Denmark’s Tax Council is proposing a new regulation to tax its resident’s unrealized gains and losses on cryptocurrencies. With the proposal, all taxes on digital assets will be unified in a streamlined process.
According to reports, the tax, which is about 42%, will apply to all crypto holders regardless of their activities with the assets. This means that Denmark residents will pay the tax whether they sell their digital assets or not. The regulation is one of the few recommended by the Council.
In the report, the tax council discussed three methods that will be used to tax digital assets. The council, headed by the Minister of Taxation Rasmus Stokland highlighted methods like capital gains tax, warehouse tax, and inventory tax.
In his statement, Stokland noted that crypto users are currently at a disadvantage with the current crypto gains tax. He clarified that there have been several instances in which they have been taxed unfairly. Therefore, he believes that a new crypto tax regulation will fix the issue.
The report discussed the three methods mentioned but seems the Council is tilting towards the inventory tax. This means that all the assets held by residents will be treated under one entity and taxed every year. With this, digital assets and other traditional assets will be unified under the taxation approach.
Denmark’s new regulation billed for 2026
The proposed bill is set to be introduced to the Danish parliament next year, with the Minister confirming plans to submit it. However, the Council noted that the bill might kick into effect by 2026.
The new bill has generated quite a noise from crypto participants in the country, but it has not yet been stamped into law. The parliament will deliberate on the regulation, making necessary adjustments before a potential approval. Meanwhile, the rate is expected to remain the only constant considering it is the same for the present capital gains tax.
Aside from the taxation aspect, the bill is expected to enforce transaction reporting on the part of crypto service providers. This way, they will be mandated to report their user’s transactions to the European Union upon request. The rule is integral to help them obey the European Union’s Markets in Crypto-Assets (MiCA) law.
It is still unknown if the law will cover retrospectively existing crypto holdings, although speculations are pointing in that direction. A retrospective law could cause issues for long-term holders because they will have to pay tax for their assets over time.
For instance, a person who has held Bitcoin since 2019 will be required to pay 42% of the increase in the price of the asset from that year until now.
Impact of the regulation on crypto holders
The crypto community has said a lot about the new regulation since it was announced. A consensus is that governments of different countries are trying to control the crypto industry through regulations.
In context, Italy has been looking at plans to increase its unrealized crypto gains tax to 42%. United States presidential candidate Kamala Harris has also discussed the likelihood of a 25% tax on unrealized crypto gains.
Looking at the recent anti-bitcoin papers released by researchers backed by different governments, their concerns are valid. Researchers have urged governments to ban or tax crypto, noting reseasons surrounding wealth distribution and helping governments maintain primary deficits.
Nevertheless, many people believe the regulation’s implementation might be a challenge that will stop it from passing. A tax on unrealized crypto gains will also force traders to sell their assets to avoid paying the taxes.