considered as a gift from the new blockchain fork. In a previous ruling on the disposal of cryptocurrencies, the Danish Tax Authority also covered hard forks. They concluded that taxes only had to be paid upon disposal of the asset. You should use DKK 0 as the cost basis.

Mining

The Tax Council found that activity relating to the mining of bitcoins constituted a hobby business and that the remuneration for ceded mined bitcoins should be included as business income in the hobby business (hobbyvirksomhed).

You need to declare profits from non-commercial businesses in box 20 in your tax assessment notice. Under other personal income.

Staking

Skattestyrelsen has recently provided information on taxes for staking. There has been some confusion previously regarding whether you tax staking right away or only when you sell your crypto. Skat has finally published guidelines for staking and airdrops.

In Denmark you will be taxed twice on your staking. You will be taxed once when you receive the staked income. You have to convert this value to DKK at the time you receive it. Once you sell the crypto you received through staking you will have to pay taxes on any gains you've made.

Lending Your Crypto

(This section will be updated shortly with new guidelines. Generally interest received will have to be declared in Box 20)

Although there are no regulations specifically regarding crypto lending, we can look to general regulations regarding lending for guidance. If a guaranteed interest rate is set out before entering a lending agreement, this return constitutes interest income.

For individuals, nterest income is generally taxed as capital income (kapitalindkomst). Although there are no specific rules regarding crypto lending, we believe that box 31 should be used to declare your interest revenue.

Borrowing Crypto

Although there are no regulations specifically regarding borrowing crypto, we can look at general regulations regarding borrowing. In certain situations, you can deduct interest expenses. For interest expenses to be deductible, a loan agreement must contain both a legally binding obligation to pay the debt and interest on the debt. Interest expense cannot be deducted in the following situations.

• Interest on taxes, fees, loans for property taxes

• Loans against security in life insurance policies

• Debt to living heirs, etc., which is a gift or inheritance

Rewards

Think, for example, of sharing a post or referring a friend to a service. Any crypto you receive for these actions is subject to income tax. You need to report the value of the reward in DKK at the time you acquired the reward. You need to state the value in Box 20 of your annual statement (field 250 of the advance statement).

Gambling winnings may also be taxed in Box 20. This is the case if you win in a game or lottery that is not approved by the Danish government.

Income From Other Activities (e.g. freelancing, salary)

Freelancing work should primarily be placed on your b-kort. This is the card used for secondary income sources. To calculate your taxes from the b-kort, first deduct 8% for labor market contributions. Then multiply the remaining amount by your withholding rate. You can find your withholding rate on your preliminary income assessment. This remaining amount in addition to the 8% labor market contributions is the tax you’ll have to pay. If your B-income is fixed, you can fill it into Box 210 of your preliminary income assessment. If, instead, it is a small amount or a lump sum, the easiest way to pay taxes over it is to fill in the form here.

Margin trading, Futures, and Derivatives trading

In the decision SKM2018.130.SR about speculative trades and margin trading of cryptocurrencies, the Danish Tax Authority ruled that margin trading must be regarded as futures contracts entered into for speculative purposes. Such contracts are covered by section 29 (1) of the Capital Gains Act. 1.

Therefore, gains on financial contracts must be included under taxable income—namely, capital income in the Personal Income Tax Act § 4.

Following this, gains and losses are taxed separately for each contract, so for each margin trade. However, with these financial contracts, the gains and losses are calculated on a rolling basis. Therefore, regardless of if you realize the gain or loss by the end of the income year, you still must report the gain or loss on the contract. The gain or loss is the difference between the contract’s value at the end of the income year relative to its value at the beginning of the income year.

Suppose the contract was entered during the income year. In that case, gains and losses are calculated as the difference between the contract’s value at the end of the income year relative to the acquisition price.

How to submit your tax report to Skat.dk

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Once all the tax calculations are done and Skat.dk’s tax portal is open, it is time to declare your taxes before the deadline in May. You can submit your taxes online or by mail. We will primarily focus on the online portal in this guide. Should you have any questions you can always call Skat.dk for free at (+45) 72 22 27 95 during working hours.

E-TAX

The online E-Tax portal will open up with your tax assessment notice in March. Here you can see how much taxes the state has determined you should pay. If you need to update any information, you can do so before 1 May. If you need to change information after 1 May, you need to contact Skat.dk and explain why you need it reopened.

Please note that the tax assessment is only available in Danish. However, translations for limited tax liability and full tax liability assessments can be found here and here.

There are a couple of things you need before you can access the E-tax Portal

• Civil Registration Number

• E-tax Password

You can find your E-tax password on the top right of your tax return

Then go to www.skat.dk/tastselv and click Adgang med TastSelv-kode (Access with TastSelv-code).

Then fill in your civil registration number and E-tax password, and click fortsæt.

If this is your first time logging in you will be asked to change the password. You must fill in your new password twice and then click fortsæt. If you want to update any information in your tax assessment you can click on Ændre årsopgørelsen (change your annual statement).

Here you will have the opportunity to fill in any information you need.

For cryptocurrencies, you can enter your profits in Box 20 of your tax assessment notice and your loss in box 58 of your tax assessment notice, respectively. Box 20 is for Other personal income not subject to labor market contributions; Box 58 is for Other employment-related expenses.

There is no limit to how often you can update your tax information as long as you get it done before 1 May.