Crypto users had, for years, been part of a niche community that did not see a great deal of interaction with the mainstream world and one of the ways this manifested was in the issue of tax. Many years ago, there was virtually no taxation code in relation to cryptocurrency and thus, many crypto holders and traders could not pay cryptocurrency-related tax or simply chose not to as there was no oversight function. However, as crypto is finding its way into the mainstream, governmental bodies are starting to demand payment of crypto-related tax and crypto holders are finding themselves in contact with them.
According to December 10, 2019 reports, danish crypto holders have begun receiving letters from Skattestyrelsen, which is the Denmark tax authority, demanding that they report their history of crypto-related transactions.
The letters are reportedly asking that the receivers provide information about their crypto transactions for the financial years of 2016 to 2018 using the first-in-first-out principle. This principle assumed that those goods were sold in the same chronological order in which they were received and there is also information being requested on the purpose for which they acquired crypto wallets as well as the rates at which their tokens were bought and sold.
“Many of our Danish users have received these letters, Skat is asking for a full breakdown of all their transactions and asking them to fix all past reports as well. Filing tax on cryptocurrency trades is a difficult task as crypto traders usually hold several exchange accounts & wallets and freely transfer crypto between them, so there’s no easy way to figure out what the capital gains are for any particular trade,” said Robin Singh, founder of cryptocurrency tax startup Koinly, who also received a letter.
This action has been a while in the making as the agency announced last year that they had identified 2,700 individuals who owed taxes with relation to bitcoin and intended to go after them.
“If something does not match, we will contact them and ask for more information. However, how many people it is and what it may mean, it is still too early to say,” they said at the time.