New legal provisions on the taxation of cryptocurrencies came into force on 01 March 2022. To a limited extent, these rules also apply retroactively to cryptocurrencies acquired from March 2021 onwards.
In conjunction with par. 4a, the (new) sec. 27 par. 1 of the Austrian Income Tax Act (EStG) stipulates that ongoing revenues from cryptocurrencies and revenues from realised increases in the value of cryptocurrencies count as income from capital assets unless these already had to be reported as a main source of income (i.e. operating income or income from salaried employment).
What are cryptocurrencies (within the meaning of the Income Tax Act)?
Sec. 27b EStG provides for further detailed provisions. It also contains a definition of the term, according to which a cryptocurrency is "a digital representation of value which has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a legally established currency and does not have the legal status of a currency or money, but is accepted by natural persons or legal entities as a medium of exchange and can be transferred, stored and traded by electronic means".
The definition of cryptocurrencies thus follows the general understanding of cryptocurrencies. Due to the broad definition, so-called "stablecoins", the exchange rate of which is tied to fiat money (e.g. Tether [USDT], which is pegged to the US dollar) are also included.
However, other crypto assets, such as non-fungible tokens (NFTs), are not included - despite the fact that these have just recently gained in economic importance.
Which transactions are covered by income tax on cryptocurrencies?
Both ongoing revenues ("fruits") and realised capital gains ("appreciation of cryptocurrencies") are now subject to income tax.
The following transactions are subject to income tax on cryptocurrencies as ongoing revenues:
- so-called "lending" (in simple terms: interest on cryptocurrencies due to a lender for borrowing these) as well as
- "mining" (the wording of the law somewhat ponderously refers to this as "the acquisition of cryptocurrencies through a technical process").
Due to an express exception in the law, revenues
- from "staking" (i.e. the acquisition of "new" cryptocurrencies by participation in a staking pool (e.g. on Cardano [ADA]);
- from "airdrops" and "bounties" (where cryptocurrencies are transferred free of charge (airdrops) or for only insignificant other performance (bounties));
- generated as a result of a "hard fork" (where cryptocurrencies are forked from the original blockchain),
are not considered to be ongoing revenues. However, capital gains achieved through such transactions are still taxable; in this context, the acquisition cost is set at nil.
Taxable gains on cryptocurrencies arise if such revenues are generated from the sale of cryptocurrencies or the exchange for other assets and services (e.g. the purchase of an asset against payment in a cryptocurrency).
However, exchanging one cryptocurrency for another cryptocurrency is not considered to constitute "realisation" and is thus explicitly excluded.
As a rule, the difference between the proceeds from sale and the acquisition costs must be recognised as an increase in value (special provisions apply to staking, airdrops, bounties and hard forks; in these cases, the acquisition costs must be recognised as nil). It should also be noted that, even if certain circumstances restrict Austrian legislation regarding capital gains taxation (e.g. the relocation of the taxpayer to a third country), such capital gains are still deemed subject to taxation as disposals.
How much tax is due?
To the extent that revenues from cryptocurrencies constitute taxable income from capital assets, they are in principle subject to a special tax rate of 27.5% pursuant to sec. 27a par. 1 sub-par. 2 EStG, irrespective of the holding period; the special tax rate is in principle also applied to operating revenues from cryptocurrencies unless cryptocurrencies are the mainstay of business activities. If standard tax treatment is not applied for, final taxation of income will be subject to this (special) tax rate, i.e. these revenues do not have to be taken into account in the calculation of income tax, neither in the total amount of revenues nor in income.
From 2024 onwards, domestic debtors and service providers will be obliged to withhold capital gains tax with regard to capital gains from cryptocurrencies.
Under the general provisions there are options to compensate for losses in connection with cryptocurrencies, which can be set off against profits from other capital income (e.g. dividends).
Are there ways to avoid the tax (for the time being)?
One way of avoiding income tax on exchange rate gains (for the time being) although the gains have been realised is an exchange for a stablecoin. Stablecoins are considered cryptocurrencies by definition, so the exchange is not taxable.
However, the exchange of a stablecoin for the corresponding "real" fiat currency will then be subject to income tax as described in this blog post as this transaction is considered to be taxable disposal of a cryptocurrency.
KWR lawyer and tax advisor Thomas Haselberger and KWR lawyer and digitisation expert Alexander Höller will be happy to answer your questions and to assist you in specific individual cases.