The Danish government is set to implement a groundbreaking tax reform starting January 1, 2026, which will introduce a 42% tax on unrealized gains from cryptocurrencies. The reform, proposed by the Danish Ministry of Taxation, seeks to align the taxation of digital assets like Bitcoin with that of traditional financial investments.
In a statement on Wednesday, the Ministry of Taxation outlined its plan to tax unrealized capital gains on cryptocurrencies that have been held since the inception of Bitcoin in January 2009. The goal is to ensure that crypto assets are taxed in a similar way to stocks, bonds, and other financial instruments.
Why the Reform?
According to Danish Tax Minister Rasmus Stoklund, many crypto investors in Denmark have been unfairly taxed under the existing capital gains tax system. He emphasized that the new regulations would simplify the taxation process for cryptocurrency transactions and provide more clarity to investors.
Taxation on Unrealized Gains and Losses:
The proposed reform will not only tax unrealized gains but also allow investors to offset losses from one cryptocurrency with gains from another. In addition, gains from crypto assets can be offset against losses from other financial contracts, and vice versa. This comprehensive approach, known as inventory taxation, treats crypto transactions as capital income, which will be subject to continuous taxation—even if the assets are not sold.
While the new rules will tax both unrealized gains and losses, the exact scope of the regulations and how they apply to existing crypto holdings remains unclear. Danish investors are still awaiting clarification on how far back these new tax policies will apply to their current crypto portfolios.
Future Legislation:
The Danish government plans to introduce further laws regarding crypto taxation and reporting by early 2025. These laws will require crypto asset providers to report transaction data on cryptocurrencies like Bitcoin and share it across EU countries. Alongside this, the Minister of Taxation is expected to present a comprehensive tax bill that will incorporate the recommendations of the Danish Tax Council.
"I believe we need clearer and more appropriate rules in this area. That's why I'm looking forward to introducing a tax bill and discussing it with the parties in the Folketing (Danish Parliament)," Stoklund said.
International Context:
Denmark’s move mirrors similar tax reforms in other European countries. Recently, Italy announced plans to raise its capital gains tax on Bitcoin and other cryptocurrencies to 42%, a significant increase from the previous 26% rate. This change is part of a broader effort to generate additional revenue for families, youth, and businesses.
Conclusion:
Denmark’s proposed 42% tax on unrealized crypto gains signals a shift toward stricter regulation of digital assets. With these new policies, the Danish government aims to streamline the taxation process for cryptocurrency investors, aligning it more closely with traditional financial markets. However, as the country moves toward implementing these changes, investors will need to navigate the complexities of this new tax landscape.
