The taxation of cryptocurrencies in Austria has changed significantly since the tax reform. This article provides a comprehensive guide to the taxation of cryptocurrencies in Austria, based on the latest information and changes.
Key Takeaways about crypto taxes in Austria:
- Old and new holdings: The purchase date of the crypto assets determines whether they belong to the old or new holdings. This distinction is important for the taxation of crypto profits.
- Crypto-to-crypto swap: The swap from one cryptocurrency to another (e.g. from Bitcoin to Ethereum) is tax-free.
- Tax rate of 27.5%: Almost all crypto transactions are now subject to a fixed tax rate. This significantly simplifies the taxation of cryptocurrencies and provides more clarity for investors.
- Taxation of NFTs: Non-fungible tokens will continue to be treated under the old regime. This means that they are subject to a holding period, exemption limits apply and they are taxed at the progressive income tax rate.
- Automatic deduction of capital gains tax: From 2024, capital gains tax will be deducted automatically at a domestic broker or exchange, making it much easier for investors.
Taxing Cryptocurrencies – What You Need to Watch out for!
In Austria, the way cryptocurrencies are taxed depends on when and how the crypto assets were acquired.
Cryptocurrencies purchased before March 1, 2021 are considered speculative transactions and are subject to income tax. A disposal after the one-year speculation period is tax-free. Gains on sales within one year are taxed as income at the progressive income tax rate.
Cryptocurrencies purchased since March 1, 2021 are considered capital assets and are subject to capital gains tax (KESt). Regardless of the holding period, gains from the sale of crypto assets are taxed at a fixed rate of 27.5%.
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New Regulation since March 2022
As part of the tax reform that became effective on March 1, 2022, Austria introduced a number of changes to the taxation of cryptocurrencies. These changes affect both new holdings and old holdings of cryptocurrencies.
New Holdings
New assets refer to crypto assets purchased since March 1, 2021. These fall under the new tax reform and are taxed at a fixed rate of 27.5%. In addition, crypto-to-crypto swaps are tax-free under the new regulation.
Old Holdings
The old holdings refer to crypto assets purchased before March 1, 2021. These fall under the old tax regime and their gains are taxed at the progressive income tax rate. It is important to note that the old regime still applies to NFTs, regardless of when they were purchased.
Advantages of the new crypto tax reform
- Simplification of taxation: With a fixed tax rate of 27.5% for almost all crypto transactions, the taxation of cryptocurrencies is now simpler and clearer.
- Tax-free crypto-to-crypto exchange: The option to exchange cryptocurrencies tax-free is particularly beneficial for traders. An exchange into stablecoins also falls under this regulation and therefore remains tax-free.
- Offsetting losses: Realized losses can be offset against gains from capital transactions. This can reduce the tax burden.
Disadvantages of the new crypto tax reform
- Higher tax rate for some investors: Depending on income, the fixed tax rate of 27.5% could be higher than the progressive income tax rate that investors would have paid under the old regime.
- Distinguishing between old and new holdings: The need to distinguish between old and new holdings can lead to additional complexity and requires careful record keeping.
- No speculation period: The old regulation allowed a tax-free sale after the one-year holding period. This no longer exists, so profits are always taxable.
- No exemption limit: The exemption limit of 440 euros no longer exists. This now only applies to NTFs.
Differentiation by Type of Token
The type of the coin or token purchased can have an influence on how profits are taxed.
Bitcoin, Altcoins, Stablecoins and Co.
Bitcoin, altcoins (alternative cryptocurrencies to Bitcoin) and stablecoins (cryptocurrencies pegged to the value of a fiat currency) are all subject to the new tax reform if they have been purchased since March 1, 2021. This means that gains from the sale of these crypto assets will be taxed at a fixed rate of 27.5%. The exchange from one cryptocurrency to another is tax-free.
Example
1 Bitcoin was bought after March 1, 2021 for EUR 30,000 and later sold for EUR 40,000. The profit from this sale is EUR 10,000. Under the new tax reform, the fixed tax rate of 27.5% applies, resulting in a tax burden of EUR 2,750.
Non-Fungible Token (NFT)
NFTs continue to be taxed under the old rules and are considered other assets, regardless of when they were purchased. After the one-year holding period, the gains are tax-free. If gains are realized within one year of purchase, the progressive income tax rate applies if the exemption limit of EUR 440 is exceeded. If the profit is even one euro above the exemption limit, the entire amount must be taxed.
When are Crypto Profits Taxable?
