Tax Nightmare: 10,000 Bitcoin Trades Net Swedish Man Nearly $1 Million in Taxes

By Linus Dunker, a Swedish crypto trader, was shocked to receive a bill for almost $1 million from the Swedish Tax Agency, claiming that the tax demand is “unreasonable.” The case is one of a growing number of cryptocurrency-related cases being taken up by the agency, with several bitcoin traders receiving tax bills for millions of Swedish kronor since last year.

The STA has increasingly indicated an interest in prosecuting cryptocurrency cases since crypto trading attained popularity in the country. In 2018 alone, the STA opened investigations into the activities of up to 400 Swedish crypto traders – 10 times more than the previous year. STA control coordinator Henrik Kisterud says that last year’s results, which brought to light a number of “unrecognized activities,” would result in more resources being allocated to crypto investigations this year.

Unreasonable Taxation Claims

According to Dunkers, the STA’s tax demands are “unreasonable” because he is being charged 300 percent of his total profits. Between 2014 and 2016, he traded bitcoin worth SEK 25 million (~$2.75) million and made a moderate profit. Now, the tax agency is taxing Dunkers’ profits at the enhanced rate because he did not deduct the price of his initial bitcoin purchase, which was paid in cash. The STA says that, by law, this makes his tax burden higher.

He also claims that in 2014, Swedish tax laws were not clear on where exactly crypto trading fell under, and he thought they would be classified as a “hobby activity.” It wasn’t until 2016, he says, that the tax agency reached out, instructing him to file his crypto trades under the category of capital income.

Following this notification, he included his crypto trades on the tax forms, but since he was still unaware of how exactly to declare the trades, he included a side note agreeing to corrections if his reports were wrong. He claims he got no response until 2018 when the tax agency audited him and decided to tax him at about 300 percent of the profit rather than 30 percent, as he had expected.

Sweden’s Tax Authority Creating a Precedent for Bitcoin Traders?

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Dunker also says that the fact that the STA is treating his trades as business activities rather than personal ones is problematic. Rather than pay the 30% tax for personal capital gains, he must pay more since his trades are classified as business activities. Potentially, this could mean that thousands of Swedish crypto traders are at risk of receiving similar demand notices form the STA.

Dunker, who thinks the STA is trying to force an appeal in an attempt to set a precedent, says he hopes to take out loans and also sell some of his company’s shares to pay off his tax debt before the January 28 deadline. Over the course of the year, he says that he intends to seek help from the public and the crypto community to pursue the legal process to a satisfactory conclusion.

Author: David Hundeyin
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US Regulator Suspends Swedish Crypto Products

American regulator the Securities and Exchange Commission (SEC) issued an immediate suspension order for trading in two Swedish cryptocurrency investment products over the weekend, claiming traders had become confused as to whether the products could be considered as exchange-traded funds (ETFs).

The SEC is opposed to the use of ETFs as a means of investing in cryptocurrencies, and has attempted to ban them altogether from the United States market. A number of companies have been trying to find a way around the regulations, however, as many in the country would like to trade cryptocurrencies in the same way as conventional stocks and shares are bought and sold.

One of the ways was Bitcoin-based ETN (exchange traded note) listed on Nasdaq Stockholm exchange, under the ticker CXBTF, as reported.

However, now, per a statement on the SEC’s website, investors will now be frozen out of trading in XBT Provider AB’s Bitcoin Tracker One CXBTF.PQ CXBTF.PK and Ether Tracker One CETHF.PQ CETHF.PK until September 20 at the earliest.

Although they are not listed on any United States stock exchange, XBT Provider AB’s products are both listed on a Nasdaq-registered exchange in Sweden, and over the counter (OTC) transactions are common in America.

The SEC cited a “lack of current, consistent and accurate information” as its reason for action, and claimed “application materials submitted to enable the offer and sale of these financial products in the United States […] characterize [the products] as ETFs.” The SEC also alleges that “certain trading websites” are currently referring to the products as ETFs.
“During such trading suspension, however, a broker-dealer may engage in activities within the United States solely for the purpose of assisting non-broker-dealer customers with the liquidation of owned positions held as of the date of this order in a transaction (or series of transactions ending with a sale) effected on the Nasdaq Nordic or other trading platform located outside the United States or with non-US persons located outside the United States including the issuer,” the SEC added.

ETNs are close cousins to ETFs (exchange traded funds), but there are some key differences. ETNs are structured products that are issued as senior debt notes, while ETFs represent a stake in an underlying commodity. ETNs are more like bonds in that they are unsecured. ETFs provide investments into a fund that holds the assets it tracks, like stocks, bonds or gold.

Meanwhile, now all eyes are still on the much-discussed VanEck ETF that the SEC is expected to decide on by September 30.

Author: Tim Alper
Image Credit:  iStock/Starcevic