Income received from the use and mining of virtual currencies is subject to tax. File the income you have received from virtual currencies or cryptocurrencies on your tax return. You can file the expenses on your tax return as deductions.
Virtual currencies include ethereum, tether, litecoin and bitcoin.
Income received from spending and exchanging virtual currencies is taxed as capital gain, which is considered capital income. Taxable income is accrued when
you exchange virtual currency for euros or for some other official currency
you exchange virtual currency for another virtual currency
you use virtual currency to pay invoices
you pay for goods or services with virtual currency.
Income from the mining of virtual currency is usually taxed as earned income.
The value of a virtual currency is the exchange rate in euros that the virtual currency has at the time when it is spent or mined. You can check the value at a well-known cryptocurrency exchange.
File income and expenses on the tax return
Calculate your profits
Estimate your gains and losses from virtual currencies using the Tax Administration’s FIFO calculator. The calculator is available in Finnish and Swedish. The calculator utilises the FIFO principle (First In – First Out) according to which virtual currencies are considered to have been spent in the order that they were acquired.
Enter all your purchases and sales in the calculator. Calculate the gains and losses separately for each sales transaction during the tax year, i.e. every time you have exchanged virtual currency for some other currency or spent it on purchases.
File your income on the tax return
Exchanging and spending virtual currencies
- Report the profits and losses arising from exchanging or spending virtual currency under Capital income – Capital gains in MyTax. Select Virtual currencies as the property type and fill in the required information.
- How to report gains and losses from virtual currencies in MyTax
- Report the income received from mining in the Other income section.
- Enter the expenses related to mining under Deductions - Expenses for the production of income -
Expenses for the production of other income than wage income. These expenses include the costs arising from the increased use of electricity and the acquisition cost, either fully or in part, of any equipment used for mining.
If you submit the information on paper, make sure you use the correct form:
- Report capital gains on Form 9 (Capital gain or capital loss)
- Report earned income received from mining on Form 50A (Earned income and deductions)
- Read more about the pre-completed tax return
Keep your records for 6 years
Do not attach any acquisition, purchase or sales documents to your tax return. You must keep the receipts and other documents for a period of 6 years after the end of the tax year. If necessary, the Tax Administration may ask you to provide the documentation at a later stage.
How to calculate capital gain or capital loss
When exchanging a virtual currency into euros, dollars or another virtual currency, you generate either a capital gain or a capital loss.
When calculating the amount of profit or loss, deduct the following from the selling price of the virtual currency:
- the purchase price of the virtual currency
- expenses associated with the purchase, sale and custody of the virtual currency, such as broker’s fees.
Alternatively, you can use the deemed acquisition cost
If you do not know what the virtual currency’s actual purchase price or purchase date is, capital gain is calculated according to the deemed acquisition cost. As a result, the deemed acquisition cost is deducted from the virtual currency’s selling price, instead of deducting the purchase price and selling expenses from it.
- If you owned the virtual currency you have sold for less than 10 years, the deemed acquisition cost is 20% of the selling price of the virtual currency.
- If you owned the virtual currency you have sold for at least 10 years, the deemed acquisition cost is 40% of the selling price of the virtual currency.
If you do not know what the exact purchase date is, report the virtual currency’s acquisition year on your tax return, as it affects the amount of the deemed acquisition cost. Enter the first date of the year in the Acquisition date field in the calculation of capital gain tax, e.g. 1 January 2013, and leave all other fields blank.
Please note that if you apply the deemed acquisition cost to your calculation, you cannot deduct the purchase price of the virtual currency and selling expenses from the selling price.
Some time ago, Sebastian bought 200 units of the “A” virtual currency at €5 per unit. In other words, the total acquisition cost was €1,000. Sebastian visits an online shop. He buys goods for €1,000 and pays for them with his “A” units. At that time, the virtual currency is valued at €10 per unit. Sebastian has now exercised his position, having exchanged 100 units of his virtual currency “A” for goods.
The transaction, i.e. the trading of virtual currency for goods, triggers tax liability for the realised increase in the value of the virtual currency, and Sebastian makes a taxable capital gain of €1,000 – €500 (= acquisition cost of 100 units of “A”) = €500.
Sebastian reports the capital gain generated from the use of the virtual currency on his tax return as follows:
- Selling date: the date on which he bought the goods with the virtual currency
- Selling price: the value of the virtual currency spent in euros at the time of purchase
- Purchase date: the date on which he acquired the virtual currency
- Purchase price: the value of the virtual currency used to make the purchase in euros on the purchase date
You can check values at a well-known cryptocurrency exchange. Sebastian can also deduct any expenses that were related to his acquisition of virtual currency, such as broker’s fees.
After the transaction, Sebastian is left with 100 units of virtual currency “A” , their acquisition cost equalling €500.
See more examples about the Taxation of virtual currencies
How is income from the mining of virtual currency taxed?
Income from mining is usually earned income (proof-of-work protocol). It comprises your income in the year, during which a virtual currency or other consideration was transferred to your virtual wallet or virtual currency account.
The value of a virtual currency is determined according to the exchange rate it has in euros at the time of mining. In the case of income from mining, you can use the daily or monthly average rate, if required. In valuation, use the period you have chosen consistently, i.e. the daily or monthly average rate, and the values provided by the same exchange throughout the year.
Expenses arising from mining are deductible
Your expenses, if any, that support your mining activity can be deducted from your mining income. For this reason, expenses cannot be later deducted from any capital gain when you exchange or use a virtual currency.
For example, you can deduct costs arising from the increased use of electricity caused by mining from earned income (first, identify the actual increase in electricity costs). You can also deduct the acquisition cost of the equipment used in mining.
You can deduct the following percentages from the equipment acquisition cost:
- 25% when the equipment is used to obtain infrequent mining income
- 50% when the equipment is used to obtain mining income
- 100% when the equipment is used primarily to obtain mining income.
Please note that you need, upon request, to present proof of how often and for what purposes the equipment is used.
Kalle bought a computer at a purchase price of €1,800. He bought the computer for private use but also uses it for mining. Fifty percent of the purchase price, i.e. €900, is considered an expense deductible in tax assessment. Kalle can deduct the whole deductible acquisition cost of €900 on his tax return for the year in which the computer was bought.
Income received from the mining of virtual currencies, and taxable as capital income
One way to obtain some new virtual currency is to block an existing amount for a limited time in order to ensure the integrity and balance of the network’s cryptocurrency ledger. The reward for this can be an increase of 5% per annum (or other comparable percentage) on top of your existing virtual currency, and paid on a daily basis (the proof-of-stake protocol).
In this case, taxation is based on the idea that you are receiving income because you own virtual currency previously. What you own previously is seen as your capital. Accordingly, the amount added to it is capital income.
If you receive this kind of income, enter the amount under “Other capital income”. If you had paid any expenses relating to the production of that income and you claim deduction, enter the amount in “Other deductions from capital income”.
Read more and see examples of the taxation on virtual currencies in the guidance Taxation of virtual currencies