- Denmark proposes a crypto law to tax unrealized crypto gains.
- The law is scheduled to be tabled in 2025 and enforced in 2026.
- It would tax cryptocurrency unrealized gains at 42%.
Taxed Even Before You See A Profit
Denmark’s Tax Council has proposed a law that aims to tax unrealized gains and losses in crypto at the rate of 42%.
The council was headed by Tax Minister Rasmus Stoklund and chose the current inventory model to tax cryptos. Overall the council was presented with three models to tax crypto assets.
- Inventory Model: Taxation on total portfolio together and on unrealized gains/losses.
- Warehouse Model: Not much clarity was present on this topic.
- Capital Gains Tax: A flat capital gains tax on short and long terms based on gains made.
Denmark already has an inventory model for traditional assets which are taxed at a flat 42% rate.
The law is to be tabled in the Danish parliament in 2025 and will likely be implemented on 1 January 2026.
Outrage in Denmark Among Crypto Investors
Not surprisingly, the model sparked an outrage in Denmark because of its provisions.
What’s more outrageous is that the law could provide for a retrospective application forcing the investors to shell out more money that they have realized over the years.
For example, if someone had bought Bitcoin in 2015 and held it till now, it would devastate them financially as they would have to pay several thousand Euros worth of taxes. Bitcoin has gone from $200 in 20`5 to over $73,700 in 2024. Retrospective tax would force them to pay
Zero Chances of Application in Other Jurisdictions
Based on my own experience as an MBA in Finance and in the crypto industry since 2021, I doubt this model would work anywhere outside India.
This was because the model seeks to tax people even before they earn anything. In the traditional sense, earning is only done when you have already sold an asset that you had bought earlier. If you are still holding the asset, taxing you seems unfair because you cannot hold an asset and profit from it at the same time. It’s like “eating a pie and still having it”.