As part of the Eco-Social Tax Reform 2022 (Ökosoziale Steuerreform 2022), the taxation of cryptocurrencies is included into the existing tax regime for capital assets. The Eco-Social Tax Reform 2022 was passed by the National Council on January 20, 2022 and published in the Federal Law Gazette on February 14, 2022.
1. Previous Regulations
According to the legal situation prior to the Eco-Social Tax Reform Act 2022, income from the sale of cryptocurrencies is taxable pursuant to Section 31 Austrian Income Tax Act. This provision concerns speculative transactions, where profits are only taxed if the period between acquisition and sale is less than one year (= speculative period). If cryptocurrencies were acquired free of charge (e.g. by gift or inheritance), then the acquisition date of the legal predecessor had to be taken into account.
If speculative losses were incurred, they could only be offset against speculative gains in the same assessment year (Sec. 31 (4) Austrian Income Tax Act). Income from speculative transactions were furthermore tax-exempt if it does not exceed the amount of € 440. However, if this exemption limit was exceeded, the entire income from speculative transactions was subject to the progressive income tax rate and is therefore taxable.
The exchange of a cryptocurrency for another cryptocurrency could also lead to taxation under Section 31 Austrian Income Tax Act. In the case of an exchange, the difference between the fair market value of the cryptocurrency given and the acquisition cost was calculated. If there was less than one year between the acquisition of the cryptocurrency and the time of its exchange, it was again a speculative transaction.
However, if cryptocurrencies were interest-bearing, the tax authorities considered them to be capital assets, which were taxable at the special tax rate of 27.5% according to
§ 27a Abs 1 Austrian Income Tax Act (both the interest and the gains from the sale).
2. New Regulations
As a result of the Eco-Social Tax Reform Act 2022, taxation of cryptocurrencies will now be included into the regime of capital assets pursuant to Section 27 Austrian Income Tax act.
a) Definition cryptocurrency
There is now a legal definition of the term "cryptocurrency" in Section 27b (4) Austrian Income Tax Act, which was taken from the Financial Market Money Laundering Act. According to Act, a cryptocurrency is "a digital representation of value that has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a legally established currency and does not have the legal status of a currency or money, but is accepted by natural or legal persons as a medium of exchange and can be transferred, stored and traded electronically."
This includes publicly offered cryptocurrencies enjoying acceptance as a medium of exchange. It also includes so-called "stablecoins", where the value depends on the value of an underlying legal currency or other assets through a mechanism. The definition of "cryptocurrency" does not include so-called "non-fungible tokens" (NFT) and "asset tokens", which are based on real assets (e.g. securities, real estate).
b) Recognized income and determination of income
The basic definition of income from capital assets is extended by the newly inserted paragraph 4a. Pursuant to Section 27 (4a) in conjunction with Section 27b Austrian Income Tax Act, income from cryptocurrencies includes both
- current income from cryptocurrencies:
- Fees for the transfer of cryptocurrencies ("lending" - cryptocurrencies are transferred to other market participants and a fee is paid for this);
- Acquisition of cryptocurrencies through a technical process, that is, in particular, income from "mining").
as well as
- income from realized gains:
- Gains and losses from the sale (e.g. cryptocurrencies against euro) and from the exchange against other assets and services, including legally recognized means of payment (e.g. cryptocurrencies against U.S. dollar)
are qualified as income from realized gains. The gain or loss from income from such realization is the difference between the proceeds from the sale and the acquisition costs, whereby incidental acquisition costs (e.g. consulting costs or transaction fees) may also be taken into account.
NOTE: Income from capital assets only exists insofar as the activity does not go beyond pure asset management in terms of type and scope. Otherwise, such income is considered income from business operations.
The acquisition of cryptocurrencies received in the course of staking, airdrops, bounties or hardforks was explicitly excluded from current income. These are only taxable in the course of the actual sale or an exchange for other assets and services, including legally recognized means of payment, whereby one assumes that cryptocurrencies received in this way are acquired at acquisition costs of zero. The income is therefore not already taxable upon receipt of the new cryptocurrency.
The exchange of one cryptocurrency for another cryptocurrency does not constitute a taxable realization. The acquisition costs of the exchanged cryptocurrency are carried-over to the received cryptocurrency units in the absence of a realization transaction.
c) Special tax rate
In the case of natural persons, income from cryptocurrencies is generally subject to the special tax rate of 27.5%. If the special tax rate comes into effect for current income from cryptocurrencies, the limitation of deductibility for income-related expenses applies (Section 20(2) no 3 lit (a) of the Austrian Income Tax Act). The prerequisite for the special tax rate is the existence of a public offering in fact and by law. The option for standard taxation (taxation at the progressive rate) also exists for cryptocurrencies.
d) Capital gains tax deduction
As of January 1, 2024, income from cryptocurrencies is subject to withholding tax deduction. A voluntary withholding tax deduction for the year 2022 and 2023 is possible if
• a domestic service provider or debtor is present,
• who credits the cryptocurrencies or other fees or handles the realization.
If there is no domestic debtor or service provider, then the taxpayers must include the income from cryptocurrencies in their tax return.
e) Exit taxation
With the classification of cryptocurrencies under income from capital assets, the provisions on exit taxation also apply. However, this only applies to new assets (see below). If the Austrian right of taxation is restricted in the course of an outbound relocation, the hidden reserves accrued until the time of relocationmust be taxed within the scope of exit taxation. When determining the income, the difference between the fair market value of the cryptocurrency at the time of the relocation and the acquisition costs must be taken into account. In case of a physical relocation of a natural person to an EU/EEA state, the taxation can be optionally deferred upon application.
f) Loss utilization
By including cryptocurrencies under income from capital assets, income from cryptocurrencies is also included in the general loss compensation for income from capital assets (Section 27 (8) Income Tax Act). According to the general principles, losses from a virtual currency can thus be offset and compensated e.g. with realized stock gains or fund distributions. The offsetting of losses will have to be carried out in the context of the assessment, because an automatic loss offset does not appear to be possible (income from cryptocurrencies is in general not generated via a classic bank deposit).
g) Effective Date Provision
The tax obligation for cryptocurrencies came into force on March 1, 2022 and is applicable to cryptocurrencies acquired after February 28, 2021 (new assets). If cryptocurrencies are acquired after February 28, 2021 and sold before March 1, 2022, the provisions relating to old assets (speculative transactions) still apply. If cryptocurrencies acquired after February 28, 2021 are realized subject to tax between December 31, 2021 and before March 1, 2022 (in particular through sale or exchange), the resulting positive or negative income can be taxed voluntarily (!) using the new rules (27.5% tax rate vs progressive tax rate).
Cryptocurrencies acquired before March 1, 2021 are considered old assets and can therefore (still) be sold tax-neutrally after the expiry of the one-year speculation period within the meaning of Section 31 Ausrian Income Tax Act. Furthermore, it was clarified that for current income from cryptocurrencies - regardless of whether these represent old assets or new assets - the new provisions will always apply as of March 1, 2022.
3. Conclusion
The inclusion of cryptocurrencies under income from capital assets has resulted in far-reaching changes in practice: In particular, the one-year speculation period is no longer applicable and the special tax rate of 27.5% applies. Furthermore, the new regulations lead to a retroactive application of the provisions. In any case, detailed and complete documentation is required in order to distinguish between old and new assets and to have evidence of the original acquisition costs. Overall, however, it is generally a positive development that cryptocurrencies have now explicitly found their way into Austrian tax law and are thus subject to such a specific tax framework
