Taxation of investments in cryptocurrencies

The Austrian Federal Ministry of Finance views cryptocurrencies as “other intangible and non-depreciable assets”, and they are not currently recognised as official currencies.

1. Cryptocurrencies held privately

In general, the sale of crypto-assets held privately is only subject to taxation if the time between acquisition and disposal is one year or less. It should be noted that trading between crypto-assets and using cryptocurrency to pay for goods or services are considered to be sales processes, as well as the conventional method of selling currency (i.e. by exchanging virtual currency for euros).

All of these transactions involve an exchange procedure, which for income tax purposes constitutes a purchase and sale transaction. The sale price (of the transferred asset) and purchase price (of the acquired asset) is the market value (usually according to the current exchange rate) of the crypto-asset in question.

Income as a result of such transactions generated within the one-year period is seen as speculation income and subject to income tax at the applicable progressive rate (up to 55%). However, speculation income of up to €440 in a given calendar year is exempt from taxation.

Set-off within a year

In recognising a speculation transaction and the amount of speculation income, the taxpayer can specify the order in which assets are sold by fully allocating the time of acquisition and the acquisition costs. If the sold crypto-assets cannot be allocated in this way, the oldest crypto assets are deemed to be sold first (applying the first in, first out method).

If losses arise in connection with the sale, they can only be set off by profits from other speculation transactions arising within one year. If speculation transactions in a given calendar year result in an overall loss, the loss cannot be set off by other income (and cannot be carried forward to subsequent years).

However, in case of interest-bearing investment of cryptocurrency (e.g. if another market participant has agreed to compensate for loan of the crypto-asset with an additional sum paid as “interest”), any profit from selling the crypto-asset regardless of how long the asset has been held (meaning, usually, even if the asset is sold outside the one-year speculation period) as well as interest realised is taxable as income from capital assets.

In this case, the special tax rate of 27.5% applies. Losses from the sale of interest-bearing crypto-assets can, under certain conditions, be offset against income from capital assets (such as dividends or profit from the sale of securities).

2. Cryptocurrencies held by corporations

In contrast, cryptocurrency acquired or held by companies that are required to present annual financial statements must be measured and recognised in the financial statements, and in case of sale, any resulting profit is subject to corresponding taxation, regardless of the period for which the asset has been held. In addition, the Ministry of Finance views activities such as cryptocurrency mining, operation of an online exchange for crypto-assets, and operation of a cryptocurrency ATM as income from trade.

Whether and to what extent a tax obligation exists with regard to cryptocurrency investments, and under what conditions commercial activity has been realised in connection with crypto-assets can still only be determined on a case-by-case basis. Since the area of cryptocurrency is subject to constant change, making a thorough assessment of potential risks with regard to taxation is essential before committing to an investment.