Finnish Tax Authority Uncovers $31M in Unreported Crypto Gains in 2023

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A local news source revealed that the Finnish Tax Authority has found out that certain individuals engaging in digital asset trading have failed to declare their crypto income tax for the year 2023. The undeclared taxes amounted to €30 million, equivalent to around $31.9 million.

Finnish Authorities Demand Investors to Report Taxes

Several crypto exchanges collaborated with the tax agency to share data via international information-sharing channels, revealing that a significant number of local investors failed to report their 2023 crypto transactions and resulting tax liabilities.

The tax authority is stressing the need to disclose any earnings derived from the employment or extraction of virtual currencies, as well as losses suffered upon their sale.

In Finland, crypto traders and miners face different tax obligations. Traders must report up to one-third (33%) of their cryptocurrency profits for tax, while miners are required to pay taxes on nearly half (44%) of their earnings. The Finnish tax system classifies crypto income as either capital or earned income, with the former being taxed based on gains and the latter being taxed according to regular income rates.

According to the law, not reporting earnings from virtual currencies, including those sold at a loss, goes against tax rules and could result in fines.

Individuals who earned income through virtual currencies in the year 2023 are required, for legal reasons, to correctly report and pay taxes on that income according to tax laws. Failing to do so could result in legal consequences.

Individuals who don’t report their income to the authorities not only have to deal with taxes but also face additional consequences. These include higher taxes, penalties for tardiness, and even potential legal action if they refuse to cooperate.

£10 Million Unpaid Taxes Recovered

Approximately 9,800 investors submitted their tax reports for the tax year 2022, while during the previous year, around 16,000 traders filed and settled their tax liabilities with the tax office for the year 2021.

Mika Siivonen, an expert in tax matters from Finland’s Tax Administration, shared that a smaller number of reported traders could mean a larger group of investors who have yet to submit their tax returns. This situation might suggest that these investors have realized fewer capital gains during the year and sold fewer assets accordingly.

He additionally mentioned that surveillance over clients has become more rigorous after discovering their details in the obtained data from the international database.

Based on the interaction data, the tax authority was able to identify certain investors and they have collectively paid £10 million so far. The remaining £20 million is still owed.

International Data Exchange to Go Global in 2027

Miners and investors have until next month to report and pay their taxes to avoid legal consequences. The due dates for filing the pre-filled tax returns, however, differ. Most wage earners must submit by May 7, 14, or 21.

Starting from 2027, the Finnish Tax Administration is expecting a significant surge in data about investors’ virtual currency deals on international exchanges compared to the present day.

In the future, tax agencies around the world will have the ability to automatically receive information about virtual currencies through global data sharing systems. (Paraphrased version)

Siivonen shared that this procedure would be facilitated by approvals such as the amended Directive 2011/16/EU on taxation administrative cooperation in the EU, known as DAC8, and the crypto-asset reporting framework (CARF), which were passed last year.

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2024-04-22 18:18