The new regulation stipulates that profits from cryptocurrencies must be taxed as soon as they are realized. It is important to note that under the new tax reform, the exchange from one cryptocurrency to another is not a taxable event.
Under the old regime, gains from the sale of cryptocurrencies were tax-free if they were held for at least one year. However, this rule is no longer relevant for crypto assets purchased since March 1, 2021.
First in First Out (FIFO)
The “first in first out” method is the calculation method of choice when determining the profits generated. It assumes that the crypto-assets purchased first are also the first to be sold. This is particularly relevant when calculating tax if several purchases of the same cryptocurrency were made at different prices.
The “last in first out” method is also often referred to. However, this is not used in practice and is not accepted by the tax authorities.
Example
Let’s assume that a Bitcoin was first bought for EUR 30,000 and later another one for EUR 40,000. Now a Bitcoin is sold for EUR 50,000. According to the FIFO rule, the Bitcoin bought first was sold. The profit from this sale would therefore be EUR 20,000 (50,000 selling price minus 30,000 purchase price), which is taxed at a rate of 27.5%.
Automatic Taxation – Capital Gains Tax (KESt) Deduction from 2024
Another important aspect of the new tax reform in Austria is the introduction of the automatic deduction of capital gains tax (KESt) from 2024. This means that the tax on profits from the sale of cryptocurrencies will be deducted automatically if the transaction is carried out via a domestic broker or exchange.
This automatic deduction of capital gains tax will greatly simplify the process of taxing cryptocurrencies for many investors, as they will no longer have to take responsibility for calculating and paying the tax on their crypto profits themselves. Instead, the tax is automatically deducted from the amount they receive when selling their cryptocurrencies and transferred directly to the tax office.
It is important to note that this automatic withholding tax deduction only applies to transactions carried out via domestic brokers or exchanges. If cryptocurrencies are traded via a foreign platform, you are still responsible for calculating and paying the tax yourself.
There will also be a change to the calculation method from 2024. Instead of the FIFO method, the moving average price will be used as the basis for calculating the tax burden.
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Avoiding Crypto Taxes in Austria
Evading taxes is illegal. However, there are some legal methods to reduce the tax burden and make investments in cryptocurrencies tax-efficient.
Offsetting losses
Realized losses from cryptocurrencies can be offset against gains from all capital transactions. This can help to reduce the overall tax burden.
Deduct consulting costs
The costs of advice from a tax advisor or lawyer in relation to crypto investments can be deducted as income-related expenses.
Deduct transaction fees
The fees for buying or selling cryptocurrencies can be deducted as expenses. However, under the new rules, fees from crypto to crypto transactions are not deductible as these transactions are tax-free.
Relocation taxation
If you wish to leave Austria and move to another country outside the EU or EEA, you may be subject to exit tax on unrealized gains. In this case, it is important to obtain information and possibly consult a tax advisor.
When do I have to Pay Taxes?
The taxation of cryptocurrencies depends on the type of transaction or activity. Below we take a look at the most common transactions and how they are taxed.
It is important to note that the exact tax rules may vary depending on your individual situation. It is always advisable to consult a tax advisor to ensure a correct tax return.
Trade & exchange
New regulation: The exchange of one cryptocurrency for another is tax-free, but the sale of cryptocurrencies for fiat currency (such as euros or dollars) is taxable.
Old regulation: The progressive income tax rate applies to exchanges/sales within one year. After one year, the sale is tax-free.
Staking
New regulation: Earnings from the staking of cryptocurrencies is tax-free for the time being and is valued at EUR 0 upon receipt. Only the profitable sale is taxed at 27.5%.
Old regulation: Income tax rate applies to inflow and sale within one year. After one year, the sale is tax-free.
Lending
New regulation: Interest from the lending of cryptocurrencies is taxable. The earnings are taxed at 27.5% on receipt, as is the subsequent sale at 27.5% if profits are made.
Old regulation: Income tax rate applies to inflow and sale within one year. After one year, the sale is tax-free.
Liquidity Providing
New regulation: Profits made from the provision of liquidity in liquidity pools are taxable. Rewards are taxed at 27.5% both on inflow and on sale.
Old regulation: Inflow of Rewards is subject to income tax as is the sale within one year. After one year, the sale is tax-free.
Mining
New regulation: Irrespective of the consensus mechanism, tax is levied at a rate of 27.5% on both the inflow and the subsequent sale of the cryptocurrencies.
Old regulation: Income tax rate applies to inflow and sale within one year. After one year, the sale is tax-free.
