In Denmark, there are no specific rules for taxation of trading with Bitcoin, other cryptocurrencies, and crypto-assets.

Therefore, trades are taxed according to the general rules in the State Taxation Act on speculation in trading with assets (spot trades) or the rules in the Capital Gains Tax Act on financial contracts (trades with financial contracts such as futures, shorts, and other leveraged trades).

However, the Danish Council on Taxation is working on a series of recommendations for the taxation of crypto. These recommendations are expected to be translated into special rules for the taxation of crypto in 2024 or later.

Until then, the rules described here apply.

It is, in our opinion, inappropriate, especially for spot trades, to be taxed asymmetrically – with much higher taxation of gains than deductions for losses. Hopefully, this will change when we get new rules in this area.

Common spot trades, where you buy or sell cryptocurrency with speculation in mind, are taxed according to the State Taxation Act. Note that this is the case when selling crypto both for fiat currency and for other crypto. The question of speculative intent is described further in section 10 below.

Profits from such spot trades must be declared as part of your personal income (box 20 on your annual statement in 2023/2024). The tax rate depends on your other income but is taxed at up to approximately 53% (if you pay top-bracket tax).

Losses from spot trades must be declared as a tax deduction for common expenses (box 58 on your annual statement in 2023/2024). The tax value of the deduction is approximately 27%.

In practice, the calculation of profits and losses is done according to the FIFO principle (First In, First Out) and when a sale occurs (upon realization of gains or losses).

This means that if, for example, you have bought 1.5 BTC in three trades where you bought 0.5 BTC each time, the profit from the sale of 0.25 BTC must be calculated by offsetting the purchase price for the first 0.25 BTC you bought against the sum you received for selling 0.25 BTC. This method must be used, even if you paid a much higher price for the last purchased 0.5 BTC and would therefore prefer to offset this purchase price against the sale price to calculate the profit.

In special cases, the tax authorities recognize that the calculation is made separately according to the asset-for-asset principle, and not according to the FIFO principle, if it can be documented that several quantities of the same cryptocurrency are kept separate. But it is a very special exception, and the authorities’ documentation requirements are very high. In practice, almost all trades are calculated according to the FIFO principle.

This may seem unreasonable. It is due to the generic nature of crypto. Until we get new tax rules on crypto, we expect the FIFO principle to be the predominant calculation method in practice. This may possibly be different for NFTs and follow an asset-for-asset principle because of the unique nature of NFTs.

Fees must be added to the acquisition cost when buying crypto and deducted from the selling price when selling crypto.

For example, if you buy 1 ETH for 15,000 DKK and pay 0.01 ETH in fees for the transaction (worth 150 DKK), the acquisition cost for your 1 ETH is 15,150 DKK.

Leveraged trades are taxed according to the Capital Gains Tax Act.

Profit and loss must therefore be calculated and taxed as capital income according to the “inventory principle”.

This means that you are taxed on both realized and unrealized gains in the tax year when it ends, which is also refrained to as notional gains tax. If you have a total loss on financial contracts with cryptocurrency, it can be offset against a gain on other financial contracts in the same tax year, but not in later tax years. In special cases, losses can be carried forward to later tax years, but this requires special notification to the tax authorities.

The tax rate is approximately 37-42%, depending on your other income.

You are not taxed on crypto received as a gift. It is tax-free and any gains made when later selling the crypto for fiat or other crypto is also tax-free.

The reason for this is that you do not have “speculative intent” when receiving a gift and thus acquiring the crypto. It is precisely the speculative intent that is decisive for whether the tax liability arises for trading assets under the State Tax Act. See section 10 below regarding speculative intent.

However, the person giving a gift must remember the rules on gift tax. Depending on who you give a gift to, there are limits on the amount of the gift that you can give without the recipient having to pay 15% in gift tax.

So, can’t you just give crypto to your friends and they can give crypto back as a gift to avoid taxes? In principle, you can. But if it is done in a way that is effectively intended to circumvent the rules for taxation of spot trades, the tax authorities will likely treat it as circumvention and tax it as spot trades between the gift givers.

There are very few statements/decisions from the tax authorities regarding airdrops. Based on this limited case law, we believe that airdrops should be treated as described here.

Airdrops received as a “gift” are taxed both upon receipt and again when they are sold.

This is because such airdrops are considered advertising gifts. If you receive 1,000 ABC tokens in 2021 without any conditions (as an advertising gift) worth 1,000 DKK as airdrops, you must report 1,000 DKK as other personal income (box 20).

If you sell these 1,000 ABC tokens for 10,000 DKK in 2022, you must report the profit (9,000 DKK) as other personal income in 2022 (box 20).

The calculation method follows the same as for spot trading – see section 2 above.

Airdrops received as gambling winnings are taxed both upon receipt and again when they are sold.

There are no special rules for gambling winnings in crypto. Taxation follows the State Taxation Act. The value of received tokens is taxable when you receive them.

