Netherlands Crypto Tax

The Netherlands features one of the most favorable tax regimes across Europe. It ranks 14th in the 2022 International Tax Competitiveness Index, and for a reason: this is indicative that the Dutch structure of taxation is reasonably fitted and made it easy for businesses to comply with tax regulations and, at the same time, boost economic development.

The Dutch Tax and Customs Administration levies on tax regulations, inspections, and the collection of taxes owed to the government. It also applies various tax reliefs and schemes for both tax residents and non-residents. Authority classifies digital cryptocurrencies as an asset, where crypto companies should share their transaction data with it.

Due to the fact that the Netherlands is part of the Organization for Economic Cooperation and Development, or OECD, it will also need to implement another crypto-asset reporting framework newly adopted by the OECD for better crypto taxation and tax reporting standards. As it was stated by CARF, the Dutch Tax and Customs Administration should automatically exchange crypto tax-related information with the international tax authorities. On top of that, such EU regulations as Markets in Financial Instruments Directive 2 influence the treatment of cryptocurrencies for tax purposes in the Netherlands.

It is not only the business model that determines how a crypto company will be taxed, but also its tax residency status. In general, companies incorporated under Dutch law are considered tax residents of the Netherlands. Also, a company will be treated as resident in the Netherlands if the place of effective management of the entity is located in the Netherlands. According to the local law, there is no definition of ‘place of effective management’, which will be determined based on facts and circumstances by case-by-case basis. Normally, that would be the case if the Netherlands is the place where decisions are taken in view of an enterprise’s business, where the company directors are working and meeting, and, finally, where the books of the business enterprise are kept and the financial statements prepared.

Corporate Income Tax

The Corporate Income Tax rate is based on the taxable amount, i.e., the taxable profit in a year reduced by deductible losses. If the taxable amount doesn’t exceed 200,000 EUR, a rate of 19% is applied. If it exceeds 200,000 EUR, companies pay 59,250 EUR, while a 25.8% tax is levied on the taxable amount exceeding 200,000 EUR. Since Dutch taxpayers are generally taxed on the presumed increase in value of their assets, using the fair market value on January 1st, even held cryptocurrencies are taxed, which is not the case in most other European jurisdictions.

A special rate of 9% applies to income, including royalties, derived from originally developed innovative assets that fall within the scope of the innovation box. The rationale behind this box is to provide tax relief that incentivizes innovative research and development. A business shall be considered as eligible for the innovation box if at least 30% of the profits have been derived from the patent. Also, in a case where the development of the intellectual property has no patent but has incurred R&D costs, such a company is also considered eligible for availing of the reduced 9% rate.

Whereas, the rate of 9% will apply only to the positive result, given the full deduction of innovation losses; a company should also be permitted to incorporate profits from an intangible asset that originated during the period between the time the patent application was filed and the granting of the patent under the innovation box regime.

Another efficient way to optimize the Netherlands’ taxes is with the help of international agreements that cover all types of income. The country has approximately 80 international agreements for the avoidance of double taxation. They guarantee clarity on how cross-border trade and investment will be treated, protecting businesses from having their income taxed twice in two different countries.

Crypto-specific rules pertaining to the Corporate Income Tax are as follows:

• Cryptocurrencies are considered taxed as assets.
• Cryptocurrencies acquired from mining will fall under Corporate Income Tax, the market value of which is determined upon receipt.
• Also, cryptocurrencies derived through airdrop will fall under Corporate Income Tax, the market value of which is upon receipt.
• The lending of cryptocurrencies is not considered a disposal for taxation purposes.

Value-Added Tax

VAT within the Netherlands works in conformity with the EU’s VAT Directive. The standard VAT rate of 21% is charged on goods and services supplied within the territory of the Netherlands. Various exemptions are available, however, due to the nature of the business. For example, issuance of security tokens is also exempt under VAT, just like buying any type of voucher. Tax liability shifts upon redemption of tokens with goods or services.

Pursuant to the ruling of the, crypto exchanges- that includes exchange for fiat money and vice-versa – are exempt from VAT. However, other crypto-related products and services may be subject to VAT and, therefore, crypto firms have to register as VAT payers with the International Office of the Dutch Tax and Customs Administration.

Withholding Tax

Dividends received from Dutch-resident entities are usually subject to a withholding tax of 15%. It would be exempt if the dividends distributed by a Dutch company were obtained by a resident of the EU, EEA, or any country with which the Netherlands has signed a tax agreement, including dividends. Exemptions may also apply in cases where dividends’ recipient would have been able to apply the Dutch participation exemption or the participation credit against the dividend if it would have been a resident of the Netherlands.

Gift Tax

Cryptocurrencies gifted by a resident of the Netherlands are liable for Gift Tax. This comes at rates between 10% and 40% of the value that the cryptocurrencies received on the value date of the gift reached. The applicable rate depends on the level of connection between the donor and the donee. Tax exemptions apply under certain conditions. In-game rewards that are transferred in cryptocurrencies are not taxed unless the transaction is carried out in a professional manner, whereby this would already fall under Personal Income Tax, Box 1.

