Capital gains on cryptocurrencies: what happens under the Belgian tax regime?

Cryptocurrencies have recently attracted a lot of attention, with many investors seeking to benefit from this new trend. Being a recent phenomenon, cryptocurrencies are not yet subject to specific rules in Belgium. Therefore, how are capital gains on cryptocurrencies taxed in Belgium?

1. VAT

With regard to VAT, the European Court of Justice, in case C-264/14, considers “Bitcoin” as a “currency”, which means, according to article 44, §3, 9° of the VAT Code, the purchase or sale of a Bitcoin is VAT exempt. The same principle should therefore apply to all other cryptocurrencies such as Tron, IOTA and Ether.

2. Tax on capital gains

Capital gains in Belgium are usually exempt from tax, provided they are not part of a business activity and are managed with due diligence (i.e. made by a pater familias or by a prudent man acting under the same circumstances). Acting as a pater familias implies normal management of a private estate rather than a business transaction or a speculative activity. The pater familias classification is assessed on a case by case basis.

In this regard, a recent Belgian administrative decision concerning a Belgian resident who developed an application to automatically sell and purchase Bitcoins considered it beyond the scope of a pater familias activity. In this case, the administration considered the activity to be speculation.

When capital gains are not exempt, they are classed as “other income”, which is taxed at 33% (see article 90 of the Belgian Income Tax Code).

The tax administration is likely to face difficulties in obtaining information about cryptocurrency trading. The market is highly opaque and usually operates in outsourced unregulated markets. Taxpayers must therefore declare capital gains in their annual tax returns. Taxpayers will not be able to deduct capital losses.