Crypto Taxes in Finland: An In-Depth Guide
Here is how crypto taxes in Finland work: You pay capital gains tax when you sell, spend, or swap crypto with gains over €1,000, while income tax applies to earnings from services, mining, or crypto-related activities.
However, this is a bit of an oversimplification. In this comprehensive guide, we will explain the ins and outs of crypto taxation in Finland, the optimal method to calculate cost basis and capital gains, ways to reduce your tax burden legally, and how to navigate the reporting process seamlessly.
How Does Vero View Cryptocurrency?
Vero, the Finnish Tax Administration, classifies cryptocurrencies and NFTs as virtual currency.
For tax purposes, your earnings in crypto will be subject to taxation, either as capital gains taxes or income taxes, depending on the specific type of crypto transaction you engage in.
How is Crypto Taxed in Finland?
In Finland, crypto earnings are classified in one of two ways: capital income or general income, depending on the nature of the transaction. However, both have different tax implications.
Here is how crypto taxes in Finland works:
Capital Gain Taxes
Capital gains in crypto occur when you sell, spend, swap, or dispose of your digital assets and realize a profit.
In Finland, all capital gains under €1,000 are tax-free. However:
- Gains exceeding €1,000 but falling below €30,000 are taxed at a fixed rate of 30%.
- For those with profits exceeding €30,000, the tax rate increases to a fixed 34%
Vero also allows taxpayers to offset their capital losses against gains exceeding €1,000 to help reduce tax liability. If you have no immediate losses to offset, even in other forms of capital income, you can carry them forward for up to five years.
Income Taxes
If you earn crypto for selling your services or products, you will be subject to income taxes in Finland. This includes scenarios like receiving crypto as payment for services or a job, mining rewards, play-to-earn crypto game rewards, and selling NFTs. And if you later sell the crypto received as income at a profit, you will be subject to capital gains taxes.
It’s important to note that, unlike other countries, the Finnish Tax Administration (Vero) does not consider staking rewards as general income. Instead, staking rewards are classified as capital gains.
Finland’s income tax rates comprise three components: the national income tax, municipal income tax, and church tax.
- The national income tax rate varies between 12% and 44%, depending on your income bracket.
- The municipal income tax rate ranges from 16.5% to 23.5%
- The church tax rate fluctuates from 1% to 2.1% based on the parish.
Vero provides a useful tax calculator on their official website that helps you determine an estimated tax rate based on your income bracket, your place of residence, and your parish.
How to Calculate Crypto Taxes in Finland
To determine your capital gains or losses, subtract the cost basis (the original purchase price) from the selling price of your cryptocurrency. Let’s illustrate this with examples:
Example 1: You bought Bitcoin for €5,000 and sold it for €7,000. Your capital gain is €2,000.
Example 2: You purchased Ethereum for €2,000 and sold it at a loss for €1,500. Your capital loss is €500.
But to calculate your crypto taxes in Finland, you must first calculate the cost basis of your digital assets. Vero, the Finnish Tax Administration, recommends using the First-In-First-Out (FIFO) accounting method to calculate cost basis.
For instance, if you purchase multiple units of the same crypto and sell some later, FIFO assumes that the earliest acquired coins are the first ones sold, simplifying your calculations.
Example: If you bought Bitcoin for €5,000, then €6,000, and finally €7,000, and you sell some, you’d first sell the €5,000 Bitcoin, then the €7,000 Bitcoin, and lastly, the €6,000 Bitcoin.
Additionally, Vero provides an alternative method known as the deemed acquisition cost basis, which states:
- For crypto held less than 10 years, the deemed acquisition cost is 20% of the sale price
- For crypto held more than 10 years, it’s 40% of the sale price.
This approach can significantly reduce your tax liability, which we’ll delve into shortly.
As you can imagine, keeping track of transactions across various exchanges and wallets can be time-consuming, but Bitcoin.Tax automates the process, making it easier to calculate and report your crypto taxes accurately and efficiently.
