Cryptocurrency remains extremely popular, with more and more people investing in digital currencies such as Bitcoin and Ethereum in the hope of attractive profits. But what happens when the tax authorities come knocking? In this article, we discuss the tax obligations regarding crypto in Belgium and examine whether you have to pay tax on your investments.
Tax legislation on cryptocurrencies
In Belgium, there is no general capital gains tax on financial assets, unless your investments are considered speculative. The Belgian tax authorities apply the ‘prudent and reasonable person’ principle. This means that if your investments are not excessively risky and you take a sensible approach, you will usually not have to pay tax or file a return.
The Ruling Service, a government agency that provides advance tax rulings, helps investors clarify their tax obligations. They provide a questionnaire that you can use to determine whether you have to pay tax on your cryptocurrency transactions.
When are you liable for tax?
Whether you have to pay tax depends on how the tax authorities assess your investments. If you trade with modest amounts and your transactions are not frequent or risky, you will generally not be taxed. If you trade intensively, for example by carrying out daily transactions or speculating with large amounts, you are more likely to be liable for tax.
For example, a student who trades sporadically with their own savings is more likely to be seen as a cautious investor and will not have to pay tax. On the other hand, a semi-professional trader who invests large amounts and regularly buys and sells may be considered a speculator and therefore have to pay tax.
How do you declare crypto capital gains?
If you have realized capital gains that do not qualify for the normal management of private assets, you are required to include those gains in your tax return. Speculative income is declared as miscellaneous income and taxed at 33%, while profits made by professional traders are taxed progressively as professional income, with rates up to 50%. To avoid disputes with the tax authorities, it is important to maintain bank statements and proof of purchase and sale.
What determines whether you are liable for tax?
The tax authorities assess your situation based on various factors, such as how you purchased your crypto (with your own funds or borrowed money), how long you hold your assets, how much of your assets you trade, and what trading strategy you follow. Actions such as day trading are more likely to be considered speculative than a strategy where you hold assets for a longer period of time.
Conclusion
If you act in a cautious and reasonable manner, there is a good chance that you will not have to pay tax on your crypto profits. However, it remains important to be alert, as the tax authorities may assess your situation differently and still impose a tax assessment.
If you are unsure about your specific situation, it is wise to contact a tax advisor or the Ruling Service. This will ensure that you remain well-informed and can enjoy your investments with peace of mind.
