It is no surprise, that the Tax authorities in Belgium, the Special Tax Inspectorate (STI) have begun to monitor investments involving Crypto-Currencies.
The STI have started investigating cases where citizens of Belgium have traded in digital currencies on foreign exchanges, and similar to many other countries around the world, the Belgium tax authorities are checking to see if these investors have been claiming their dealings and paying the 33% Capital Gains tax.
This gain would be reported in the “other income” section on a Belgian tax return.
Belgian tax authorities have found the taxation of Crypto-Currency challenging as every other county has, because the management of these assets takes place on foreign trading platforms and there is no jurisdiction around virtual space… Yet.
Likely, the Belgian tax authorities will follow suit of other countries and tax the gains as a commodity based on the location and / or residence of the trader.
The incentive to report will come in the way of significant penalties and interest when the STI finds the taxpayer before the taxpayer reports.
STI opened the investigations after receiving information from a foreign tax authority about the Crypto-Currency dealings of several Belgian citizens.
Information sharing among all tax authorities increased effective January 1, 2018 with the signing of The Multilateral Competent Authority Agreement (MCAA).
The MCAA is a multilateral framework agreement which provides a standardised and efficient mechanism to facilitate the automatic exchange of information in accordance with the Standard for Automatic Exchange of Financial Information in Tax Matters (Standard).
This new framework avoids the need for several bilateral agreements to be concluded, which means each participating country has ultimate control over exactly which exchange relationships it enters into and that each countries’ standards on confidentiality and data protection always apply.
In case you are ready to deem this framework illegal, the legal basis for MCAA rests in Article 6 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Convention) which provides for the automatic exchange of information between Parties to the Convention, where two Parties subsequently agree to do so.
So as it becomes easier to get information on local citizens from international tax regimes, you can expect government tax authorities, like the STI to continue to approach trading platforms, and other governments directly to obtain more data about Belgian citizens and their transactions related to digital currencies.
In December 2017, the Belgian tax agency, STI, agreed that a 33% withholding amount would be applied to profits and incomes from Belgian citizens who were involved in speculative trading of Bitcoin and other Crypto-Currency.
The tax is imposed on private individuals who trade in digital currencies with the intention of earning profits from the price fluctuations.
When the crypto trading is conducted by a business, or by an individual as a business, the tax rate might be as high as 50%.
Governments believe that Crypto-Currency companies should be obliged to cooperate with tax authorities, or as in the case of the US, where the IRS sent legal requirements to a firm, who were then required to do so by law.
In Belgium, Crypto-Currency are neither legal, nor illegal, however, the government have not announced a comprehensive policy yet, and like other EU Countries, appear to be waiting for a common European policy.
If you have been dabbling in Crypro-Currency, and not reported it on your Canadian Tax return, you should reach out to us at inTAXicating Tax Services, and we can help you amend your return, report the gaims, claim the losses and get filed before the CRA finds you!