From 36% to zero tax rate: The "Trump variable" behind the EU crypto tax reform tearing battle

Original source: hackernoon

Compiled by: Golem, Odaily Planet Daily

President Trump recently announced his plan to hold talks with Putin to end the Ukraine conflict. Trump's recent actions have caught European leaders off guard, and they are now concerned that potential peace negotiations may bypass them. Beyond security issues, the Ukraine conflict has had a significant economic impact on Europe. In this article, we will discuss how Trump's recent actions affect the European economy, including his crypto tax policies, and introduce the existing personal capital gains tax rates for crypto users in the EU.

EU Countries May Impose More Crypto Taxes

The two most important events at the Munich conference were the speeches by U.S. Vice President Pence and European Commission President Ursula von der Leyen. Despite their differing positions, both expressed a lot of views on EU security spending. The EU will need to pay for social welfare in the coming years and increase defense spending. Following a recent informal meeting in Brussels in early February, EU leaders decided they need to invest about €500 billion in defense over the next decade.

At the Munich conference, European Commission President Ursula von der Leyen stated that she would propose activating the exemption clause of EU fiscal rules to increase member states' defense spending. Defense spending by EU countries currently accounts for about 2% of GDP, and by 2024, this figure is expected to rise from €200 billion to €320 billion. Ursula proposed raising this figure to 3%, which would lead to an increase in defense spending by hundreds of billions of dollars, necessitating changes in the economic policies of EU member states. Some countries have also called for the issuance of European bonds to fund the increased defense spending.

Overall, any increase in defense spending could be debt-financed, meaning a significant increase in taxes that would affect all financial sectors, including the cryptocurrency industry.

According to the European Parliament, the EU's post-pandemic economic recovery in 2019 was negatively impacted by the Ukraine conflict. In 2022 alone, the budget impact increased by €175 billion, accounting for about 1.1% to 1.4% of EU GDP. One direct impact has been rising energy prices, leading to increased inflation. To curb inflation, the European Central Bank began raising interest rates. Despite some recovery, including interest rate cuts by the European Central Bank, the EU economy remains in distress.

As Europe plans to increase defense spending, EU cryptocurrency companies and net asset individuals are likely to face higher taxes. Below is an in-depth study of the existing EU cryptocurrency tax landscape.

Current Cryptocurrency Tax Situation in EU Countries

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

Netherlands

In the Netherlands, a 36% tax is levied on assumed gains from cryptocurrency holdings from the previous year.

Denmark

In Denmark, crypto income is taxed in four tiers: national income tax of 12.1% to 15%, municipal tax of 24.982%, labor market tax of 8%, and an average church tax of 0.7%. The combined effective tax rate is 37%.

Finland

Finland has complex crypto tax rules, including a 30% tax on all income exceeding €1,000 and below €30,000. Any additional income is taxed at 32.4%.

Ireland

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

Germany

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

Average Cryptocurrency Tax Rate in the EU

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

Tax Havens for Cryptocurrency in the EU

However, there are also some EU countries with relatively lax regulations on personal cryptocurrency taxes, imposing the lowest taxes on the sale of cryptocurrencies. Here are four EU countries, but there are actually more.

Cyprus

Cyprus is known as a tax haven, friendly to both corporate and personal cryptocurrency activities. The country offers a 0% tax option for long-term holders, while short-term holders must pay a 20% tax.

Romania

In Romania, all cryptocurrency investments enjoy a temporary tax exemption until July 31, 2025.

Germany

In Germany, individuals who hold cryptocurrencies long-term do not have to pay capital gains tax.

Czech Republic

In the Czech Republic, individuals who hold cryptocurrencies for more than three years do not have to pay capital gains tax.

Other Jurisdictions

Poland has a positive attitude towards cryptocurrencies, with a tax rate of 19%. Greece and Bulgaria have a tax rate of 15% on personal cryptocurrency income. Additionally, Luxembourg and Portugal exempt long-term holders (holding for 1 year) from capital gains tax. Among European countries, Malta and Andorra also have low capital tax rates.

Progress on Bitcoin Reserves in EU Countries

At a press conference on January 30, 2025, European Central Bank President Christine Lagarde dismissed the idea of adding Bitcoin to the EU's reserves. She pointed out that Bitcoin is too volatile and closely associated with money laundering. Despite such statements, some EU countries are still considering adding Bitcoin to their reserves.

Norway

Norway's sovereign wealth fund manages over $1.5 trillion in assets and has significant indirect exposure to Bitcoin. Norges Bank Investment Management (NBIM) holds shares in MicroStrategy worth over $600 million.

Czech Republic

Although the Czech Republic is not part of the Eurozone, it is part of the European Central Bank's Governing Council. Central Bank Governor Aleš Michl acknowledged Bitcoin's volatility when discussing the possibility of Bitcoin joining the central bank's assets. Recently, the Czech central bank confirmed it has analyzed the situation of adding new asset classes to its reserves. However, it does not intend to take action until the analysis is complete.

This initiative comes at a time when the Trump administration proposed establishing a Bitcoin reserve. So far in the U.S., Texas and Utah have introduced legislation to include Bitcoin in their treasuries. Utah has passed a favorable vote, while Texas has two pending bills.

Possible Future Scenarios

The European Central Bank may increase its cryptocurrency holdings in the coming months if the Trump administration continues to push its agenda. However, this will not lead to a decrease in the effective tax rate for cryptocurrency investors; as central banks increase their cryptocurrency holdings, the resulting increase in cryptocurrency values may lead to more taxes.

As Trump tightens the trade imbalance between the EU and the U.S., this could deepen Europe's economic difficulties, prompting governments to consider new taxation avenues. In addition to the U.S., the EU's economic relations with Russia and China have also deteriorated, which may lead to increased taxes for EU citizens, with the potential result being that cryptocurrency investors will shift to more friendly countries.

At the same time, if the EU maintains tax incentives, the high taxes in the aforementioned EU member states will lose their effectiveness. If military spending increases, member states' tax policies may unify. But even if this does not happen, the major contributors to the EU's military budget will be forced to seek additional sources of income and further raise taxes.

In this sense, countries like Germany, France, Poland, Italy, Spain, and the Netherlands may face greater risks. Furthermore, such measures may extend to capital income and general financial transactions. Even if these measures are gradually implemented to avoid causing excessive panic among investors, they will still harm the Eurozone's economy.

From the EU's perspective, supporting innovation and capital inflow, including the crypto industry, is absolutely beneficial for member states, but in times of crisis and increased military spending, the choices for EU countries are limited.