The tax treatment of the bitcoin in Austria

Published on September 17, 2021

Dealing with cryptocurrency, especially with bitcoin is becoming more and more popular nowadays. However, with the boom of the digital economy, several questions regarding taxes arise as well.

Generally, the tax treatment of bitcoins invested as security shall be simple; A withholding tax of 27.5% on the capital gains is paid by an Austrian credit institution or the Austrian branch of a non-Austrian credit institution as the paying agent. This withholding tax is final, i.e. the income does not have to be included in the income tax return.

On the other hand, not all investments are made as security. Indeed, since cryptocurrency doesn’t exist in physical form, bitcoins are held in a digital wallet. Within this wallet, all transactions are recorded and stored on the blockchain. When bitcoins are held in such a wallet, their tax treatment varies depending on whether the bitcoins are held as private- or business assets.

Tax treatment of bitcoins held as private assets

Under certain conditions, “speculative gains” on privately held bitcoins are taxable. Capital gains from the disposition of privately held bitcoin are only taxable if the sale of them occurs within a year after the acquisition. The following three transactions can be considered as sales:

- exchange of the bitcoins for Euros

- exchange into another cryptocurrency

- exchange for goods/ services

Also, there is a tax exemption limit of EUR 440, - per year. If this is exceeded, the gains must be included in the tax return under the category “other income/speculative transactions” and will be taxed at a progressive income tax rate.

In case transactions with Bitcoins held as private assets lead to losses, these losses can only be offset against profits from other speculative transactions within the same year.

Profits (realized increases in value) from the investment into crypto assets in an interest-bearing manner are subject to income tax at a special rate of 27,5%. An interest-bearing investment takes place when crypto-assets are lent to other market participants. If an additional unit of crypto-asset is granted in return for the loan, this constitutes also an interest that is taxable as income from capital investment.

Furthermore, to fulfill documentation requirements of the tax authority, the transactions have to be accurately recorded (euro value at purchase and sale, date of transaction, etc.). Usually, securities accounts include statements and tax reports. However, since for bitcoins, there is no security deposit available documentation could be challenging. Alternatively, excel sheets or specially designed software could be also provided for administrative purposes.

Tax Treatment of bitcoin held as business assets

If bitcoins are held as business assets - contrary to privately held bitcoins, the holding period is irrelevant for their tax treatment.

The sale profit is always taxed at a progressive rate for individuals (up to 50%) and for corporation taxation at a 25%- corporate income tax rate.

To interest-bearing investments in the business sector, the same rules apply as above mentioned regarding privately held bitcoins.

Tax treatment of mining activities

In this context, mining is understood as the creation of new units of cryptocurrencies.

According to the tax authorities, this activity is to be regarded as business activity and therefore also treated accordingly for income tax purposes, i. e. included in the income tax return.

Within the calculation of the income, the market value of the created units has to be assessed. Furthermore, proportional electricity costs or depreciation of hardware purchased for business purposes could be claimed as operating expenses.

While including the mining activity in the income tax return, it is also necessary to notify the tax authority about the start of the mining activity within a month by a questionnaire.

According to the current case law of the European Court of Justice and the interpretation of tax authorities, the transactions are not subject to VAT thus there is no input tax deduction possible.