Denmark is evaluating a new approach to cryptocurrency taxation that could significantly impact investors holding digital assets like Bitcoin. The Danish Tax Law Council recently recommended a tax bill that would impose a capital gains tax on unrealized crypto profits, which could come into effect as early as 2026. This move aligns Denmark’s approach to crypto with its traditional asset taxation, aiming to simplify the tax system and increase equity among asset holders.
Key Proposals: Tax Models on Unrealized Gains
The Council’s 93-page report outlines three main taxation models:
- Capital Gains Tax – A 42% levy on unrealized gains for crypto assets, mirroring the taxation of traditional investments.
- Inventory Taxation – Annual tax requirements on an entire portfolio, regardless of asset sales.
- Loss Write-Offs – Provision to offset gains with losses, similar to traditional assets, potentially softening the tax impact for investors.
Implications for Investors
If approved, the bill would require Danish investors to pay taxes on the value of crypto holdings from the purchase date, taxing unrealized gains annually. This means crypto holders could face tax liabilities even if they haven’t sold their assets, potentially causing cash flow challenges.
The proposal draws inspiration from recent European tax trends, such as Italy’s increase in capital gains tax from 26% to 42% on crypto assets, signaling a wider push in the EU toward comprehensive digital asset regulation.
Transparency and Reporting Requirements
To ensure transparency, the bill would compel crypto exchanges and service providers to report customer transactions, a provision aimed at reducing crypto tax evasion. This requirement aligns with Denmark’s broader goals of increasing tax accountability and compliance in the sector, as well as sharing data with other EU member states.
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Motivations and Potential Impact
Denmark’s tax minister, Rasmus Stoklund, noted that the proposal seeks “more reasonable taxation” for crypto assets, responding to the growing number of Danish crypto investors. The bill would represent a fundamental shift in the Danish tax landscape, aligning it closer with conventional asset taxation and potentially reducing crypto market volatility by stabilizing regulatory expectations.
With this proposal, Denmark is making a strong move toward increased crypto regulation, which could set the stage for further changes across the EU.
