As part of the Austrian Eco-Social Tax Reform 2022 (Ökosoziale Steuerreform 2022), the taxation of cryptocurrencies in Austria is now included in the existing tax regime for capital assets. The Eco-Social Tax Reform 2022 was passed by the National Council of Austria on 20 January 2022 and published in the Federal Law Gazette on 14 February 2022. The new regulations came into force on 1 March 2022 and are applicable for the first time to cryptocurrencies acquired after 28 February 2021.
Previous tax regulations of cryptocurrencies in Austria
According to the legal situation prior to the Eco-Social Tax Reform Act 2022, income from the sale of cryptocurrencies was taxable pursuant to Section 31 of the Austrian Income Tax Act. This provision concerns speculative transactions, where profits are only taxed if the period between the acquisition and sale is less than one year (speculative period). If cryptocurrencies in Austria were acquired free of charge (e.g. by gift or inheritance), then the date of acquisition by the legal predecessor had to be taken into account.
If speculative losses were incurred, they could only be offset against speculative gains in the same assessment year. Furthermore, income from speculative transactions was tax exempt if it did not exceed EUR 440. However, if this exemption threshold was exceeded, the entire income from speculative transactions was subject to the progressive income tax rate and therefore taxable.
Exchanging a cryptocurrency for another cryptocurrency could also lead to taxation under Section 31 of the Austrian Income Tax Act. In the case of an exchange, the difference between the fair market value of the cryptocurrency given and the acquisition cost was calculated. If there was less than one year between the acquisition of the cryptocurrency and the time of its exchange, it was again a speculative transaction.
However, if cryptocurrencies were interest-bearing, the tax authorities considered them to be capital assets, which were taxable at the special rate of 27.5% according to the Austrian Income Tax Act (both the interest and the gains from the sale).
New tax regulations of cryptocurrencies in Austria
As a result of the Eco-Social Tax Reform Act 2022, the taxation of cryptocurrencies in Austria will now be included in the regime of capital assets pursuant to Section 27 of the Austrian Income Tax Act.
There is now a legal definition of the term cryptocurrency in Section 27b (4) of the Austrian Income Tax Act, which was taken from the Financial Market Money Laundering Act. According to this law, a cryptocurrency is “a digital representation of value that has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a legally established currency and does not have the legal status of a currency or money, but is accepted by natural or legal persons as a medium of exchange and can be transferred, stored and traded electronically.”
This includes publicly offered cryptocurrencies enjoying acceptance as a medium of exchange. It also includes “stablecoins”, whose value depends on the value of an underlying legal currency or other assets through a mechanism. The definition of cryptocurrency does not include “non-fungible tokens” and “asset tokens”, which are based on real assets (e.g. securities, real estate).
Recognised income and determination of income
Extending the basic definition of income from capital assets means income from cryptocurrencies in Austria now includes both current income from cryptocurrencies as well as income from realised gains.
The current income from cryptocurrencies covers:
- fees for the transfer of cryptocurrencies (“lending” – cryptocurrencies are transferred to other market participants and a fee is paid for this),
- acquisition of cryptocurrencies by means of a technical process, in particular, income from “mining”.
Gains and losses from sales (e.g. cryptocurrencies against the euro) and from exchanges against other assets and services, including legally recognised means of payment (e.g. cryptocurrencies against the U.S. dollar) qualify as income from realised gains. The gain or loss from income from such realisation is the difference between the proceeds from the sale and the acquisition costs, whereby incidental acquisition costs (e.g. consulting costs or transaction fees) may also be taken into account.
It is important to note that income from capital assets only exists insofar as the activity does not go beyond pure asset management in terms of type and scope. Otherwise, such income is considered income from business operations.
The acquisition of cryptocurrencies received in the course of staking, airdrops, bounties or hardforks was explicitly excluded from current income. These are only taxable in the course of the actual sale or an exchange for other assets and services, including legally recognised means of payment, whereby one assumes that cryptocurrencies received in this way have an acquisition cost of zero. The income is therefore not already taxable upon receipt of the new cryptocurrency.
The exchange of one cryptocurrency for another cryptocurrency does not constitute a taxable realisation. The acquisition costs of the exchanged cryptocurrency are carried over to the received cryptocurrency units in the absence of a realisation transaction.
Apart from the new definitions and the changes in the determination of income, the new regulations introduce a special tax rate for income from cryptocurrencies in Austria and other far-reaching changes in practice. If you are also interested in reading about these changes, please click here and read the full article on the homepage of WTS Austria, partner firm of WTS Global in Austria.