Unlock the secrets of crypto taxation in Finland: Your ultimate guide for 2023 revealed. Discover the lowdown on crypto capital gains, losses, income, tax calculations, and reporting to Vero. It's all here in our fact checked guide. Let's go!
Yes. Vero - the Finnish Tax Administration, is clear that crypto is subject to tax. You’ll pay tax on capital gains from disposing of crypto by selling, trading, or spending it, as well as Income Tax on earned income from activities such as crypto mining.
The amount of tax you’ll pay depends on your transaction and how much you earn. For capital gains, you’ll pay 30% Capital Gains Tax on crypto gains over €1,000 - provided your total capital gains are less than €30,000. If your capital gains are over €30,000, you’ll pay 34%. As for earned income from crypto, you’ll pay Income Tax at up to 44% depending on your municipality and how much you earn.
Yes, Vero may be able to track your crypto transactions and holdings.
Despite a reputation for anonymity, as crypto has moved closer to the mainstream, governments and tax authorities have started paying attention and regulating crypto exchanges as financial service providers.
In particular, as part of the European Union’s Sixth Anti-Money Laundering Directive, every company that provides financial services to cryptocurrency customers and businesses has to comply with much tougher regulations around customer identification.
This customer data is made available between all EU member states, including Finland.
As well as this, there is a new EU directive proposal on data sharing, known as Dac8, which may take effect soon. Under the proposed directive - it's possible that Vero will have the ability to check whether someone owns crypto, as well as have the authority to look into crypto companies' accounts and gain insight into crypto assets.
And for those tempted to just outright avoid their crypto taxes - don’t. You'll face penalties, interest on any tax due, and even potentially jail time for severe tax evasion, with sentences ranging from four months to four years.
Let’s start with the good news, you won’t always have to pay tax on your crypto transactions in Finland. Certain transactions are tax free, including:
Vero considers crypto as a virtual currency and has provided extensive guidance on the tax implications of various crypto transactions.
In summary, the tax you’ll pay depends on your transaction, but crypto is generally subject to Capital Gains Tax or Income Tax, as well as Gift Tax in specific circumstances. We’ll look at both in detail.
Vero is clear that income received from exchanging crypto is seen as capital income and taxed as a capital gain. Exchanges of crypto according to Vero, include:
So if you sold, swapped, or spent crypto and made a gain, or received staking rewards - you’ll pay Capital Gains Tax. But there are some specific rules regarding how much and when you’ll need to pay.
First of all, every taxpayer in Finland receives a €1,000 allowance on capital gains. That means if your gains (from all assets, not just crypto) are less than €1,000, you don’t need to pay Capital Gains Tax on them.
If you have more than €1,000 - you’ll pay either 30% or 34% tax depending on how much capital income you have.
Not every investment ends with a gain, and if you have a loss, it is considered a capital loss. While nobody likes a bad investment, they are actually good news for your tax bill.
Under Section 50 of the Income Tax Act, you can deduct capital losses from crypto, as long as the total gain is more than €1,000, meaning you can offset your losses against your gains to reduce your overall tax liability.
If you have more capital losses from crypto than gains, you may offset these losses against other types of capital income - for example, from shares.
If you still have more capital losses from crypto with no capital income to offset them against, you may carry forward your losses for up to 5 years to offset against any capital income in that period.
Vero has not released guidance on the tax implications of lost or stolen crypto, whether that’s due to a hack, loss of private keys, or a collapsed exchange.
This said, Vero is quite explicit in their guidance that losses are only considered capital losses when crypto is sold or otherwise disposed of. As such, they may not allow losses due to theft or negligence as deductible capital losses.
You should contact Vero or an experienced crypto accountant in Finland for more information.
To report your crypto gains and losses to Vero, you need to know how to calculate them.
This starts with knowing your cost basis.
Your cost basis is whatever your crypto costs to acquire, plus any allowable fees, for example, purchase or sale fees.
Once you know your cost basis, simply subtract this from your sale price to calculate your capital gain or loss. If you otherwise exchanged your crypto, for example, by selling or spending it, use the fair market value of the crypto in EUR on the day you disposed of it as your sale price instead.
So you know the basics, but what about when you’re dealing with multiple coins or tokens of the same kind?
For example, if you owned 5 ETH, and you’d acquired these at different prices on different dates, and you later sold 1 ETH. How do you know which cost basis to use to calculate your gain or loss? It can have a significant impact on your tax bill.
This is where a cost basis method comes in and Vero is very clear that only the FIFO accounting method is allowed.
The First In, First Out cost basis method is pretty straightforward, it assumes that the first crypto you bought is the first crypto you sell. So you’ll always use the cost basis for the crypto you acquired first for your capital gain or loss calculations.
Vero has specific guidance for investors who cannot determine their cost basis - and it’s known as the deemed acquisition cost method.
This method says investors who cannot determine their original acquisition cost may deduct a fixed percentage of the sale price instead of the purchase price. For crypto held less than 10 years, the deemed acquisition cost is 20% of the sale price. For crypto held more than 10 years, the deemed acquisition cost is 40% of the sale price.
It’s important to note that you must be able to prove, with evidence, that you’re unable to access your original transaction history in order to use the deemed acquisition cost method.