For income taxes, the taxable amount is determined by the fair market value of the crypto at the time of receipt. You will pay income taxes based on this value, and if you later sell the crypto at a profit, capital gains taxes will apply.
Crypto Taxable Events in Finland
Although we have outlined the basics of crypto taxes in Finland, sometimes it can get difficult to apply these frameworks to complex crypto transactions, like lending rewards or hard forks. That is why we have listed the most common crypto transactions and their tax implications in Finland below:
Selling or Spending Crypto
Selling or spending crypto is potentially subject to capital gains taxes if the profit exceeds €1,000.
Swapping Crypto
Similar to selling, swapping cryptocurrencies is also considered a disposal event and may be subject to capital gains tax if the profit exceeds €1,000.
Getting Paid in Crypto
Receiving paid in crypto is treated as income and is subject to income tax based on the fair market value at the time of receipt.
Staking or Lending Rewards
Staking and lending rewards are regarded as capital income in Finland, making them subject to capital gains tax.
Airdrops
Although there are no official guidelines, airdrops are likely treated similarly to staking rewards, potentially incurring capital income tax.
Mining Crypto
Mining rewards are considered income and are subject to income tax based on their fair market value at the time of receipt.
Crypto Donations
Currently, there are no specific guidelines for crypto donations. However, it’s unlikely that they qualify as tax-deductible unless made by a corporation to support specific areas like scientific research, arts, or Finnish cultural heritage.
Tax-Free Crypto Transactions in Finland
Gifting Crypto
When you give or get crypto gifts worth less than €5,000, it’s tax-free.
Hard forks
According to explicit guidelines by Vero, hard forks are classified as tax-free events, offering clarity on their non-taxable status.
Buying and Holding Crypto
Simply purchasing and holding cryptocurrency is tax-free as long as you don’t engage in any disposal events.
Transferring Crypto Between Personal Wallets
Transferring cryptocurrency between your personal wallets is considered a non-taxable event, as the ownership of the assets remains unchanged, and there are no disposal events involved.
How to Avoid Crypto Taxes in Finland
When it comes to crypto taxes in Finland, understand that there are no legal ways to avoid them.
As a part of the European Union, Finland enforces strict regulations on crypto exchanges in line with the European Union’s Sixth Anti-Money Laundering Directive. Hence, all crypto platforms operating in Finland must verify the identity of their users. This makes it almost impossible to hide transactions from tax authorities.
Avoiding taxes in Finland can lead to severe consequences, including audits, penalties, fines, and even legal actions. However, there are ways to reduce your tax liability while staying compliant with the law.
Firstly, smaller investors may be exempt from all taxes if their crypto gains fall below the €1,000 allowance.
Besides that, you can explore the Deemed Acquisition Cost Basis Method. As mentioned, this accounting method allows you to reduce your taxable capital gains by applying a lower deemed acquisition cost, which is especially beneficial for long-term investors.
Lastly, consider employing traditional tax-saving strategies like Tax Loss Harvesting. If you have crypto assets that have lost value, you can sell them to generate capital losses. You can then use these losses to offset gains from profitable crypto transactions, reducing your overall tax liability. However, this strategy has its pros and cons.
While you can’t entirely escape crypto taxes in Finland, these strategies offer legal ways to optimize your tax savings and ensure compliance with the law. We suggest you consult a tax professional for personalized guidance based on your unique circumstances.
How to Report Crypto Taxes in Finland
In Finland, the tax year matches the calendar year, starting on January 1st and ending on December 31st. The time to pay your taxes can change, so you should look at the official tax calendar. Usually, you’ll need to file your taxes in April or May.
You can easily report your crypto taxes in Finland online using the MyTax portal provided by Vero,
It’s crucial to maintain detailed records of your crypto transactions to ensure accurate reporting. Consider using tools like Bitcoin.Tax, which can help automate calculations and reporting, simplifying the tax filing process and ensuring compliance with Finnish tax regulations.