Income tax amounts to 30% of your income from savings and investments (Box 3). This tax is calculated on the basis of the flat-rate return. That return is calculated on the value of your assets at 00:00 on 1 January of the tax year; the reference date.
Reference date
The fact that the reference date for Box 3 is decisive became very clear once again at the start of this year. For example, people who have invested their euros in bitcoins declared a value of around €11,000 per bitcoin in their 2018 income tax returns. By February, that value had fallen to around €9,000. PLEASE NOTE: these figures are no more than a rough guide.
Investors in “traditional” securities have, incidentally, had a similar experience. In February 2018, share prices fell significantly compared with their value on 1 January 2018. However, this fall in prices is much less severe than that seen in cryptocurrencies.
Bitcoin
Cryptocurrencies that form part of your private assets must be declared in Box 3 of your income tax return. Whilst the value of shares, bonds and other securities can generally be determined quite easily, this is considerably more difficult in the case of cryptocurrencies. This is because there is no centrally determined value for cryptocurrencies. Unlike shares and bonds, you can buy and sell bitcoins on thousands of exchanges worldwide. However, there are websites which publish cryptocurrency prices. These prices are based on the average price, which is derived from recent transactions on major exchanges.
Incidentally, this refers to the bitcoins that you own directly. If you invest in bitcoins via a fund, the value of your investment can usually be determined quite easily.
Pre-filled tax return
You won’t find your bitcoins listed in the tax return pre-filled by the tax authorities (the VIA). There is no single body responsible for reporting information on cryptocurrencies to the tax authorities. Even if you use the VIA, you remain personally responsible for submitting an accurate and complete income tax return to the tax authorities in good time. This includes any bitcoins that form part of your private assets.
At present, it is difficult for the tax authorities to prove that you are investing in cryptocurrency. Whilst they do have access to all transactions in this currency, that information is not linked to the identity of taxpayers. The purchase or sale of this currency may, for example, be evident from changes in your assets. An unexplained (significant) increase or decrease in your assets may give rise to critical questions.
The Tax and Customs Administration has five years in which to determine, retrospectively, that you owned bitcoins which you did not include in your income tax return. This is the period within which a final income tax assessment may be followed by a supplementary assessment. If you hold the bitcoins abroad, this period may even be as long as 12 years. If the Tax and Customs Administration can demonstrate gross negligence or wilful misconduct, administrative fines may be imposed.