Breaking: Crypto-assets as capital assets planned from 1.1.2022!

8. October 2021 | Reading Time: 3 Min

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Austria: What tax changes crypto investors can expect next year!

The eco-social tax reform in Austria is to include a fundamental change in the taxation of income from crypto-assets. This emerges from the presentation to the Council of Ministers on 6.10.2021. In order to create legal clarity, an explicit legal regulation on the tax treatment of cryptocurrencies as income from capital assets shall be set up. This is justified by the “de facto convergence of crypto assets with capital assets”. Details are subject to upcoming legislation.

Elimination of the 1-year speculation period

Until now, gains from the sale or swap of crypto-assets (apart from security token, for example) held as private assets for tax purposes have been tax-free after a one-year speculation period. If crypto-assets are now classified as capital assets in accordance with the Council of Ministers’ proposal, this would mean that the one-year speculation period would no longer apply. Profits from trading crypto-assets would then be taxable regardless of the holding period.

Crypto-Tax: Is a transitional arrangement coming?

A number of questions remain unanswered regarding the future tax treatment of crypto-assets as capital assets until the specific draft legislation is available. First of all, it is unclear whether corresponding transitional provisions are planned and how they will look like. It would be possible to differentiate between “old assets” (acquisitions before 1.1.2022 or also before 1.1.2021 (taking into account the one-year speculation period, which was also applied in the regime change in connection with capital income in 2012)) and “new assets” (acquisitions thereafter).

For “old assets”, the tax-free disposal could then be maintained. On the other hand, such a transitional provision could also be omitted for reasons of simplification, which would lead to a – in the result retroactive (!) – tax liability for increases in value that have already occurred but have not yet been realized.

TPA TIP: The sale of crypto-assets until 31.12.2021, for which the 1-year speculation period has already expired at the time of sale, could be advantageous in individual cases from a purely tax perspective in order to realize increases in value that have occurred tax-free. In case of a later reacquisition of crypto-assets, these would then already be subject to the new regime.

Crypto-Assets: Applicable tax rate

Insofar as income in connection with crypto-assets qualifies as income from capital assets, it must further be clarified from a tax perspective whether the special tax rate for income from capital assets of 27.5% is applicable to crypto-assets. If this is not the case, the income resulting from crypto-assets would continue to be subject to the progressive tax rate of up to 55%, but then without tax exemption after the expiry of a speculation period. In particular, the currently existing exemption from the special tax rate for non-securitized derivatives and private loans could be “problematic” for some investment forms of crypto-assets, especially in the DeFi market.

However, it would also be possible that income from trading with crypto-assets would be subject to the special tax rate, certain investment forms of crypto-assets to the progressive tax rate, with the consequence – which is questionable – that a loss compensation would not be possible even within the calendar year. It would be appropriate to regulate such income in relation to crypto-assets in the same schedule.

The structuring of larger crypto trading companies would then also have to be reassessed. While a GmbH is often advantageous for larger trading activities so far, this assessment may change depending on the applicable tax rate.

In a nutshell

The request to the Council of Ministers indicates that the Austrian federal government envisages far-reaching changes for the taxation of crypto-assets, which are to be embedded in the existing taxation system. It remains to be seen how the specific legal provisions will be structured, in particular with regard to any transitional provisions and the applicability of the special tax rate for income from capital assets. Based on the concrete legal provisions, there may be a need for action, for example, with regard to unrealized increase in value of crypto-assets, or also with regard to the advantageousness of crypto trading in a GmbH.

We will be pleased to keep you informed about the planned tax changes for crypto-assets in Austria!



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