From 36% to zero tax rate: "Trump variable" behind the EU's crypto tax reform war

Original source: hackernoon

Compiled by: Golem, Odaily Planet Daily

President Trump recently announced that he plans to hold talks with Putin to end the Ukrainian conflict. Trump's recent move caught European leaders off guard, and they are now worried that potential peace talks could bypass them. In addition to security issues, the Ukrainian conflict has also had a huge economic impact on Europe. In this article, we will discuss how Trump’s recent moves affect the European economy, including its crypto tax policy, and introduce the existing EU tax rates for personal capital gains for crypto users.

EU countries may impose more crypto taxes

The two most important events of the Munich Conference were the speeches of US Vice President Vance and European Commission President Ursula von der Leyen. Despite their differences in their position, both have expressed a lot about EU security spending. The EU will need to pay social benefits in the coming years and increase defense spending. After a recent informal meeting in Brussels in early February, EU leaders decided they needed to invest about €500 billion in defense over the next decade.

At the Munich conference, European Commission President Ursula von der Leyen said she would propose to launch exemptions to EU fiscal rules to increase defense spending in member states. EU countries spend on defense together accounts for about 2% of GDP, and by 2024, this figure has risen from the previous 200 billion euros to 320 billion euros. Ursula proposes to increase this figure to 3%, which will lead to hundreds of billions of dollars in defense spending, so it is necessary to change the economic policies of EU member states. Some countries have also called for the issuance of European bonds to fund increased defense spending.

Overall, any increase in defense spending could be debt financing, which means a significant increase in tax revenue, affecting all financial sectors, including the cryptocurrency industry.

According to the European Parliament, the EU economic recovery after the epidemic in 2019 was negatively affected by the Ukrainian conflict. In 2022 alone, the budget impact increased by 175 billion euros, accounting for about 1.1% to 1.4% of EU GDP. One of the direct effects is the rise in energy prices, which leads to rising inflation. To reduce inflation, the ECB began raising interest rates. Despite some recovery, including the European Central Bank rate cut, the EU economy remains in a difficult situation.

As Europe plans to increase defense spending, EU cryptocurrency companies and individuals with net worth are likely to be subject to higher taxes. The following is an in-depth study of the existing EU cryptocurrency tax pattern.

Current status of cryptocurrency taxation in EU countries

Here are the countries in the EU that impose higher cryptocurrency taxes.

Netherlands

In the Netherlands, a 36% tax is imposed on assumed earnings held by cryptocurrencies in the previous year.

Denmark

In Denmark, crypto income is divided into four levels of taxation, namely, national income tax of 12.1% to 15%, municipal tax of 24.982%, labor market tax of 8%, and church tax on average 0.7%. Overall, the actual tax rate is 37%.

Finland

Finland has complex crypto tax rules that include a 30% tax on all incomes over €1,000 and below €30,000. A 32.4% tax is imposed on any additional income.

Ireland

Ireland has a capital gains tax of 33% (uniform tax rate).

Germany

For short-term crypto trading, Germany's tax rate is 45%.

The average crypto tax rate in the EU

For large European economies, the crypto tax rate is already between 20-30%. France imposes a 30% capital gains tax on cryptocurrencies, and Italy and Spain impose a 26% capital gains tax on cryptocurrencies' profits. Austria's tax rate is 27.5%, while Belgium's tax rate is 25%.

European cryptocurrency tax haven

But there are also some EU countries that regulate individual cryptocurrencies fairly loosely, and the minimum tax on selling cryptocurrencies is imposed. The following are four EU countries, but there are actually more.

Cyprus

Cyprus is known as a tax haven and is friendly to cryptocurrency activities for both businesses and individuals. The country offers a 0% tax option for individual long-term holders, while short-term holders are subject to a 20% tax.

Romania

In Romania, all cryptocurrency investments are subject to temporary tax amnesty until July 31, 2025.

Germany

In Germany, long-term cryptocurrency holders are not required to pay capital gains tax.

Czech Republic

In the Czech Republic, people who hold cryptocurrencies for more than three years are not required to pay capital gains tax.

Other jurisdictions

Poland is positive about cryptocurrencies with a tax rate of 19%. Greece and Bulgaria tax on personal cryptocurrency income at 15%. In addition, Luxembourg and Portugal exempt long-term holders from capital gains tax (holding for 1 year). Among European countries, capital tax rates in Malta and Andorra are also low.

Progress in Bitcoin reserves in EU countries

At a press conference on January 30, 2025, ECB President Christine Lagarde rejected the idea of ​​adding Bitcoin to the EU reserves. She pointed out that Bitcoin is too volatile and is closely related to money laundering. Despite such a statement, some EU countries are still considering adding bitcoin to their reserves.

Norway

Norway’s sovereign wealth fund manages over $1.5 trillion in funds and has huge indirect Bitcoin exposure. Norwegian Bank Investment Management Corporation (NBIM) owns shares of MicroStrategy worth more than US$600 million.

Czech Republic

Although the Czech Republic is not part of the euro zone, it is part of the ECB General Council. Central Bank Governor Aleš Michl acknowledged the volatility of Bitcoin when discussing the possible addition of Bitcoin to the central bank's assets. Recently, the Czech Central Bank confirmed that it had analyzed the addition of new asset classes to its reserves. However, it does not intend to take action until the analysis is completed.

The move comes as the Trump administration proposes to build a Bitcoin reserve. In the United States, Texas and Utah have introduced legislation to include Bitcoin in their treasury. Utah passed a vote in favor, while Texas has two pending bills.

Possible future situations

The ECB is likely to increase its cryptocurrency holdings in the coming months if the Trump administration continues to advance its plans. But this will not lead to a drop in effective tax rates for crypto investors, and the rise in cryptocurrency value caused by the move may lead to more taxes as central banks increase their holdings of cryptocurrencies.

As Trump tightens trade imbalances between the EU and the United States, this could deepen European economic difficulties, leading the government to consider new ways to tax. In addition to the United States, EU economic relations with Russia and China have also deteriorated, which could also lead to higher tax revenues for EU citizens, with the potential result that cryptocurrency investors will move to more friendly countries.

At the same time, if the EU maintains a tax preferential policy, the high taxes of the above-mentioned EU member states will lose their effect. If military expenditure increases, the tax policies of the member states may be unified. But even if this does not happen, major donors to the EU's military budget will be forced to find additional sources of income and further increase taxes.

In this sense, European countries such as Germany, France, Poland, Italy, Spain and the Netherlands may have greater risks. In addition, such measures may be extended to capital income and general financial transactions. Even if these measures are implemented gradually to avoid over-panic investors, they will still damage the eurozone economy.

From the EU's interests perspective, supporting innovation and capital inflows, including the crypto industry, is absolutely beneficial to member states, but EU countries have less choices in amidst crisis and increased military spending.