DeFi is short for decentralised finance and covers several services and products in connection with virtual assets, such as cryptocurrency and other tokens used together with decentralised technology.
Many of these services and products present themselves as a type of banking services, where you can take out loans, make deposits, or provide collateral. Some examples of DeFi are Uniswap, Compound, Yearn and Aave.
How to treat DeFi products
As a rule, the same tax rules and principles apply to DeFi products as to virtual assets. This means that all income is taxable. You must determine yourself if your virtual currency has been realised with a gain or loss, or if you’ve had other taxable income, for example, by receiving virtual assets.
Here are some examples:
- The swap/exchange of cryptocurrency and tokens is regarded as realisation.
- The exchange from and into a wrapped token is regarded as realisation.
- A deposit into a liquidity pool in exchange for a liquidity pool token or similar is regarded as realisation
- Yield from the participation in a liquidity pool counts as taxable income. This applies regardless of whether the yield is the result of underlying value and is triggered later through realisation or in other ways as, for example, the receipt of tokens or similar where income is generated at the moment of receipt.
- The receipt of the master token is regarded as income at the moment of receipt and as realisation at a later sale/exchange.
How to enter gain/loss and other income from virtual assets in your tax return
There are two ways of doing this in the card for Virtual assets/cryptocurrency:
- You can either enter the information for each virtual asset/cryptocurrency in a separate card, or
- enter the summarised information for all virtual assets in one card, with an attachment showing the information for each virtual currency and other virtual assets.
Log in to the tax return and select the topic Finance and then the card Virtual assets/cryptocurrency. You’ll find information and guidance on what to do and how to proceed once you’re logged in. There are help texts for every field