Bitcoin profits are taxable, Denmark’s Supreme Court has ruled

Denmark’s Supreme Court has announced two rulings that concluded that profits from the sale of Bitcoin are taxable, potentially setting a precedent for the taxation of Bitcoin and digital assets in the country going forward.

The two cases are slightly different in nature, but in both the plaintiffs took the Danish Ministry of Taxation to court over perceived unjustified taxation of profits from various Bitcoin-related activities.

In the first case, the plaintiff acquired Bitcoin between 2011 and 2015 through six purchases and as donations received from third parties. They then sold these bitcoins between 2017 and 2018 at a profit.

In the second case, the plaintiff bought bitcoins between 2011 and 2013 as payment for Bitcoin mining operations and sold some of them in 2018 at a profit.

The price of Bitcoin when the holders bought them in 2011-2015 would have been – roughly – between $0.48 and $217; and on sale, the value could have risen to anywhere between $970 and, at bitcoin’s peak in 2017, $14,156 – a potentially significant profit.

The cases concerned whether these profits were taxable. In both cases, the Supreme Court ruled that they were, but for slightly different reasons.

In the first case, it was decided that “the purchase of bitcoins must be considered to have been made for speculative purposes” and thus is not tax-free according to Section 5(1)(a) of the National Tax Act; while in the other case, the court ruled that bitcoin received as gifts or through mining constituted income of “non-business” enterprises, and therefore triggered tax liability under Section 4(a) of the Internal Revenue Code.

Section 4 of the National Taxation Act states that a taxpayer’s total annual income consisting of money or property is taxable, which includes income from any business or other activity; and no distinction is made between business and non-business activities. In this case, bitcoin mining was considered a “non-business activity” and thus fell under Section 4.

Section 5 of the Landsskatteloven states that taxable income does not include capital gains resulting from a property increasing in value or income from the sale of a person’s property, unless these sales belong to the person concerned or are carried out for the purpose of speculation. This provision came in when the court ruled that the original purchase of bitcoin was speculation, and so when it was sold at an increased value, the profit was not exempt from tax.

Invoking different tax laws to cover different profitable bitcoin-related activities is a sign that legislators and courts, at least in Denmark, are taking up digital assets and deciding this, despite their new way of working and the claims of some of them making money. from them they do not necessarily demand that all new rules or laws should govern.

Thursday’s two Supreme Court decisions uphold previous Supreme Court decisions from 2021 and 2022, which also went in favor of the Ministry of Taxation (as the defendant).

Bitcoin and Digital Assets: Where Will Real Value Come From?

width=”560″ height=”315″ frameborder=”0″ allowfullscreen=”allowfullscreen”>

New to Bitcoin? Check out CoinGeeks Bitcoin for beginners section, the ultimate resource guide for learning more about Bitcoin – as originally envisioned by Satoshi Nakamoto – and blockchain.