In advance ruling no. 2024.0452 dated July 9, 2024, the Belgian Ruling Commission (also known as the Service for Advance Decisions, or "DVB") issued an opinion on the tax treatment of capital gains on bitcoins obtained through online gaming. The applicant, a full-time consultant, had received bitcoins over a period of four years through the sale of so-called in-game coins that he had acquired in an online game. The question was whether the capital gains on the sale of these bitcoins should be considered as professional income or miscellaneous income, taxable under article 23 or article 90, first paragraph, 1° of the Belgian Income Tax Code 1992 (ITC 92), respectively.
In addition to his profession as a consultant, the applicant was also active as an online gamer, albeit purely as a hobby. During gameplay, he collected so-called "in-game coins," which could be used within the game. Over the years, these coins were occasionally sold to other players through an external platform. The compensation for these coins was received in the form of bitcoins. It is important to emphasize that the applicant's gaming activity did not have a professional character, nor were there significant investments or external resources utilized to support this activity.
The applicant held the acquired bitcoins in his own management since 2020 through an online wallet, without further trading or conversion to other currencies. The question arose whether the capital gains he would realize from a future sale of these bitcoins would be taxable as professional income or miscellaneous income, or rather as exempt income resulting from the normal management of private assets.
Tax Analysis: Capital Gains on Bitcoins Exempt from Taxation
Professional income, according to Article 23, §1 of the ITC 92, refers to income that directly or indirectly arises from activities of any kind. To qualify as professional income, there must be an organized and professional activity aimed at generating income. In this case, the DVB concluded that there was no professional activity because:
The applicant’s gaming activity was a hobby, without any commercial intent.
No specific knowledge or expertise related to his professional activities as a consultant was acquired.
There were no substantial investments or professional structures underlying the activities.
As a result, it could not be stated that the capital gains from the sale of the bitcoins were the result of professional activities.
Miscellaneous Income (Art. 90, 1° ITC 92)
Article 90, first paragraph, 1° of the ITC 92 states that occasional or incidental profits or benefits arising from transactions or speculations are taxable as miscellaneous income. It is important to note that the management of private assets is excluded from taxation under this provision, provided that the transactions can be qualified as normal management actions.
Bitcoins are considered portfolio assets and fall under the category of movable property. The DVB found that:
The applicant did not have speculative intentions when acquiring and holding the bitcoins.
The sale of the "in-game coins" was a one-time and limited occurrence, without any ongoing transactions aimed at making a profit.
The applicant did not follow a short-term strategy and had held the bitcoins for over four years without further trading.
Based on these elements, the DVB concluded that the planned sale of the bitcoins could not be considered speculative or as a transaction outside the normal management of private assets.
Conclusion
The DVB ruled that the capital gains the applicant would realize from the sale of his bitcoins do not qualify as professional income or miscellaneous income, but as non-taxable capital gains resulting from the normal management of his private assets. This advance ruling confirms that the sale of cryptocurrencies, if part of the normal management of private assets, can remain tax-free. This provides significant legal certainty for individuals considering similar transactions.
However, it is crucial that each situation is assessed individually. The tax treatment of cryptocurrencies remains dependent on specific facts and circumstances, including the nature, frequency, and intent of the transactions.
Please do not hesitate to contact us if you are considering applying for an advance ruling regarding your crypto transactions, or if you would like advice on your tax situation. We are always available to provide you with expert tax advice.
Christophe Romero Senne Verholle
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