Danish Supreme Court Sets Precedent with Tax Ruling on Bitcoin Profits

The Supreme Court of Denmark has recently upheld lower court decisions, ruling that profits made from the sale of Bitcoin are taxable. The verdicts, announced on March 30, 2023, involved two different cases where plaintiffs challenged the Danish Ministry of Taxation over perceived unjust taxation on profits from various Bitcoin-related activities.

The first case revolved around a party that acquired Bitcoin through purchases and donations, while the second case dealt with Bitcoin received as gifts or obtained through mining. In both instances, the Supreme Court determined that the profits made from the sale of Bitcoin were taxable, albeit for slightly different reasons.

In the first case, the court concluded that “the purchase of bitcoins must be regarded as having been made for speculative purposes” and, as such, is not tax-free under Section 5(1) (a) of the State Tax Act. In the second case, the court ruled that Bitcoin received as gifts or through mining constituted “turnover in their non-business enterprises,” and the gains made from these enterprises “trigger tax liability.”

The Supreme Court emphasized that Bitcoin is generally acquired with the intent to be sold, and only to a limited extent, to be used as a means of payment. The court further underscored that Bitcoin was speculative in nature and, therefore, subject to the country’s tax law.

These rulings are expected to set a precedent for the tax treatment of crypto investments in Denmark. However, the court did not specify the tax rate applicable to these gains. Denmark is not alone in introducing crypto gain tax regulations, as several other countries have also started to regulate the taxation of cryptocurrency profits.