Skattestyrelsen, Denmark’s tax agency board, has begun its country-wide crackdown on alleged cryptocurrency tax evaders. As per the blog post of Koinly, a crypto startup, the tax authority has sent out letters to crypto users in the country
Early this year, Skattestyrelsen was authorized by the country’s Tax Council to investigate three crypto exchanges operating domestically. The agency was permitted to get information on crypto trades in preparation for making adjustments to Denmark’s tax treatment for particular cases. Notably, in late 2018, Skattestyrelsen has identified around 2700 Bitcoin (BTC) users with unsettled tax dues on crypto gains.
According to the report, Skattestyrelsen’s letter is requesting Danish crypto traders to present documents showing the background and history of their crypto-related activities. It was also specified that users must disclose the gains and losses they have acquired from 2016 to 2018, in pursuant with the principles of “First In First Out” (FIFO).
FIFO principles serve as a system of inventory valuation, given that all products are sold. The goods would be listed in a chronological order based on when the customers purchased them.
The tax agency also requires crypto users to disclose the reasons behind their purchase of cryptocurrencies, the rates applied for each transaction, as well as their crypto wallets’ documentation.
The crypto exchanges being used in conducting transactions were not missed as well. According to the letter, crypto consumers must provide screenshots of their trading activities. The name of the individual and the agreement on the account creation must be shown as well.
Koinly’s founder, Robin Singh, summarized the content of the letter. In a comment shared with Cointelegraph, he said that Skattestyrelsen requires crypto users to provide a full breakdown of their crypto transactions, complete with reports from the past. Singh emphasized the struggles that crypto users would face when filing tax on their crypto trades since most own several wallets in different crypto exchanges. He noted that figuring out the capital gain for each trade would be a tough thing to do.
However, Singh also voiced out that the letter is just one of the steps that Skattestyrelsen would take against tax evaders. As early as possible, Koinly’s founder asked crypto users to get their affairs in order.
As warned by Denmark’s tax agency, if they found something that does not match, they will chase crypto users and oblige them to provide more information. As for the implication of the letter, Skattestyrelsen said that it’s too early to determine how crypto users would react.