we are increasingly being asked questions about cryptocurrencies, also known as virtual currencies. We have compiled more information on this page.
What is a cryptocurrency?
The cryptocurrency, also known as the virtual currency, is a digital virtual currency that has grown significantly as one investment product in recent years. The best known of the virtual currencies is Bitcoin, which was born years ago in 2008.
In addition to Bitcoin, there are now hundreds of different virtual currencies and more and more are emerging.
The values of virtual currencies are determined by the market and are greatly affected not only by supply and demand but also by mining costs.
Cryptocurrency in your business accounting
As virtual currencies have gained significant popularity, it is becoming increasingly common for a company to also own virtual currencies. In this case, the virtual currency must also be dealt with in the company’s accounting and here we can be of help.
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Income from cryptocurrency is capital income
In general, it is good to note that transactions related to cryptocurrencies are taxable transactions under the Income Tax Act and the income from them is capital income for the recipient of the income, in which case capital income tax is paid on them.
Incomes from cryptocurrencies
According to the taxpayer’s decisions, revenue is generated from cryptocurrencies in the following situations:
- Exchange of virtual currency into official currency
- The virtual currency is exchanged for another virtual currency
- Virtual currency is used as a means of payment when purchasing services or products
Income from cryptocurrencies is calculated in the so-called FIFO by the procedure by which they are deemed to be used in the order in which they were purchased. To facilitate this calculation, the tax administration has created its own counter, which can be found here: FIFO counter
Losses on cryptocurrencies
As with the income incurred, losses on cryptocurrencies can be taken into account for tax purposes. It is also possible to deduct the losses incurred from the income accrued in connection with taxation. However, it is important to note that they cannot be considered as a deductible disposal loss, for example in the case of listed investments.
Deductions for earnings from cryptocurrencies
It is also often asked whether it is possible to reduce the costs of mining (eg electricity) for tax purposes.
This is subject to the same guidelines as for the deduction of other assets, ie it must be possible to prove that the deduction is complete. Thus, for example, it is not possible to reduce the electricity bill for the entire economy, but it must be possible to specify the share of the electricity bill that is caused by extraction.
Declarations of cryptocurrencies to the taxpayer
The notifier is responsible for making the above notices. The required declarations are made quickly and easily through the tax administration’s electronic transaction channel, ie own tax.
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Further information on taxation can also be found in the taxpayer’s instructions: