The tax treatment of crypto derivatives

The tax rules governing derivative contracts are applied on the tax assessment of crypto-derivative contracts like on other similar contracts that derive value from an underlying asset.

By definition, a “crypto derivative” is a derivative contract where the underlying item is a crypto asset. One of the usual characteristics of crypto derivatives is that when you enter into a contract, you pay the initial investment in the form of crypto assets, not euros.

In general, when taxes are assessed after the outcome of these contracts, there are two distinct events: on the one hand, the taxation of a derivative and on the other hand, a taxable disposal of crypto assets.

This guidance focuses on the tax rules applicable to derivatives. The tax to be paid in connection with sales, disposals, other conveyances of crypto assets is discussed in more detail in the Tax Administration’s guidance Taxation of crypto assets (available in Finnish and Swedish).

Profits are capital income, losses are non-deductible

In general, when you use or exercise a derivative and make a profit, it is income from capital and subject to tax. In the reverse case, when the outcome is a loss, it is not tax-deductible because with transactions involving crypto assets, you are not operating in a regulated market.

If a derivative contract is closed and you make a profit, it will be treated as capital income for you. The amount of the income will be the fair market value of the crypto assets you received. Capital income is assessed at the rate of 30% up to €30,000 and if the income is higher, the capital-income tax rate rises to 34% for the part you receive that exceeds €30,000. Afterwards, you may use the received crypto assets in some way. For purposes of tax calculations, the acquisition cost is the crypto assets’ fair market value at the date when you received them.

Losses from derivatives are not taken into account in tax assessment in any way, as you had made the transactions outside of regulated markets. This means that even if you incurred a loss on the disposal, sale, etc. of a crypto asset involved in a derivative, that loss cannot be deducted from a gain (in the form of a capital loss against a capital gain), nor as a business expense that would normally be tax-deductible.  

For tax purposes, every instance of realising, selling or closing a derivative contract, which gives rise to your tax liability, is treated as a separate transaction. This means that any profits made from derivatives will be taxed as capital income, while losses caused by your trades cannot be deducted from profits. If you enter into crypto derivative contracts, you can therefore lose the capital you had invested and still be liable to pay tax on those of your trades where you make profits.

Declare your income on the pre-completed tax return

Add the profits together and declare the sum total on your pre-completed tax return in MyTax under Other income – Other capital income. To declare your income on paper, submit Form 50B – Capital income and deductions.

No losses and no expenses caused by your derivatives transactions should be declared on the tax return at all, because they cannot be deducted from the profits.

The Tax Administration receives information on foreign-sourced income from third parties. The Tax Administration oversees the way taxpayers fulfil their duty to declare income.