The question has become relevant after the Danish Tax Agency in a significant number of decisions regarding taxation of crypto-assets has stated that taxpayers may have violated some penalty provisions. But what is the law and how many people have actually been penalized for not declaring or incorrectly declaring gains on crypto assets? We focus on that in this article, where the Minister of Taxation has just answered some questions to the Tax Committee on the subject.
"You may have violated some criminal provisions".
This is the wording that the Danish Tax Agency has inserted in a large number of decisions regarding the taxation of cryptocurrency.
The possible consequences of the wording can have far-reaching consequences, which of course can be confusing and worrying for those who receive it. Specifically, this means that the Tax Agency's immediate assessment is that some criminal provisions may have been violated, especially the Criminal Code's provisions on tax evasion, which - depending on the amount evaded and other circumstances - may result in a prison sentence.
If you have received a decision from the Danish Tax Agency that contains the above wording, the Danish Tax Agency will forward the decision to the Danish Tax Agency's criminal case unit. The criminal case unit will then make an actual assessment of whether there are legal factors that indicate that there may be a potential criminal offense. If so, the criminal case unit will send the case to the police, who will initiate an investigation and possibly file charges and indictments.
In other words, there is no actual and in-depth legal assessment of whether criminal provisions have been violated when you receive a decision from the Tax Agency with the above wording. This will only be done subsequently in the criminal case unit and possibly subsequently by the police. Based on our experience, the referral to the criminal case unit is based on objective circumstances such as the amount rather than subjective circumstances such as intent. The latter is decisive for whether there is criminal liability.
But can you go to jail for either not declaring taxable gains from cryptocurrency or declaring them incorrectly? The short answer is yes, but so far no one has been jailed for this reason and only 4 cases have ended in fines.
In a recent answer to the Tax Committee, the Minister of Taxation has provided relevant figures in the area. In his answer - which can be read here - the Minister states that the Tax Agency has sent 200 cases to the criminal case unit. Of these cases, 26 of the cases have been finalized, of which only 4 cases have ended with a fine and none of the cases have led to a prison sentence.
The rules surrounding the taxation of cryptocurrency are complicated and the calculation of taxable gains and losses is difficult. Therefore, the Minister of Taxation has also asked the Tax Law Council to consider new rules in this area, which we have written about here. We always encourage you to seek advice and possibly ask the Danish Tax Agency for a binding answer if you are in doubt about your tax position.
As Denmark's only specialist office within cryptocurrency, Samar Law has extensive experience in advising on matters relating to the taxation of cryptocurrency. If you want advice on taxation of cryptocurrency, we encourage you to contact lawyer Payam Samarghandi at payam@samarlaw.dk or mobile 60793777 for a non-binding conversation.
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