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.

A New taxation of cryptocurrencies in Austria bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

Virtual currencies or cryptocurrencies have recently experienced a great boom all around the world. In response to the growth of this industry, more and more countries have started to introduce new regulations for crypto businesses to control the flow of cryptocurrencies and ensure greater transparency in their sourcing and uses.

With the same goal, the Estonian Money Laundering and Terrorist Financing Prevention Act was amended in January 2020. The amendments are due to come into force on 10 March 2020. The deadline for implementing the changes is 1 July 2020 for existing virtual currency activity licence holders. To comply with the new regulations, crypto businesses in Estonia have to meet the requirements described below.

Revision of internal Anti-Money Laundering procedures 

The management must determine whether new business relations are established with persons from outside the European Economic Area or with e-residents.

Data must be identified and verified with the help of information technology (separate regulation applies) where a business relationship is established with an e-resident, with a person from a country outside the European Economic Area, or with someone whose place of residence or registered office is in such a country (unless it is possible to carry out the identification face-to-face).

Appointment of a Compliance Officer 

The Compliance Officer must have the competence, means and access to relevant information across all structural units of the business.

Assessment of experience and business reputation of the management 

The so-called fit & proper test must also be carried out. The Financial Intelligence Unit will require documentation on the management’s level of education (at least secondary education), work experience, character and responsibilities of earlier posts, extra training, etc. The education, knowledge, experience and skills will be evaluated against the responsibilities and area of activity of the managers, in order to assess their ability to understand the risks and carry the responsibility derived from it. A business reputation is presumed to be good until proven otherwise. This is evaluated based on earlier activities such as media coverage, penalties, court dealings, participation in management of companies, etc. Reputation is deemed to be of a more permanent nature than current checks of criminal records, and therefore it is not subject to legal expiry provisions. The prerequisite for an impeccable reputation is the absence of any circumstance precluding a high reputation.

Business in Estonia 

The registered office of the company, the location of the management board and the place of business must be in Estonia. Another option is that a foreign company operates in Estonia through a branch which is registered in the commercial register and has its registered office and head office in Estonia:

• The registered office of the company as seen on the commercial registry is in Estonia.
• The location of the management board is in Estonia, meaning that essential functions of management and the control of money laundering are carried out, including the continuity of functions necessary for conducting business.
• The place of business is the actual location of the business and must include the location of the Compliance Officer. This does not necessarily have to match the registered office address. 

Other requirements

• Existence of a payment account with a credit institution, an electronic money institution, or a payment institution established in Estonia or a Contracting State of the European Economic Area providing cross-border services in Estonia or having established a branch in Estonia.

• The share capital of the company must be at least EUR 12,000. 

The Financial Intelligence Unit has the legal right to revoke an existing licence if it identifies non-compliance, e.g. if crypto businesses do not carry out their activities in Estonia or their management board is not located in Estonia.

Click here if you want to read the full article about the new requirements for Estonian crypto businesses on the homepage of Sorainen, the exclusive partner of WTS Global in Estonia.

A Stricter requirements for crypto businesses in Estonia bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.