Tax treatment of crypto assets
Taxes on income
Crypto assets such as bitcoins are not currently recognised as an official currency. Neither are they usually financial instruments. They are classed as other (intangible) assets. Intangible assets are considered to be non-depreciable.
Crypto assets as part of business assets
If crypto assets are held as part of business assets, the relevant assessment regulations of the Austrian Income Tax Act (Einkommensteuergesetz, EStG) must be observed by companies preparing their balance sheets. Additionally, those of the Austrian Commercial Code (Unternehmensgesetzbuch, UGB) must be observed by profit auditors in accordance with § 5 of the Austrian Income Tax Act. As in the case of intangible assets, these are assigned to fixed or current assets on the basis of their typical corporate function. The documented intention to retain the assets over the long term will determine the allocation to fixed assets. Otherwise, they are regarded as current assets. Therefore, for tax purposes, the annual assessment can result in devaluations as well as in write-ups of assets. A business owner who buys crypto assets (such as bitcoins) on the "stock exchange" and exchanges them there for Euros or another virtual currency may incur exchange rate gains or losses that must be taken into account when determining profits (§ 6 subparagraph 14 lit. a of the Austrian Income Tax Act). The actual value is used in this instance; this usually corresponds with the valid daily rate.
Income tax treatment
With regard to income tax assessment, crypto assets are treated like other, tangible assets and any resulting income is calculated at the applicable rate.
However, if crypto assets are assessed as yielding interest, they are deemed tangible assets in the sense of § 27(3) of the Austrian Income Tax Act. Changes in the value of crypto assets which are assessed as interest-bearing are subject to the special tax rate pursuant to § 27a(1) of the Austrian Income Tax Act (and § 27a(6) of the Austrian Income Tax Act). An interest-bearing investment is deemed to take place when crypto assets are lent to other market participants (private individuals or companies specialising in trading crypto assets). For this purpose, a given quantity of a crypto asset is sent to the crypto-asset-address of the recipient, prompting a change of assignment of the crypto asset. If an additional quantity of crypto assets is pledged pro rata temporis in return for the provision of the crypto asset, this constitutes “interest” and is therefore taxable as income from capital transfers.
Commercial income generated with crypto assets
According to § 23 subparagraph 1 of the Austrian Income Tax Act, income from commercial operations is classed as income from independent, sustainable activity undertaken with the intention of making a profit where this involves participation in general economic transactions that are not defined as agriculture, forestry, nor as income from self-employed work.
The creation of crypto assets (mining) is fundamentally a commercial activity with corresponding tax consequences. The creation of crypto assets is therefore not treated differently from the production of any other economic goods.
Operation of an online exchange for crypto assets
The operation of an online exchange for crypto assets, where these can be exchanged (“bought and sold”) for other crypto assets or for real currencies, is fundamentally regarded as a commercial activity with corresponding tax consequences.
Operation of a crypto asset ATM
The operation of a crypto asset ATM, from which crypto assets can be obtained with cash, is regarded as a commercial activity with corresponding tax consequences.
Crypto assets as part of private assets
Income tax treatment
The income tax treatment of crypto assets held as private assets depends on whether they are interest-bearing. § 27(3) of the Austrian Income Tax Act stipulates whether the crypto assets are deemed an interest-bearing investment. The gained interest, as well as realised changes in value are in this case subject to the special tax rate of 27.5% in accordance with § 27a(1) of the Austrian Income Tax Act. If the income from the sale of bitcoins is subsumed under § 27(3) of the Austrian Income Tax Act, the provisions of § 27a(4) of the Austrian Income Tax Act apply, according to which the moving average price is applied.
If, on the other hand, there is no interest-bearing investment, the selling or exchange of crypto assets is deemed taxable as speculative transaction in accordance with § 31 of the Austrian Income Tax Act if the period between acquisition and disposal does not exceed one year. In the case of assets acquired free of charge, the date of acquisition by the legal predecessor will be taken as the basis. Trading between crypto assets and the exchange of virtual currencies for Euros are both classed as exchange transactions. Exchanging assets involves a purchase and a sale. The selling price (of the given asset) as well as the acquisition cost (of the acquired asset) is classed as the common value (also called market value or individual selling value) of the given asset (see § 31(1) and § 6 subparagraph 14 lit. a of the Austrian Income Tax Act). Where a crypto asset is held in a virtual wallet that has been acquired at different times and at different daily exchange rates, the decisive factor for the existence of a speculative transaction and amount of speculative income in the event of an exchange (“sale”) is which respective “tranche” of the crypto asset has been sold. If the taxpayer can fully assign the respective crypto asset stock with regard to time of purchase and acquisition costs, s/he can determine any order of sale of the (allocatable) “tranche”; if the crypto assets sold cannot be assigned, the oldest crypto assets will be regarded as having been sold first (FIFO method).
Value Added Tax (VAT)
Based on the case law of the Court of Justice of the European Union (CJEU) on bitcoin crypto assets, the following value added tax treatment applies to bitcoins:
Exchange from legal tender to bitcoins and vice versa
The exchange of legal tender (e.g. Euros) for bitcoins or vice versa, is exempted from VAT according to the case law of the CJEU (see CJEU 22/10/2015, Case C-264/14, Hedqvist; UStR 2000 m.no. 759).
Consideration in bitcoins
Supplies or services for which consideration is made in bitcoins shall be treated in the same way as other supplies or supplies or services for which the consideration consists of legal tender (e.g. Euros). The tax base for such supplies or services shall be determined by the value of the bitcoin.
Bitcoin mining is not subject to VAT due to the lack of an identifiable service recipient and in light of CJEU case law (see CJEU22/10/2015, Case C-264/14, Hedqvist).