Denmark’s National Tax Board Skatterådet has authorized the country’s Tax Administration Skattestyrelsen (SKAT) to inspect the tax records of three domestic crypto exchanges, as indicated in a statement published January 14.
As detailed in the statement, SKAT will be using information gathered from domestic exchanges to determine whether Danish users of the three platforms have settled the appropriate taxes on crypto gains and losses.
The authorization issued by the tax council gives SKAT the power to obtain identifying information, including trader names, addresses, and tax information from the three undisclosed crypto trading platforms, which were asked to surrender details of all crypto transactions facilitated from January 1, 2016 to December 31, 2018.
According to SKAT directorate Karin Bergen, this would be the first time SKAT has been given such comprehensive access to domestic crypto exchanges.
As Bergen explained:
“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 … [and] we now have the opportunity to uncover even more.”
As previously explained by Skatterådet, local crypto exchanges are not required under Danish law to report trade and exchange information. Nevertheless, SKAT filed the request after the council determined that the information are “crucial” to ensure that regulatory compliance with respect to cryptocurrency taxes is observed.
The comprehensive access was granted to SKAT following the investigation initiated on December on 2,700 Danes who failed to report profits or losses on their tax documents after trading Bitcoin on a Finnish crypto exchange from 2015 to 2017.
The investigation was immediately met with opposition, with Danish lawyer Payam Samarghandi disputed the measure, citing Skatterådet’s declaration in 2014 that cryptocurrencies “have almost no link to the real economy,” therefore, the profits generated by traders were not taxable. However, Danish Parliament member and Liberal Party tax rapporteur Louise Schack Elholm V contradicted this, arguing that cryptocurrencies were taxable if they were speculative purchases with the objective to make profit from the short-term market fluctuations.
While it remains unclear how SKAT will face the taxation situation, Bergen noted that it is still too early to make an estimate of the exact number of Danish traders involved and how much cryptocurrencies were traded, as the initial tax adjustments will be issued before summer, according to information from the crypto exchanges.