With capital income out the way, let’s take a look at when crypto may be subject to Income Tax.
Vero is clear that there are several instances where crypto is viewed as earned income and subject to Income Tax, including:
If you have any of these transactions, they’ll likely be viewed as earned income and you’ll pay Income Tax on them. The amount of tax you’ll pay depends on how much you earn.
Finland's Income Tax is a progressive tax system that's made up of three different taxes:
You can see the National Income Tax rates for Finland below.
As for municipal taxes - your rate will vary between 4.36% to 10.86% depending on where you live, but the average rate is around 7.40%.
Finally, there’s Church Tax. This is payable by members of the Evangelic Lutheran, Orthodox, and Finnish German churches in Finland on income determined for municipal taxation at a flat rate between 1% to 2.10% depending on the parish.
If you’d like help figuring out what your tax rates will be, Vero has an Income Tax calculator that can help based on your specific circumstances.
It’s easy to calculate crypto income, although time-consuming if you have regular income from crypto. You’ll need to take the fair market value of your income in EUR, also known as the exchange rate. For mining income in particular, Vero says you may either take the daily or monthly average exchange rate, provided you use this method consistently throughout the financial year.
Want to know more about when you won’t pay tax on your crypto?
You won’t pay tax when you buy crypto with euros or another fiat currency. But you do want to keep track of your acquisition costs, including any allowable fees, to help you calculate gains and losses accurately later on.
Waiting for the moon? Good news. You’ll pay no tax while you wait as holding crypto is tax free.
Moving crypto between your own wallets is not viewed as an exchange and therefore you won’t pay tax. However, transfer fees may not be so clear-cut. Learn more about how to deal with transfer fees from a tax perspective.
Vero is clear that coins or tokens received due to a hard fork are tax free upon receipt. However, the tax office is also clear that if you later go on to sell, swap, or spend these coins, you’ll pay Capital Gains Tax on any gain. As well as this, the guidance states that for coins received as a result of a hard fork, the acquisition cost is zero - so your entire proceeds from a sale will be taxable.
In Finland, you can gift and receive a gift up to €5,000 without paying tax. For anything over this amount, the recipient may be liable to pay Gift Tax.
Now let's take a look at the transactions you'll pay tax on, and the tax you'll pay.
Selling your crypto for euros or any other fiat currency is a taxable event. You’ll pay Capital Gains Tax on any gain as a result.
Swapping one cryptocurrency for another - whether that’s coins, tokens, stablecoins, or NFTs - is another taxable event. You’ll pay Capital Gains Tax on any gain as a result.
Vero is clear that as crypto is not viewed as legal tender, spending it counts as an exchange, and therefore any perceived gain is subject to Capital Gains Tax.
Vero guidance views staking rewards as capital gains, not earned income. As well as this, the guidance is clear that the only point a gain is realized for tax purposes is when you gain possession of the new coins or tokens - and that this guidance also applies to other transactions where income is based solely on a gain on previously owned virtual currency. So this guidance may also apply to a variety of DeFi transactions.
Vero is clear that mining rewards are viewed as earned income and subject to Income Tax upon receipt.
To value your mining rewards in EUR, you can take either the daily average market value or the monthly average market value. But you need to be consistent with whichever method you choose.
Vero is one of the few tax offices around the world to release guidance on the tax implications of crypto earned in games. The guidance is clear that play to earn rewards are taxable as earned income - but only at the point the player converts the game's internal currency to fiat currency, virtual currency, or another asset.
Creating and selling NFTs? Vero is clear that this is viewed as earned income, based on the value of the crypto you sold your NFT for at the time of payment.
Meanwhile, if you bought an NFT and later resold it - this would be treated the same as any other crypto to crypto exchange from a tax perspective, and any gain subject to Capital Gains Tax.
Vero has guidance for tax on initial coin offerings (ICOs). The guidance states investors are deemed to have purchased virtual currency and any realized increase in the value of said currency is subject to Capital Gains Tax.
Vero hasn’t released specific guidance on DeFi taxes yet - but that doesn’t mean you won’t pay tax on your DeFi capital gains or earned income. Instead, you need to look at the existing guidance and how it applies to your transactions - or better yet, speak to an experienced crypto tax advisor to help you navigate your tax liability.
The Finnish financial year runs the same as the calendar year, so from January 1st to December 31st each year. This is the period you’ll be reporting on in your tax return.
The deadline for your tax return changes slightly each year depending on when you receive your pre-filled tax return. Generally, you’ll receive your tax return by April of the following financial year, and the due date for your return is mid-may. You can see the full list of dates on the Vero calendar.
Once you’ve calculated your capital gains, losses, and earned income, you can report your crypto to Vero using the myTax platform. Here’s how to report your gains and losses:
You’ll also report any earned income in the other income section of my tax, and you can add any mining expenses in deductions, under expenses for the production of income other than wage income.
Koinly saves you hours by calculating your crypto taxes obligations for you. Here's how easy it is:
Vero is clear that investors should keep records relating to crypto transactions for a minimum of six years including:
Koinly can help you keep excellent records should Vero ever require more information from you.
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