Airdrops, Forks & Bounties
New regulation: Cryptocurrencies received from airdrops, forks and bounties are taxable and valued at EUR 0 upon receipt. Profits made from the sale are taxed at 27.5%.
Old regulation: The inflow of airdrops is valued at EUR 0 upon receipt. If sold within one year, profits are subject to income tax. After one year, the sale is tax-free. In the case of hard forks, the sale within one year is subject to the income tax rate. After one year, the sale is tax-free.
Crypto income
If cryptocurrencies are received as income, for example through work or as payment for services, income tax applies.
Use of cryptocurrencies for payment
New regulation: If cryptocurrencies are used for payments, for example to buy goods or services, an exchange transaction takes place. Taxes may therefore be incurred on profits realized through the exchange.
Old regulation: The progressive income tax rate applies to an exchange/sale within one year. After one year, profits made are tax-free.
When is Trading Considered a Business?
Whether trading in cryptocurrencies is classified as commercial depends on various factors. These include the frequency and volume of transactions. The intention to make a profit and whether the trading activities are carried out in an organized and business-like manner are also factors as well as significant investments in resources (e.g. mining hardware).
Taxes as a trader
If trading in cryptocurrencies is classified as a business, the profits must be taxed as income from a business. This can lead to a higher tax burden than the taxation of cryptocurrencies as private assets.
When trading derivatives as a private individual (e.g. futures or options) the income generated is considered capital assets. In this case, the profit made is taxable at a fixed tax rate of 27.5%.
It is important to note that the exact tax rules may vary depending on the individual situation.
How does the Federal Ministry of Finance Find out About my Cryptocurrencies?
Exchange of information between countries: Austria participates in the automatic exchange of information between countries. This means that financial institutions in other countries can pass on information about accounts and assets belonging to Austrian citizens to the Austrian tax office.
Notifications from domestic brokers and exchanges: With the introduction of the DAC8 Directive, service providers are obliged to transmit their customers’ data to the competent authorities. This includes in particular the disclosure of KYC (Know-Your-Customer) data and all relevant transaction data of their customers. This directive is also linked to the MICA Regulation.
Self-disclosure: Every citizen is obliged to declare their income, including profits from cryptocurrency trading, in their annual tax return. If errors have been made or income has not been declared correctly, a voluntary disclosure can mitigate the penalty.
It is important to note that tax evasion is a serious offense that can be punished with heavy fines and even prison sentences. It is therefore always advisable to declare all income correctly in your tax return and to consult a tax advisor.
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Taxation of Cryptocurrencies Abroad
Crypto Tax in Germany
Profits from the sale of cryptocurrencies within one year are taxed at the personal income tax rate. After the one-year speculation period, sales are tax-free.
Crypto Tax in Swiss
Profits from private trading in cryptocurrencies are normally treated as tax-free capital gains in Switzerland. However, the tax regulations differ from canton to canton.
Tips on the Taxation of Cryptocurrencies
Taxing cryptocurrencies is tedious, but with the right strategies and tools, the process can be simplified. Here are some tips that can help.
Use tax-simplified exchanges
From 2024, domestic exchanges will have to deduct capital gains tax automatically, which will greatly simplify the process for investors.
Crypto tax consultants
Specialized tax advisors can assist with complex issues and help to calculate taxes correctly and take advantage of all possible deductions.
Careful documentation
It is important to carefully document all crypto transactions. These records are crucial for keeping track and calculating taxes correctly.
Tax declaration with CoinTracking
CoinTracking is the market leader in tax solutions and portfolio tracking for cryptocurrencies. Transactions can be imported automatically and the tax reports are accepted by the tax authorities.
Offsetting crypto profits with losses
Losses from the sale of cryptocurrencies can be offset against gains from the sale of other capital transactions. This can help to reduce the overall tax burden.
Frequently asked questions about crypto taxes in Austria:
Can crypto losses be deducted from tax in Austria?
Yes, realized losses can be offset against gains from other capital transactions. This can help to reduce the overall tax burden.
When do taxes on cryptocurrencies have to be paid in Austria?
Taxes on cryptocurrencies must be paid on sales or income generated. A tax-free sale is no longer possible since the new tax reform.
What is the tax rate for cryptocurrencies in Austria?
A tax rate of 27.5% applies to profits from the sale of cryptocurrencies acquired since March 1, 2021.
Conclusion
The new tax reform brings some changes and also simplification in the taxation of cryptocurrencies. CoinTracking is an excellent tool for tracking and calculating crypto transactions and simplifies the tax process enormously. For complex questions, the full-service tax experts help to calculate and report taxes correctly.
