Denmark Tax Authority Inspects Crypto Exchanges to Track Tax Evaders

The Danish Tax Agency (Skat) has recently been authorized to conduct an inspection of three domestic crypto trading platforms.

According to a press release published Monday, Skat has received the Danish Tax Council’s permission to scrutinize a number of crypto exchanges and gather information on traders that have been involved in digital assets investments between 2016 to 2018. The tax authority’s probe is part of a broader initiative to investigate potential tax evaders engaged in crypto trading.

As Skat previously announced in December last year, the tax agency is initiating an inquiry on over 2,700 individuals involved in trading digital assets through an anonymous Finnish crypto exchange. A month into the probe, Skat has concluded that Denmark facilitated crypto trading transactions that may have circumvented the country’s existing tax laws. As such, the tax authority is reportedly gathering information on domestic crypto traders, including names, CPR numbers, addresses, as well as CVR information.

In December 2018, Skat had confirmed that it would enquire 2,700 individuals who traded bitcoins on an unidentified Finnish exchange. Now, after a month, the agency believes that exchanges within Denmark have facilitated untaxed crypto trading. It is reportedly seeking traders’ information, which includes names, addresses, CPR numbers and possibly, CVR data.

According to Skat director Karin Bergen, inspecting a Finnish Bitcoin trading platform is but a minute part of the tax authority’s much broader initiative to look into how traders exploit digital currencies to skirt tax debt.

As Bergen stated:

“With the permission of the Danish Tax Council, we will for the first time gain access to the trades made via the Danish stock exchanges. This gives us completely new opportunities in relation to control in the area. Without going too far, I think you can say that this is a big market that we need to look into.”

While Bergen no longer disclosed any further details about the tax agency’s plans, Skat indicated in its press release that it is preparing a list of possible tax evaders which will subsequently be subjected to a screening process to ascertain whether or not their trading transactions fall under the scope of capital gain taxes.

As Skat underscored in the release:

“Changes will be made on the basis of a specific and individual treatment that clarifies whether the trade must be included in the taxable income.

According to the tax agency, Bitcoin tax is defined as the compulsory contribution to state revenue levied on crypto traders depending on their capital gains.

As the agency further explained:

The profit on the resale [of cryptocurrencies] must be included as personal income. … [and] losses could be deducted as an equalization deduction.”

However, Danish lawyer Payam Samarghandi argued that the tax authority’s current stance negates its own previous statement made in 2014, suggesting that Bitcoin is not a legitimate currency.

Danish parliament member Louise Schack Elholm V begged to differ, explaining that those who invest in digital assets for the purpose of speculating on its value and subsequently generating profits are required to settle capital gain tax.

While Skat did not detail the manner in which it plans to approach the situation, the tax agency stated that it would seek further information, should there be any potential discrepancies on the facts previously provided by crypto traders.