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Bitcoin and its analogous cryptocurrencies quickly became a worldwide phenomenon. The companies and individuals all around the world started incorporating it in their services. For instance, in many gambling establishments, where you can play casino online for real money and Bitcoin, are already dominating the industry and pushing the boundaries of innovation in the entertainment business.
Not everyone was happy about them: the governments all around the world started to tackle this new technology by putting it under their regulatory restrictions. In terms of when they initiated their process, there are pioneers like China and its despotic crypto regulations, and there are the lead-followers like Denmark that are just coming up on stage.
According to recent reports, the country’s main tax agency, Skattestyrelsen (Skat), sent out thousands of letters to the crypto traders, requesting comprehensive information about their crypto trading experiences and wallet credentials. In these letters, the tax agency asks the individuals to disclose information about their crypto profits and losses in the 2016-2018 period, in accordance with the principles of FIFO (First In First Out), implying a valuation method that assumes that all products are sold or used in the chronological order in which consumers bought them.
Denmark showing interest in crypto taxation
Denmark has rejuvenated its interest in cryptocurrencies in recent years. Last year, for instance, the same agency, Skat, initiated an identification process of more than 2700 individuals with crypto trading or exchange backgrounds. The agency intended to contact each person in order to determine their payment obligations:
“If something does not match, we will contact them and ask for more information. However, how many people it is and what it may mean, it is still too early to say.”
In January 2019, Skat received full authorization from Denmark’s Tax Council to acquire any information from the Danish citizens that it deemed necessary. As its activities grew in scale, Skat turned its attention to the country’s legislation, stating that it needed further additions about cryptocurrencies and their use in Denmark. More specifically, it wanted and still wants to broaden the tax treatment for various financial activities, including crypto exchanges.
Does Skat refer to the tax services in other countries?
As some analysts suggest, Denmark and its main tax agency are following the US’s lead. Some four months ago, the Internal Revenue Service (IRS) started sending out tens of thousands of letters to the US crypto investors, demanding their cooperation in clarifying tax declaration requirements and whatnot. Some investors were even compelled to pay back their due taxes and/or fines.
As Skat followed the IRS’s lead, the agency required crypto investors to provide detailed information about their: 2016-2018 fiscal year revenues, profits, and losses, the rates at which their every transaction was executed, the purpose behind their acquisition of cryptocurrencies, as well as some of the basic credentials of their crypto wallets.
The last clause is particularly interesting because it messes with customer privacy and anonymity. While the agency only requires a screenshot of the page where the user’s name and an agreement with the crypto exchange are showcased, it’s still concerning to many Danish users. Not only that, Skat even requires the individuals to provide the financial statements from their bank accounts, to see if there’s anything wrong with their regular financial background.
With this move towards regulating and taxing crypto exchanges, Denmark is moving towards the countries that have taken a stricter approach towards digital currencies. And while the country cannot be directly compared with China and its “draconic laws”, there’s a certain red line beyond which Denmark has to back off and let the market do its job.
Image courtesy of Sktst.dk
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