In a bold move, Denmark is introducing a 42% tax on unrealized crypto gains, affecting Bitcoin and other digital assets acquired since 2009. This new rule aims to bring cryptocurrency taxation in line with traditional investments like stocks and bonds.

Denmark’s Crypto Tax Targets Unrealized Gains at 42%

Unrealized capital gains from all cryptocurrency assets will be subject to a 42% tax in Denmark, said the press release.

Cryptocurrencies like Bitcoin, which are decentralized and not tied to any central bank or real currency, will be subject to this tax. If approved, the bill will thus subject these digital assets to the same tax regulations as more conventional forms of investment.

Aligning Crypto Taxation With Traditional Investments

The government's goal is to standardize the tax treatment of cryptocurrency investments with those of traditional assets like equities and bonds.

Even cryptocurrency bought in 2009, when Bitcoin was still in its infancy, will be subject to the new tax regime. Consequently, the 42% tax rate on unrealized profits will apply to all cryptocurrency holders, regardless of whether they sell or not.

Support From Denmark’s Tax Minister

The developments have Rasmus Stoklund, the tax minister, behind them. He said:

“Throughout recent years, there have been examples of Danes who have invested in crypto-assets being heavily taxed. That is why I am pleased that the Tax Council has today submitted some elaborate and up-to-date recommendations. The council’s recommendations can be a way to ensure more reasonable taxation of crypto investors’ gains and losses.”

Tackling the Complexity of Taxing Cryptocurrencies

To simplify the process of taxing digital assets, this crypto tax will be introduced. Taxation has become more complicated for authorities and crypto holders due to the decentralized structure of cryptocurrency. Denmark intends to implement extra regulatory steps to address this.

International Data Sharing on Crypto Investors

Coingape reports that starting in 2027, the Danish government will begin exchanging data about Danish cryptocurrency investors worldwide. Additionally, they intend to present a measure mandating that crypto service providers disclose client transactions in the first half of 2025.

Reducing Tax Disparities for Investors

With this, Denmark will be able to control the roughly 300,000 Danes who have cryptocurrency holdings and prevent tax avoidance.

The government would also let people profit from financial contracts and other cryptocurrencies by offsetting their losses. Investors are currently subject to a disproportionately high tax on their gains; this strategy will even out the playing field.

Italy’s Stricter Approach to Crypto Taxation

All of this is happening at the same time as Italy is trying to have a better grip on its digital assets.

The Italian government has just revealed intentions to raise the capital gains tax on cryptocurrency from 26% to 42%. Part of Italy's larger plan to increase tax income is to tax cryptocurrency investment earnings, which is why this shift is happening.