As the tax filing deadline approaches in the Netherlands, it’s essential to avoid common mistakes when reporting your cryptocurrency assets. The Belastingdienst take crypto taxes seriously, and failing to comply with Dutch tax laws can result in penalties. We’ve compiled a list of five costly crypto tax filing mistakes with tips on how to avoid them.
Not Reporting Crypto on Your Wealth Tax Return
Failure to report crypto taxes in the Netherlands can result in penalties, fines, and legal charges of willful tax evasion. Crypto transactions are not private and are subject to tax. The Belastingdienst consider cryptocurrencies as personal assets, subject to annual taxation under the wealth tax known as “Box 3”. This means that any individual holding crypto assets as personal assets must include cryptocurrency holdings on their wealth tax return, along with other assets that produce income, such as savings accounts and investment funds.
However, if you are professionally involved in cryptocurrencies, including trading and investing, and expect to profit from such a business, you may be subject to income tax under “Box 1”. For detailed information on Dutch crypto tax regulations, refer to our regularly updated comprehensive crypto tax guide.
Failure to Keep a Record of Your Transaction History
Keeping accurate records of all your crypto transactions is crucial for accurate tax reporting. Not keeping a record of your transaction history could result in misreporting earnings or overlooking opportunities to reduce your tax liability. To avoid these mistakes, you must keep detailed records of all your trades, including the date, type of coin, amount, value at the time of the trade, and any associated fees.
As manually capturing this data would be a logistical challenge, Accointing’s crypto portfolio tracking and tax tool can automate all of this for you after connecting your wallets and exchanges via API or CSV. Our crypto tax calculator and the free crypto portfolio tracking feature help you visualize your portfolio’s gains at a glance. You can track the total value of your crypto portfolio in real-time and keep accurate records of your transactions.
Missing out on the Benefits of Tax Loss Harvesting
Many crypto traders fail to take advantage of tax loss harvesting. By not optimizing your crypto taxes, you may miss out on the opportunity to offset short or long-term capital gains tax and reduce your overall tax liability. Tax loss harvesting involves selling crypto assets with unrealized losses to turn them into realized losses that can be claimed on your tax return. This strategy can be beneficial when dealing with volatile cryptocurrencies.
However, it can be challenging to determine which assets to sell and which are in a loss position. This is where a reliable software solution like Accointing’s Tax Loss Harvesting Tool can be helpful. The tool can organize your coins by wallet and tax lots and show you the potential tax impact of selling each asset. You can quickly identify unrealized losses in your coins and sell those that will generate the most significant loss, thus minimizing your tax bill.
Tax loss harvesting is relevant for Dutch crypto traders, given the tax implications of owning and trading cryptocurrencies in the Netherlands. The Dutch tax authorities require crypto traders to accurately report their gains and losses.
Not Reporting Crypto from Airdrops
Airdrops occur when a project distributes free tokens or coins to holders of a specific cryptocurrency. Many crypto investors mistakenly believe that airdrops are not taxable. In fact, the Dutch tax authorities generally consider airdrops and hard forks as taxable events. This cryptocurrency is subject to Box 3 taxation, where the value of the assets received is added to the taxpayer’s other assets and investments and taxed at a flat rate of 31%.
Failing to report these assets can result in penalties and fines from the Dutch tax authorities.
However, once again, if you’re classified as a trader, the crypto assets received from airdrops or hard forks may also be taxed under Box 1.
Failing to Meet the Tax Filing Deadline
The deadline for filing taxes in the Netherlands is April 30th of the following year. Failing to file your taxes on time can result in late filing penalties and interest charges. It’s also important to note that there may be different deadlines for certain types of taxes or situations.
Are you in a hurry to prepare your annual tax return in time? Crypto tax filing can be complex, but staying compliant with Dutch tax laws is essential. Accounting by Glassnode’s crypto tax calculator makes this process manageable, and it’s available in the Netherlands. Simply connect your wallets and exchanges via API or CSV to automate your crypto tax report generation.