The rise of blockchain technology and cryptocurrencies has not only transformed the financial world but has also raised new questions about the tax treatment of income generated from these activities, such as crypto harvesting. A recent advance ruling from the Belgian Ruling Commission (DVB), No. 2022.1049 dated January 17, 2023, provides valuable insights into the tax classification of income from 'harvesting,' stating that this income should be regarded as movable income.
What Does the Ruling Entail?
The applicant in this decision had invested in various cryptocurrencies and participated in the Symbol blockchain network. This network uses a consensus mechanism known as 'Proof-of-Stake+,' whereby validators are rewarded with the cryptocurrency XYM for their contribution to the validation of new blocks on the blockchain. These rewards are known as 'harvesting' income. The central question was whether this income should be considered movable income under Article 17, §1, of the Belgian Income Tax Code 1992 (WIB 92).
The applicant had initially invested in Bitcoin and other cryptocurrencies, including NXT and NEM. Later, they participated in the launch of the Symbol blockchain network, receiving cryptocurrencies through the 'harvesting' mechanism. This mechanism, which is similar to staking, rewards account holders for their contribution to validating transactions on the blockchain.
Importantly, the applicant obtained these cryptocurrencies without being continuously connected to the network. Instead, these rewards are distributed over time, depending on the amount of cryptocurrency held by the account holder and the 'importance score' attached to their account.
Key Conclusions of the DVB
The DVB concluded that the income (including crypto) the applicant obtained and will obtain through 'harvesting' is taxable as movable income in accordance with Article 17, § 1, WIB 92. More specifically, this income can be taxed as income from movable assets, namely interest (Article 17, § 1, 2° WIB 92) or income from the use and concession of movable property (Article 17, § 1, 3° WIB 92).
Tax Implications for 'Harvesting'
This ruling clarifies that 'harvesting' income can be considered movable income, meaning that it is taxed as income from movable assets. This has significant implications for individuals actively participating in blockchain networks such as Symbol. It emphasizes that the Belgian tax authorities view such income as the result of making capital (in the form of cryptocurrencies) available to a network, which is comparable to receiving interest on traditional capital and will consequently be taxed at a rate of 30% in personal income tax.
Conclusion
Advance ruling No. 2022.1049 provides clarity on the tax treatment of 'harvesting' income from cryptocurrencies. This income is taxed as movable income, ensuring that investors know how to declare their income from blockchain activities. This underscores the importance of a solid understanding of the tax rules surrounding cryptocurrencies and the necessity of timely tax planning for anyone involved in the world of digital assets.
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Christophe Romero Senne Verholle
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