From initially being an interest mainly among ”computer nerds”, investment in crypto currency has gained popularity among the general public. During the last few years, so-called “altcoins”, i.e. cryptocurrency, other than Bitcoin, has also steadily emerged.
But how is actually a capital gain derived from the selling of cryptocurrency taxed for a tax resident in Sweden? And how is such a capital gain declared when filing the annual tax return? Are there any possibilities for deduction for losses?
Initially, the legal position in Sweden on the tax treatment of Bitcoin, and other cryptocurrencies, was uncertain. The Swedish Tax Agency claimed that cryptocurrencies could not, from an income tax perspective, be seen as neither currency nor a security. This reasoning was subsequently confirmed by the Swedish Supreme Administrative Court, in a verdict from 2018.
Since the above mentioned verdict, capital gains derived from selling cryptocurrency is to be taxed as “other assets”, meaning that capital gains are to be calculated using the average cost basis method, and that only 70 percent of a capital loss is deductible.
Consequently, one has to declare capital gains and losses, in a K4-form, which is to be attached to the annual Swedish tax return. Any surplus in the income category “capital” is then subject to 30% tax. One should also observe that capital gains and losses has to be converted to SEK, according to the exchange rate at the day of each transaction, if the trade in point has been conducted with another currency.
Moreover, when an individual is seen as tax resident in more than one state, there could be reasons to apply a so-called double taxation agreement, to avoid the income being taxed twice. Various tax consequences can also arise when exchanging cryptocurrency, lending cryptocurrency, or performing miscellaneous actions with cryptocurrency.
It should also be mentioned that there is a risk of crypto currency income being taxed as business income, which is taxed at much higher rates compared to the Swedish Capital Gains Tax, if the activities conducted are seen as sufficiently professional and independent. This reasoning can be applied in relation to trading, exchanging, “mining”, and similar activities with cryptocurrency. Finally, an individual also risks a tax surcharge if he/she is not openly reporting the income in point towards the Swedish Tax Agency.
Skeppsbron Skatt’s CAS-group is specialized in international individual taxation. We offer assistance with filing of tax returns, formation of strategies tailored for your specific situation, and many other services, including tax advice on crypto currency. Do not hesitate to reach out to any of us, should you be in need of our services.