Personal Income Tax

All employees of Dutch crypto companies are liable for Personal Income Tax. The residents are taxed on their income acquired worldwide, while the non-residents are taxed on the income sourced within the territory of the Netherlands, including employment, director’s fees, business income derived, and income from Dutch immovable property.

For purposes of tax, world income is divided into three kinds of taxable income. Each type of income is taxed under a specific schedule, known as a box, which has its own tax rate or rates. The sum of an individual’s income in these three boxes provides the taxable income.

These boxes are:

Social Security Contributions

As explained by the Dutch legislation, all employees within the Netherlands are deemed to be insured under the national insurance schemes which cover for a state pension and surviving dependants. Employers subtract this from the employees’ salary and pay to the Dutch Tax and Customs Administration. The national insurance contributions are deducted from all the elements of the employment income: salaries, holiday allowances, overtime pays, end-of-year bonuses, and benefits in kind. The national insurance contributions are levied on income up to 37,149 EUR and capped at 10,272 EUR per annum.

Employers also pay insurance contributions for employees. The insurance covers the unemployment benefit scheme, sickness benefits, disability insurance scheme, and the work and income/capacity for work scheme. Instead of deducting these contributions from salaries, employers pay these themselves. In fact, contributions are payable on earnings up to 66,956 EUR. The rate depends on the industry in which the company operates. The annual average per permanent employee is about 7,887 EUR. It can be as high as 11,235 EUR per year for temporary employees.

How to pay taxes on crypto in the Netherlands in 2024? During 2024, income tax on cryptocurrencies remains one of the most discussed topics among Dutch investors and users. The country is generally friendly towards new financial developments, including cryptocurrencies but also would like to be clear about tax compliance. Taxes ought to be paid with knowledge of the local regulations and requirements of taxation to avoid punishment for acting contrary to the law. This article looks at how to pay tax on cryptocurrency income in the Netherlands in 2024.

Basics of Cryptocurrency Taxation in the Netherlands

Generally speaking, for tax purposes, cryptocurrencies obtain the classification of “other property” in the Netherlands. Income derived from cryptocurrencies is thus subject to tax, although the methodology and the rates of taxation vary depending on the type of income involved and the way in which the activity is given. Thus, different rules may apply to the charging of a specific cryptocurrency for Value-Added Tax purposes, depending on its use.

Taxation of capital and savings

In contrast, the income associated with investments in cryptocurrencies in the country is under “box 3” – taxation of capital and saving. The tax bases are calculated not by actually obtained income or capital gains but by legally estimated investment yields of the state. Tax rates in box 3 may change over time. To be more precise, one needs to look for up-to-date information.

Tax Base Calculation

Holders of cryptocurrency have to declare the value of their assets as at 1 January of the tax year. The value of all assets less debts is aggregated and the tax rate in Box 3 applies, subject to applicable tax credits and deductions.

Income declaration

Taxpayers have to declare their cryptocurrency possessions in the annual tax return. It is recommended that record-keeping of all purchases, sales, and exchanges of cryptocurrency be done in order to further accurate declaration.

Entrepreneurs’ income tax

If the cryptocurrency has been used within a business, such income may fall under corporate income taxation. The rules and rates applied will then become different.

VAT and cryptocurrency

According to the European Union jurisprudence, the exchange of traditional currency to and from cryptocurrency is outside the scope of VAT. The same applies in the Netherlands; therefore, cryptocurrency exchange transactions do not bear a VAT burden. On the other hand, the provision of services regarding cryptocurrency, such as mining or exchange transactions, can be subject to the general rules on VAT, depending on the terms and circumstances.

Recommendations for payment of taxes by holders of cryptocurrency-based income

1. Record keeping: If you correctly keep records about your cryptocurrency transactions, it will be possible to correctly declare both income and expenses on time. Provide the date, the amount, value in euros at the time of the transaction.
2. Timely filing: File your return in time so that you will not have to incur late payment interest and penalties.
3. Look for tax incentives: that may be available to you because, under certain conditions, this may apply when you invest in a startup or some innovative project. Check if that applies to you.

Conclusion

Proper attention needs to be given when taxing cryptocurrency earnings is considered within the borders of the Netherlands. Given the continuous change in the tax code, one should utilize all resources and advice to optimize the tax burden of one’s cryptocurrency income. With the proper approach and due attention paid to details, you will be able to keep your income from cryptocurrencies properly aligned with regard to liability for taxation.

Overview of main tax rates in the Netherlands for 2024: the table displays personal income tax rates, corporate tax, VAT, and information on capital gains tax that may apply to cryptocurrency income.

In case you are determined to succeed in the Netherlands and want to pay optimum taxes, highly qualified and experienced legal consultants of Regulated United Europe will be happy to assist you in structuring your taxes. We fully understand and closely follow Dutch and international taxation rules related to crypto, trying to make sure that our clients do not only comply with the local regulations but also work in a tax-efficient way. Moreover, we gladly assist you with company formation, crypto licensing, and accounting. Order a private consultation now.

More than that, the lawyers of Regulated United Europe consult on crypto projects and adapt to MICA.