The calculation method follows the same as for spot trading – see section 2 above.

For example, if you win 100 ABC tokens worth 100 DKK in 2021, you must report 100 DKK as other personal income (box 20).

If you sell these 100 ABC tokens for 10,000 DKK in 2022, you must report the profit (9,900 DKK) as other personal income in 2022 (box 20).

Airdrops received as payment for work are taxed both upon receipt and again when they are sold.

If you perform work for a project (write articles, promote them in other ways, help them on social media, etc.) and receive 1,000 ABC tokens worth 1,000 DKK as airdrops for your work in 2021, you must report 1,000 DKK as other personal income (box 20).

If you sell these 1,000 ABC tokens for 10,000 DKK in 2022, you must report the profit (9,000 DKK) as other personal income in 2022 (box 20).

The calculation method follows the same as for spot trading – see section 2 above.

There are very few statements/decisions from the tax authorities about or related to staking. Based on this limited case law, we believe that staking rewards should be treated as described here.

Staking rewards are taxed both upon receipt and again when they are sold.

Staking rewards can be compared tax-wise to the salary one receives for work on a project (like airdrops, see section 5 above).

If you receive 1,000 ABC tokens worth 1,000 DKK as a staking reward in 2021, you must report 1,000 DKK as other personal income (box 20).

If you sell these 1,000 ABC tokens for 10,000 DKK in 2022, you must report the profit (9,000 DKK) as other personal income in 2022 (box 20).

The calculation method follows the same as for spot trading – see section 2 above.

If you receive forked tokens as a result of a hard fork of a blockchain on which you already have tokens, the receipt of the forked tokens is tax-free. However, there is a tax liability on the sale of the forked tokens.

The calculation method follows the same as for spot trading – see section 2 above.

For example, if you have 10 ABC1 tokens in your wallet and receive 10 ABC2 tokens in your wallet because the ABC1 blockchain is forked, the receipt of the 10 ABC2 tokens is tax-free. This is because the tax authorities consider that you already acquired the 10 ABC2 tokens when you acquired the 10 ABC1 tokens.

The acquisition cost for your 10 ABC2 tokens was 0 kr. When you sell your 10 ABC2 tokens for a value of 10,000 DKK, you must report the full profit (10,000 DKK) as other personal income (box 20).

Tokens received as a result of mining are taxed both upon receipt and again when they are sold.

Mining can be compared tax-wise to the salary one receives for work on a project (like airdrops, see section 5 above). Mining will in most cases be treated as running a so-called “hobby business” – which, however, does not change the basic fact that mined tokens are at receipt and again when sold as other personal income.

Therefore, if you receive 1,000 ABC tokens worth 1,000 DKK as mining reward in 2021, you must report 1,000 DKK as other personal income (box 20).

If you sell these 1,000 ABC tokens for 10,000 DKK in 2022, you must report the profit (9,000 DKK) as other personal income in 2022 (box 20).

However, if you mine, you can also report your mining costs, such as hardware and software costs and electricity costs directly related to the mining business, as a deduction. There are no guidelines yet on how these costs should be documented and calculated.

The Danish Tax Agency is authorized to obtain information about Danes who trade on crypto exchanges.

This is done in practice through cooperation with tax authorities in other countries with which Denmark has data exchange agreements on tax matters.

Thus, the Tax Agency can request information about Danes who trade on crypto exchanges in other countries. However, the authorization does not allow for “fishing expeditions” for data on individuals but only for broad data collection on Danes active on these exchanges.

 The EU is expected to adopt a new directive on data exchange in crypto in the coming years (the DAC8 directive – Directive on Administrative Cooperation) which will increase audits and control on crypto.

The crucial factor in whether trading in assets triggers taxation is whether the trade is made with “speculative intent”.

It is a subjective assessment. When do you buy or sell something with speculation in mind?

In a sense, the same assessment is made for crypto as it is when people buy and sell expensive spirits, art pieces or other assets.

The tax authorities’ practice in this area is quite clear. Due to the high volatility and market developments, the authorities will consider trading in crypto as speculation, which, in our estimation, includes 99%+ of all trades in crypto.

However, it is possible to document that crypto has been acquired without speculative intent. This may be because one has received crypto as a gift (see section  4 above). It may also be because one can demonstrate that crypto was purchased for the purpose of being used as a means of payment and then used as payment relatively shortly thereafter. But if nothing else can be documented, trading in crypto will be considered speculation.

Whether this is fair or not is also subjective. In any case, this is how the tax authorities administer the tax rules as they stand today.

The Danish tax authorities’ guidelines on the taxation of Bitcoin and other cryptocurrencies can be found here.

The tax authorities’ detailed legal guidelines can be found here.

The tax authorities’ decisions on the taxation of Bitcoin, other cryptocurrencies, and digital assets can be found here.