.png)
The taxation of cryptocurrencies is a topic of growing interest in Belgium, as virtual currencies gain prominence in the global economy.
However, Belgian legislation currently remains limited and unclear. In this article, we break down the current tax framework, taxpayer obligations, and the different tax rates applicable based on investor profiles.
A Very Varied International Situation
At the European level, there are countries such as Cyprus, Malta, Estonia, or Slovenia that specifically offer total exemptions on capital gains from cryptocurrencies.
Conversely, many European countries have opted to legislate for specific taxation of cryptocurrency gains. For example, Germany (progressive rate up to 45%), France (fixed rate of 30%), the Netherlands (fixed rate of 31%), Italy (fixed rate of 26%), Spain (progressive rate of 19% to 28%), and Denmark (progressive rate of 37% to 52%).
No Specific Rules in Belgium
Belgium does not fall into either of the aforementioned categories, as it has yet to implement specific tax rules for capital gains on cryptocurrencies.
The applicable Belgian tax rules are based on general laws adopted in the 1990s, well before the emergence of digital assets.
Investors must therefore rely on general principles, which may seem ill-suited to the current complexity of the sector while overlooking certain specific individual situations.
Fortunately, the Service for Advance Decisions, or "ruling" (a department of the tax administration that provides guidelines on how a law should be applied in specific cases), has published a note that currently serves as a reference in the matter. This document qualifies cryptocurrency income as "miscellaneous income," subject to a fixed rate of 33%, but leaves the door open to situations of non-speculative investments, where capital gains are then exempt from tax.
Despite this "ruling," the matter remains a significant source of uncertainty, which can, in some cases, prove advantageous for Belgian investors.
However, the matter is likely to evolve in the medium term. Indeed, negotiators for Belgium's future government are discussing the possibility of introducing a new tax specifically targeting cryptocurrency capital gains.
Taxation of Capital Gains in Belgium
In Belgium, the current tax treatment of cryptocurrency capital gains consists of three main approaches:
- Declared as Professional Income: If capital gains are generated as part of a professional activity, they are considered professional income. Professional traders, for example, will see their capital gains taxed under this category. These gains are subject to the progressive income tax rate, ranging from 25% to 50% (depending on income), in addition to social contributions applicable to professional income.
- Declared as Miscellaneous Income: Capital gains realized by private individuals, outside of any regular professional activity, may be considered miscellaneous income. This mainly concerns operations carried out speculatively or with significant risk (such as leverage or derivatives). These capital gains will be subject to a flat rate of 33%, with the possibility of deducting justified expenses to reduce the taxable amount (such as acquisition or asset maintenance costs).
- No Declaration in the Case of Normal Private Asset Management: Capital gains do not have to be declared as income if they are non-speculative. Managing cryptocurrencies in this context must be done with the intention of preserving or reasonably increasing assets. The concept of normal management is tied to that of the "prudent family man," which leads us to the following crucial point.
The Central Concept of Private Asset Management as a "Prudent Family Man"
It is clear that the concept of normal private asset management is essential in Belgium to determine whether a capital gain is taxable.
The "prudent family man" principle is a guideline that involves prudent, thoughtful, and rational management of one's assets, comparable to what a reasonable individual would do to preserve and grow their wealth.
In practice, a person who manages their cryptocurrencies with a long-term objective, without excessive speculation and with a measured approach, can consider their management as part of normal private asset management. However, each case is unique and will be assessed based on the specific circumstances of the operation:
- Normal Asset Management Operations: If a person performs asset management operations to increase or secure value while respecting principles of prudence and long-term objectives, they can legitimately refrain from declaring the corresponding capital gains. This could include, for example, the occasional sale of cryptocurrencies to adjust or grow a portfolio.
- Speculative Operations: If operations are deemed overly speculative or high-risk (such as active or daily trading), they may be reclassified as professional income or miscellaneous income, as the case may be, and thus become taxable.
To help determine whether a taxpayer's operations fall into the category of normal private asset management or speculative investments, the tax administration's "ruling" service has established a series of questions, such as:
- How many years have you been investing in cryptocurrencies?
- What is the total amount you have invested in cryptocurrencies?
- What is the frequency of your cryptocurrency purchase and sale transactions?
- Do you buy or sell cryptocurrencies through an automated process or software? Did you design this process/software yourself?
- Have you used loans to finance your cryptocurrency purchases?
- Do you rely on advice from financial sector professionals?
- What is your investment strategy for cryptocurrencies?
If the answers generally indicate that you are not taking high risks (leverage, etc.), you are not investing a large part of your capital, you are not using loans for investments, and you are not implementing a professional structure (automated investments, professional advice, etc.), then you can reasonably consider that your profile aligns with that of the prudent family man investor, who therefore does not need to declare capital gains related to cryptocurrencies.
The Important Question of Realizing Capital Gains
In Belgium, even if a taxpayer's investment profile leans more toward that of a speculator or professional, it is important to note that cryptocurrency capital gains are taxed only when gains are realized, that is, when a cryptocurrency is exchanged for fiat currency (euro, dollar, etc.).
If you keep your gains in the form of cryptocurrencies, for example by converting them into "stablecoins" (cryptocurrencies maintaining a stable value by typically pegging their price to fiat currency), you avoid realizing a capital gain, as you are not selling your cryptocurrencies for fiat currency. In this way, you can avoid (or delay) taxation by optimizing the timing of your exit strategy.
Taxation of Other Income from Staking, Farming, Mining, etc.
Income generated from staking, farming, or mining cryptocurrencies is treated differently from capital gains. Depending on the nature of the income and its frequency, taxation will vary:
- Staking and Farming: These practices involve locking cryptocurrencies in a network or lending them, thereby generating recurring income in the form of interest. In Belgium, these incomes are generally considered professional income if they are regular and carried out in a professional context (e.g., as a primary activity or specialized work). In this case, they are subject to professional income taxation, including progressive tax rates (25% to 50%) and social contributions. However, if staking or farming is performed occasionally or as a side activity, these incomes are considered miscellaneous income and subject to a flat tax rate of 33%.
- Mining: Cryptocurrency mining, which involves creating new tokens for a cryptocurrency, generally generates professional income if the activity is regular and carried out professionally (as is often the case since mining requires significant investments in electricity and powerful computers to be profitable). More exceptionally, if mining is occasional, the income may be taxed at a flat rate of 33% (miscellaneous income).
Conclusion
The taxation of cryptocurrencies remains a complex and constantly evolving area. Although the current Belgian legislation is based on often vague general principles, it also offers opportunities for optimization for savvy investors, particularly when it comes to defining the nature of their operations and managing their assets. The prudent management of cryptocurrencies can allow investors to defer or even avoid taxation on capital gains, notably by keeping gains in the form of stablecoins. However, every situation is unique and requires a personalized analysis.
With its expertise in the field, Vanbelle Law Boutique will provide tailored support and ensure compliance and optimization of your operations with Belgian and international tax laws. Our cryptocurrency tax experts are at your disposal to guide you in optimizing your tax strategies to best secure the gains from your investments.
Mirjan Gjoni
Senior Associate
