Taxation of Cryptocoins

Nicolai Damtoft & Nicolaj Einbor

Student thesis: Master thesis


During the last couple of years, the Cryptocoin market has experienced momentous growth which has resulted in several individuals achieving significant profits or losses. As a result of this, a legal problem has now arisen regarding how profits and losses from Cryptocoins should be taxed in accordance with Danish tax law. The purpose of this paper is to contribute to the understanding of the taxation of certain Cryptocoins by examining which laws and regulations are applicable and their consequences. The primary conclusion of the thesis is that Cryptocoins such as Bitcoins, are to be taxed in accordance with the Danish “Statsskatteloven”. However, some types of transactions, such as margin trades, are to be encompassed by the capital gains laws. Bitcoins are created by mining. The legal consequences thereof, in relation to the Danish tax laws, depend on whether the activity is classified as part of a professional business or as a hobby. It is concluded that mining, in most instances, must be characterized as a hobby due to the costs most likely exceeding the potential gains. If the owner loses access to his acquired Bitcoin, the Coin is gone and cannot be recovered. No deductions can be made if the owner is classified as a speculator in relation to trading Bitcoins. However, if he was trading Bitcoins for a living, deductions for losses related to the daily operations could be applicable. The profit and loss statement can be created using the asset-for-asset-principle in those instances where the individual asset can be identified. If this is not possible, the FIFO-principle can be used. This thesis contributes to the current material on the subject by illustrating exactly when tax payers are included by certain regulations and the consequences thereof. The current, information from the tax council often contains prerequisites or argumentation, which simplify the legal problems and the solutions hereof. Therefore, the conclusion from the tax council and their prerequisites are examined, and examples of when they are not applicable are made in order to contribute with new information on how Cryptocoins are taxed.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2019
Number of pages127
SupervisorsLouise Fjord Kjærsgaard