As an individual, cryptocurrency income in Belgium can be taxed in four ways:
Normal Management: Exempt from tax;
Miscellaneous Income: Abnormal or speculative management, taxed at 33% (plus municipal surcharges);
Movable Income: Taxed at 30%;
Professional Income: Taxed at progressive rates (plus social security contributions).
Category 1: Normal Management (0% Tax)
If your investment in cryptocurrencies is considered a normal part of managing your private assets, the realized capital gains are generally exempt from tax. Consequently, in this scenario, you do not have to pay any taxes on your crypto gains in Belgium. Whether this scenario applies depends on a factual assessment and is determined by various factors, such as:
The way in which the cryptocurrencies were acquired (e.g., with personal funds, loans, inheritance, etc.);
The holding period before the cryptocurrencies were sold;
The frequency of buy and sell transactions;
The investment strategy used, such as buy & hold, trending, day trading, scalping, or arbitrage;
Involvement in mining activities;
The use of specialized software or equipment for trading;
The proportion of your total assets invested in cryptocurrencies;
The type of cryptocurrency: Bitcoin and Ethereum are often considered less speculative than coins with smaller market capitalizations, such as Dogecoin or Shiba Inu.
Category 2: Miscellaneous Income or Speculative Income (33% Tax)
If the tax authorities determine that your crypto activities are speculative in nature, the realized profits are taxed as miscellaneous income at a fixed rate of 33%, plus municipal surcharges. This applies when cryptocurrency trading is more focused on quick gains and high-risk speculation.
Category 3: Professional Income (Progressive Rates)
In cases where the tax authorities classify your crypto investments as professional activities, such as frequent trading by day traders, the income can be considered professional income. These earnings are then subject to progressive tax rates, which can reach up to 50% in Belgium. Moreover, social security contributions are often due, further increasing the total tax burden.
Category 4: Movable Income (30% Tax)
In addition to capital gains from your crypto investments, you can also generate passive income, for example, through staking, lending, or liquidity rewards. Income from airdrops can also fall under this category. Such income may be taxed as movable income at a rate of 30%. If the income is classified as proceeds from movable rental, the same rate applies, but a flat-rate cost deduction may be applied first, resulting in a lower effective tax burden.
These scenarios illustrate the different ways crypto income can be taxed in Belgium, depending on the nature of your activities and how you manage the assets. It is essential to be aware of these distinctions and, if necessary, seek professional advice to optimize your tax position.
Ruling 2022.1049: Harvesting Income as Movable Income
In this ruling, the applicant sought clarification on the taxation of his harvesting income on the Symbol blockchain. Harvesting is the process by which a node validates transactions and receives rewards in the form of new cryptocurrencies. The applicant had invested in cryptocurrencies such as Bitcoin, NXT, and NEM. Through the Symbol network, he received new cryptocurrencies via an opt-in mechanism. These rewards were obtained by validating transactions through the "Proof-of-Stake+" consensus mechanism, where nodes are randomly selected based on their "importance score."
The Ruling Commission (DVB) concluded that the income the applicant received for his contribution as a validator should be classified as movable income. According to Article 17, § 1, WIB 92, income from movable property or capital falls under this category. This means that harvesting income is taxed at a rate of 30%. The decision clarifies that such rewards are not exempt from tax and are considered in-kind income.
Ruling 2022.0911: Staking and Liquidity Rewards as Miscellaneous or Movable Income
In another ruling, a request was submitted by an applicant who worked as a software developer and consultant. He asked the DVB to confirm that his income from staking and participation in Decentralized Finance (DeFi) projects would not be considered professional income but rather income from private assets.
The DVB analyzed the situation and determined that the applicant's activities did not meet the criteria for professional income as defined in Article 23, WIB 92. The income was generated without professional advice or investments through his company, and the crypto investments were funded with private assets without the use of loans.
Regarding the nature of the income, the DVB found that capital gains from the sale or exchange of crypto assets could be classified as miscellaneous income under Article 90, first paragraph, 1°, WIB 92. In addition, staking rewards and liquidity rewards were mainly considered movable income, taxed at a rate of 30%. However, when the income does not fall under movable property or capital, it is classified as miscellaneous income and taxed at a rate of 33%.
This ruling provides clarity on the tax treatment of staking and liquidity mining and emphasizes that the exact tax treatment depends on the specific nature of the income.
Tax Obligations
The above rulings make it clear that taxpayers must correctly declare their crypto income in the annual personal income tax return. This means that, unlike dividends where withholding tax is often deducted automatically, the responsibility for declaring crypto income lies with the taxpayer.
It is crucial to stay well-informed about developments in crypto tax regulations. The rules are changing rapidly, and careful filing can help avoid penalties and back taxes.
Conclusion
The recent DVB rulings provide more clarity on the taxation of crypto income, particularly regarding the treatment of income from staking, harvesting, and liquidity mining. These decisions highlight the need for taxpayers to carefully handle their crypto income declarations. Given the complexity and evolving nature of the regulations, it is advisable to seek professional advice. At Aeacus Lawyers, we are ready to guide you in complying with your tax obligations and making the most of your tax opportunities.
If you need assistance, please contact us to discuss your legal options. An appointment can be made via email or through our appointment page.
Christophe Romero Senne Verholle
Comentários