Denmark Declares Bitcoin Trades are Tax-Free

It seems like the United States is not the only country making important decisions about bitcoin in the middle of its tax season.

Shortly after the US Internal Revenue Service (IRS) declared that it would treat digital currencies as property for tax purposes, the Tax Board in Denmark has ruled that gains and losses from casual bitcoin trading are not subject to taxation.

Politiken

reports that Denmark's top tax authority met today to discuss digital currencies and how to approach their taxation, and the Tax Board concluded that any gains made from bitcoin trading are exempt from being taxed by the Danish government, and similarly any losses from trading are not deductible.

A long-awaited decision

The Danish government has been under pressure to decide the fate of digital currency taxation for months, according to Michael Popp-Madsen, a member of Denmark's bitcoin community.

The increasing popularity of bitcoin and other digital currencies combined with uncertainty about their tax status in Denmark has brought a lot of attention on the Tax Board to decide one way or another whether bitcoin will be taxed.

Said Popp-Madsen:

"They have postponed this decision since December and were originally supposed to come to a conclusion in January. Today is the first time they have made a decision, and I think that's a sign that the Tax Board was unsure how to approach bitcoin."

Popp-Madsen says that he ultimately thinks the Tax Board made the best decision, and that it may have had a hard time trying to tax digital currencies anyway, given their cryptographic nature.

Bitcoin transactions considered "purely private"

Part of the reasoning behind the Tax Board's decision to keep bitcoin gains and losses exempt from taxation is that since digital currencies don't exist in a physical form, they can't be considered "real" money to be taxed by the government.

Hanne Søgaard Hansen, the chairman of the Tax Board, explained the organisation's decision:

"We see the outcome of bitcoin transactions as a result of something purely private. Therefore, any gains on bitcoin are tax-exempt, and losses are not deductible."

The exception to this new ruling is for businesses whose primary focus is in digital currencies. Businesses who directly trade with bitcoin as their primary function must declare their winnings and losses to the government.

Community reaction

Denmark's decision to make bitcoin winnings tax exempt (and losses non-deductible) strikes a contrast against the US's decision to classify bitcoin as property for tax purposes.

Members of the bitcoin community quickly voiced their opinions on reddit, comparing the decisions made today by the US and Danish governments:

As more countries around the world start to take notice of digital currencies, different regulatory approaches are being seen.

While governments may disagree about how much regulation is necessary, one government official in Japan recently called for an international effort in approaching bitcoin regulation.

Christiansborg Palace image via Shutterstock.