Cryptocurrency investments have grown significantly in recent years, and with that growth, the tax implications for investors have also evolved. The Belgian tax authorities make a clear distinction between investors who hold their crypto as part of the normal management of their private assets (buy and hold) and those who actively trade (day trading). This distinction determines whether and how you must pay taxes on your gains.
Buy and Hold: Normal Management of Private Assets (Tax-Free)
When you purchase crypto and hold it for a long period without actively trading, this is generally considered normal management of private assets. This means you are acting as a passive investor, similar to a long-term investment in stocks. As long as you hold these cryptos without frequent trading, any gains upon sale are generally considered tax-free in Belgium.
Day Trading in Crypto: Speculative Investments or Professional Trading?
Day trading, where you conduct multiple transactions per day to profit from short-term price movements, is generally not considered normal management of private assets. This type of trading is considered riskier, and taxes must be paid on it. How much tax you pay on day trading in crypto depends on your specific situation:
1) Speculative Investments
If you regularly buy and sell crypto in the short term to make quick profits, the Belgian tax authorities may classify you as a speculative investor. Speculative gains are taxed as miscellaneous income at a flat rate of 33%, plus local surcharges. The frequency and nature of your trading activities determine whether it is considered speculative, regardless of whether you do this as a hobby.
2) Professional Trader and Professional Income
If the number of trades you make daily or monthly is substantial and the way you conduct them is professionally organized, the tax authorities may consider your crypto gains as professional income. Consequently, your profits would be taxed according to the progressive tax rates ranging from 25% to 50% (plus local surcharges), depending on your total income. Additionally, as a professional trader, you would also have to pay social security contributions, as you would be considered self-employed. The advantage here is that you can deduct professional expenses from your taxable base.
3) Using a Trading Company
For professional day traders, establishing a trading company can be a tax-efficient option. By structuring your trading activities within a company, you can benefit from the Belgian corporate tax rate of 20% to 25%, which is typically lower than personal income tax on professional income. Moreover, a company provides opportunities to deduct expenses and manage profits in a more tax-efficient manner.
Additionally, a company offers tax advantages when distributing profits to shareholders. Through the VVPRbis regime, dividends can be distributed at a reduced rate of 15%, provided that the shares meet certain conditions, such as a minimum holding period of four years. This is significantly lower than the standard withholding tax of 30%.
Furthermore, using a liquidation reserve can make the distribution of profits even more favorable. Here, a rate of only 10% is applied when creating the liquidation reserve, and you pay only 5% withholding tax when distributing profits after at least five years (0% if the company is liquidated). This makes using a company even more attractive, reducing the overall tax burden significantly compared to a situation where you trade without a company and all your profits are taxed at the progressive rates in personal income tax (with additional social contributions).
Conclusion
The tax treatment of investing or trading in cryptocurrencies in Belgium depends on how you conduct your investment or trading activities. Buy and hold strategies, where you hold crypto for the long term without (frequent) trading, are generally considered normal management of private assets and are therefore tax-free. However, with day trading, this is quickly seen as speculative or professional trading, with gains taxed at 33% or progressive rates up to 50%. For professional traders, establishing a trading company can be more tax-efficient, with lower corporate tax rates of 25% and distributions through the VVPRbis regime or a liquidation reserve, significantly reducing the overall tax burden compared to personal income tax.
Do you have any questions or comments regarding the above issue? Feel free to schedule a non-binding consultation.
Christophe Romero Senne Verholle
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