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Crypto taxed in box 1 or box 3?


Crypto currencies are popular. A question we often get is how will my crypto be taxed? Is crypto taxed in box 1 or box 3? Will I pay capital gain tax on the crypto?

Crypto taxed in box 1 or box 3?

We have a boxing system in the Netherlands to simplify the tax system. Box 1 is for sources of income such as employment, self-employment, freelance. The house that is the main residence is also in this box. It is seen as a source of income, negative income that is. Suddenly the house is fun!

Box 2 is for persons that hold at least 5% of the share capital in a company, or persons who are strongly related to a person that holds at least 5% of the share capital in a company.

Box 3 is for the world wide assets. We tax your world-wide assets, exceeding the threshold of EUR 50.000 a person (2021).

30% ruling holders do not need to worry about Box 2 and Box 3 if their tax return is properly done. Read: have us do your income tax return.

Capital gain tax

First of all, the Netherlands does not know capital gain tax, hence the capital gain will not be taxed in the Netherlands for private individuals.

Crypto taxed in box 1 or box 3?
Crypto taxed in box 1 or box 3?

Box 1 income

Crypto taxed in box 1 if work, effort or knowledge is required to make a profit. What is considered work, effort or knowledge is a grey area. The official line is: when more time is spend on trading than is done for normal asset management. What is normal asset management? The question of this decade. The tax office needs to proof you exceeded normal asset management.

In general, it will be considered work if you spend quite some time trying to get the highest exchange rate possible. Then again, a normal asset manager would do the same. That is the point of being an asset manager.

Box 3 Assets

The normal situation is that your crypto currency is part of your Box 3 assets. In Box 3 you report your worldwide assets like bank accounts, shares, options, property. Crypto is in fact a bank account with a different currency than the EURO currency.

If we replace a crypto by USD and you trade in USD currency, you get a result. If you do that all day and night, it is an effort that makes the result taxed in Box 1.

It is the Dutch tax office that needs to proof your efforts exceed that of normal asset management. If you keep that in mind and you try to act as a normal asset manager, the Crypto is in Box 3.

Box 3 is value is determined per the value per 01-01- relating year, so for 2021 per 01-01-2021. Rough tax rate for 2021 is 1,4%.

Tax is exciting

We think that is exciting. We are excited to assist you with the crypto currency filing in the Dutch income tax return. That said. Each situation is different. Whether your crypto is taxed in box 1. Or is taxed in box 3 is not answered easily without background details. Please reach out to us if you are uncertain how your crypto will be taxed. We would happily explain more about your situation!



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