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Speculating with bitcoin and altcoins (ethereum, litecoin, ripple, neo, icon, iota, vechain, etc) is hugely popular. Despite the fact that the price varies enormously almost from day to day, many people are purchasing the virtual currency. This should be declared in your income tax return in box 3 in The Netherlands.
Value of bitcoin and altcoins is highly volatile. Fluctuations of dozens of percent per day are no exception. For your income tax return, however, only the value on the reference date of box 3 (1 January) is important. For 2017 income tax return value at 1 January 2017 was approx EUR 950 (for the exact value, take a look at https://coinmarketcap.com , Blockfolio, or your broker account). The fact that current value is many times higher, will only be important for your 2018 return.
Please note! Bitcoin transactions are in principle anonymous. However, you are obliged to declare your possession of them. If you fail to do so and the tax inspector discovers your possession of cryptocurrency, an additional assessment will be imposed on you, plus a hefty fine.
The probability that Tax Authorities will trace your possession is by no means small.
Although they have a whole range of control methods at its disposal, they cannot check transactions and amounts in MyEtherWallet, or at foreign exchanges like Binance, Kucoin, etc.
In the Netherlands, banks are required to give the tax authority access to transactions. And they have agreements about this with foreign banks.
They might ask Dutch companies that exchange fiat to cryptocurrancy (and vice versa) for details of people and transactions.
Additionally, tax authorities can have insight into purchases of a considerable sum. So if, for example you spend part of your bitcoin profit on a new car (e.g. Lambo), tax authorities can ask you to explain how you financed it.
If undeclared income or hidden assets, like bitcoin and altcoins, is suspected, you can also be sent an additional assessment and be fined.
If you have any questions, please contact us.