Dutch investors urged to declare crypto holdings as tax office's power expands

Lawyers in the Netherlands are urging their clients to rectify their old tax returns and declare their cryptocurrency assets. A new EU directive on data sharing, which is likely to take effect later this year, will give the Dutch tax office, Belastingdienst, the ability to check whether someone owns cryptocurrency. And tax evasion suspicions are best avoided, Trouw reports after speaking to lawyers and advisers about the matter.

To date, collecting tax on cryptocurrencies like bitcoin has primarily been based on good faith. The Belastingdienst trusts that crypto investors report their holdings honestly under the "other assets" heading on their tax returns. But the new EU directive - Dac8 - will very likely give the Belastingdienst the authority to look into cryptocurrency companies' accountancy and gain insight into crypto assets. The tax office already has the power to review this information with banks and pension funds.

There is no longer an easy way for citizens to catch up on making annual income tax declarations about Box 3 assets, which include savings and investments, when they forget to disclose them to the tax office. Many lawyers and financial advisers think it is best to get ahead of the situation by rectifying old tax returns before the tax office lodges accusations regarding tax evasion.

After correcting old returns, cryptocurrency owners will have to pay the overdue tax, plus the interest on it, and a fine. But it does give someone a better chance of a reduced penalty, according to Woody Jansen de Lannoy of Jaeger Advocaten. "That's why I say: step forward yourself," he said to Trouw. Once that happens, the crypto investor is in the clear in the government's eyes.

Dac8 is already on paper and went through the consultation round last year. It is not yet clear whether all parts of the directive will be implemented, but giving the Belastingdienst insight into crypto assets almost certainly will be the rule of law, all the lawyers and advisers Trouw spoke to said. That's partly because it is relatively simple to implement.

Anti-money laundering legislation already requires cryptocurrency companies to keep track of their clients and capital investments. It's just one small step to give the Belastingdienst access to that data.