Cryptocurrencies are on the rise. Terms like Bitcoin or Ethereum are not as exotic as they were a few years ago, and investing in crypto is increasingly common. But how do these digital currencies work exactly, and do you have to pay taxes on them? Find out what you need to do with cryptocurrencies in your tax return.
What are cryptocurrencies?
You’ve probably heard of Bitcoin. That’s an example of a cryptocurrency. Cryptocurrencies or cryptocurrency are a digital and entirely virtual currency. They work with cryptographic, encrypted codes. These codes change with every transaction. Cryptocurrencies have a virtual value that can vary greatly.
Do you have to pay taxes on cryptocurrencies?
Do you own cryptocurrencies without converting them to fiat currencies, e.g. euros, dollars, etc., or do you use crypto for buying things? Then you don’t pay taxes on them in Belgium (yet). If you make a profit from your crypto investments, there are 3 possibilities.
Scenario 1: You’re an amateur trader
If you invest in crypto according to the principles of a ‘prudent investor’, then your digital investments are exempt from taxes. The tax authorities consider you an amateur. This is the case if, for example:
- you invest in crypto as a hobby
- you make long-term investments, i.e. you buy cryptocurrencies and keep them for a long time
- you take few risks, for example, by spreading your investments, and not taking out loans to invest in crypto
What if your digital coins increase in value over time? Then you don’t need to declare those value increases. You don’t have to pay VAT on crypto transactions either.
⚠️ Warning: If you convert your cryptocurrencies into fiat currencies in this scenario, you must declare the capital gain (i.e. the difference between the purchase price and the selling price) in your tax return under ‘miscellaneous income’ and pay 33% income tax on it.
Scenario 2: You’re a private trader
From the tax authorities’ perspective, you’re no longer an amateur if you:
- take risks with your crypto investments
- regularly buy and sell and play on heavy price fluctuations
- want to make your investments profitable in the short term
In those cases, the government considers you a private trader. You must then declare the crypto profits in your tax return as ‘miscellaneous income’. On these profits, you pay 33% in income tax to the tax office.
Scenario 3: You’re a professional trader
Is trading cryptocurrencies your (main) job? Then you must follow the rules for a sole proprietorship: you declare your crypto income in your personal income tax declaration. The usual progressive tax rates then apply to your annual net income, ranging between 25% and 50%. A few examples:
- For income under €15,200 per year, you pay 25% in income tax.
- For income over €46,440 per year, you pay 50% in income tax.
⚠️ Warning: As a professional trader, you must also meet the other obligations self-employed people have, for example, joining a social security fund and paying social contributions.
Tax rules around crypto are not set in stone
The above rules are not always clear-cut. The Belgian government looks at each case individually, taking into account the full picture. They consider your intentions, the types of investments you make, and the risks you take.
Need help with your tax return?
Not sure where to declare your crypto profits in your tax return? Accountable helps you correctly complete your declaration in a few clicks.
FAQ: Frequently asked questions about cryptocurrencies in Belgium
You don’t pay taxes on owning cryptocurrencies or when you use crypto as a payment method. Also, amateur traders who invest in crypto as a hobby or long-term investment, in principle, don’t pay taxes on crypto. But when you make a profit as a private or professional trader from buying and selling crypto, you do have to pay taxes.
You can own as much crypto as you want, tax-free. Taxes are only levied from the moment your crypto regularly generates a profit. As a private trader, you’re taxed at a rate of 33%, while as a professional trader, depending on whether you have a sole proprietorship or a company, you’re taxed according to the progressive income tax brackets (25-50%) or corporate tax (20-25%).
The tax authorities have no insight into your crypto portfolio. You can therefore own as much crypto as you want. But if you suddenly start trading a lot and make a substantial profit, the tax authorities will of course notice the increase in wealth. As a private or professional trader, you must also declare your profits from crypto to the tax authorities.
If you regularly make a profit by trading crypto, you are obliged to declare this to the tax authorities. In Belgium, any form of regular income is taxed.
