Trading with virtual currencies is extremely popular but its tax treatment in Finland is not clear to every foreigner.
First of all, if you reside in Finland you have to report income from crypto in your Finnish tax return. It is not relevant whether you purchase, hold or sell them outside of Finland.
What also causes uncertainty is how to report income from crypto in your annual tax return. Let’s have a look:
Tax on gains and losses from selling crypto in Finland
Gains from selling crypto are capital income, i.e. you have to pay a 30% tax (34% for the amount above 30 000€) on them. If you incurred losses from selling crypto, they will offset capital gains in your tax calcuation. F.ex. if you sold crypto A with a gain of 100€ and crypto B with a loss of 60€ you pay capital income tax only on the 40€ net capital income.
Exchanging virtual currency into another or using it for payment is treated as selling in terms of taxation.
When calculating gains and losses always remember to include expenses associated with the purchase and sale as well. Such expenses are transaction and broker fees related to the transactions of the crypto in question.
If your transactions were in other currency than euros, you need to calculate the value into euros. Use the Tax Authority’s list of average currency rates in 2022. Please note that the average rate is not always in your favour.
Every investor’s friend: deemed acquistion cost
If your investment’s price has skyrocketed after purchase there is a tax rule in Finland that you’ll love: the deemed acquisition cost. It’s one of the rare gifts the Finnish Tax Authority has for you! It was introduced to support investors to keep shares long-term, but it has the side-effect that you can profit from short-time tenbaggers as well.
Accordingly the gain from every crypto sale will automatically be calculated as below:
– the deemed acquisition cost is 20% of the selling price, if you owned the crypto less than 10 years
– the deemed acquisition cost is 40% of the selling price, if you owned the crypto for 10 years and more
Then the Tax Authority will check for every sale whether the deemed acquisition cost is more favorable for the taxpayer than the real acquisition cost. If so it will be applied automatically, otherwise not. You can only win and don’t even need to claim the more favorable, i.e. higher acquisition cost for your tax calculation!
Most foreigners investing in Finland don’t know this tax rule. It also applies to selling stocks, funds and even shares in a housing cooperative. Keep the deemed acquisition cost rule in mind!
How to report gains and losses of crypto in the tax return
The tax return in MyTax offers two ways to report gains and losses: either every sale one by one or just the totals.
If you report sales one by one the Tax Authority will be able to calculate the total gains and total losses itself. It will also check the deemed acquisition cost for every transaction and apply it if favorable for you. But unfortunately it is not a realistic option to enter hundreds of transactions into your tax return manually.
If on the other hand you count the totals yourself, you run the risk to miss out on deemed acquisition cost in some cases.
Luckily there is an easy to use tool that will provide a reliable report of gains and losses from your transactions according to the rules laid out by the Tax Authority. Affiliate link: Divly is available in English, takes into account the Finnish deemed acquisition cost rule, and supports over 7 000 currencies and 140 exchanges/wallets/blockchains.
Another option is to use the free Tax Administration’s FIFO calculator. It will always check whether the deemed acquisition cost would be favorable for you. Besides that it wil make sure the order of sales of the same virtual currency is according to the FIFO principle. Unfortunately the official calculator does not work automatically and is available only in Finnish and Swedish.
Income from crypto mining and tax in Finland
Income from mining is usually considered earned income in taxation and thus taxed progressively. Mining (proof-of-work protocol) comprises your income in the year, during which a virtual currency was transferred to your virtual currency account. Report this kind of mining income as Other income in the tax return.
On the other hand income from mining (proof-of-stake protocol) is capital income. Report it under the section Other capital income in your tax return.
The above mentioned Divly service can also track your mining income for your tax return.
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.