Brussels set to begin talks on a European crypto-currency tax

The European Commission is preparing to discuss with member states the adoption of a common tax regime for crypto-assets, European officials said. Discussions with national treasuries are expected to begin next year with the aim of ending the differential tax treatment of crypto-currencies across the 27 EU jurisdictions.

The European Union will consider a single tax regime for the income and profits of crypto-currencies.

Brussels’ executive arm, the European Commission, intends to begin discussions with member states’ finance ministries soon to determine whether an EU-wide tax regime for crypto-currencies is warranted, a Politico report revealed Thursday, citing three EU officials.

The discussions are expected to begin in 2023, the sources told the publication. They will focus on sharing best practices, as currently crypto-currency wealth is subject to different taxes in each country. Commenting on the initiative, a Commission spokesperson said:

The difficulties in classifying, valuing and administering crypto-assets pose challenges for tax administrations seeking to tax them fairly and efficiently.

Before implementing a single tax regime, however, the European Union must introduce new requirements for crypto-currency companies to collect details about digital asset owners, whether individuals or businesses, and share them with tax authorities across the EU, the report notes.

This would give tax authorities a clear picture of crypto assets. The European Commission is expected to propose the regulation in December or January, but it is expected to start implementing it in 2026, allowing it to impose the crypto-currency tax the following year.

European institutions have been working on a comprehensive legislative framework for crypto-currencies, called Cryptographic Asset Markets (MiCA), which was approved this summer. Media reports have attributed a delay in its adoption to the need to translate the complex legal document into all official EU languages. MiCA is expected to come into force in 2024.

Currently, member states use different rules to tax income and capital gains from cryptocurrencies, with rates ranging from zero to 33 percent, Politico notes. Authorities in some European countries are revising their policies in anticipation of a possible EU-level decision.

Portugal, for example, which did not tax gains from crypto trading unless they were part of a business activity, now intends to impose a levy on profits from short-term crypto investments starting in 2023. Traders who cash in on crypto gains made in less than a year will face a 28% tax, according to next year’s budget.