In 2023, Finland’s Tax Authority discovered that profits from sales of unreported crypto gains amounted to €30 million. As a result, the nation has mandated reporting income from the sale of mining digital assets. Those who invested in virtual currencies are now required to pay ten million euros in capital income tax. Tax expert Mika Siivonen stated that the amount found last year indicates that the tax supervision is effective. Individuals who have not declared their income are also required to pay tax increases and late penalties, with potential criminal sanctions for failing to do so.
According to the findings from the Finnish Tax Authority, a total of 9,800 customers reported receiving crypto income in 2022, which is lower than the 16,000 customers reported in 2021. Siivonen mentioned that they have been receiving more information from crypto exchanges regarding the crypto transactions of Finnish customers. Despite this, a significant portion of crypto income receivers still fail to declare their income for taxation. The Tax Administration received information from various foreign virtual currency exchanges through international data exchange. It is mandatory for individuals who received income from the use or mining of virtual currencies in 2023 to declare it with a pre-filled tax return.
Income from cryptos in Finland is taxed as capital income, while cryptos received from mining are taxed as earned income. Additionally, virtual currencies sold at a loss must also be declared for taxation. Siivonen explained that when the exchange rates of virtual currencies are low, investors tend to sell fewer holdings or do not declare sales losses for taxation. The Tax Administration emphasized that it is essential for individuals to accurately report their crypto income in order to comply with tax regulations and avoid penalties or criminal sanctions. The effectiveness of the tax supervision in identifying unreported gains highlights the importance of proper reporting of crypto transactions.
In order to address the issue of unreported crypto gains, the Finnish Tax Authority has taken steps to improve its oversight of virtual currency transactions. By receiving more information from crypto exchanges and implementing stricter reporting requirements, the authority aims to increase compliance with tax regulations. The mandate for reporting income from the sale of mining digital assets is part of these efforts to ensure that all crypto income is properly declared and taxed. Failure to comply with the reporting requirements can result in tax increases, late penalties, and even criminal sanctions, underscoring the significance of accurate reporting.
As the number of individuals reporting crypto income in Finland decreases, it is evident that there is still a significant portion of crypto income receivers who fail to declare their earnings for taxation. The exchange of information with foreign virtual currency exchanges through international data exchange has provided the Tax Administration with more insight into the crypto transactions of Finnish customers. Moving forward, it will be crucial for individuals who received income from virtual currencies in 2023 to accurately report their earnings to avoid penalties and potential criminal sanctions. By enforcing stricter reporting requirements and increasing oversight of crypto transactions, the Finnish Tax Authority aims to improve compliance with tax regulations and ensure that all income from virtual currencies is properly taxed.
