Tax regulations - virtual assets
With regards to taxation, virtual currencies such as cryptocurrency, digital tokens and other digital assets are considered assets. All income from virtual assets is taxable.
Income from assets is considered capital income and is taxed at a rate of 22 percent.
Virtual assets should be included in the calculation of net wealth tax with the market value as at 1 January in the year after the income year.
Virtual assets fall under the general tax regulations for assets. They are not subject to exemptions and special tax rules that apply to regular currencies (FIAT), shares, bonds, financial instruments or other types of assets with special exemptions. This means, among other things, that the exemption method does not apply to virtual assets, and that the factor for upwards adjustment for share income does not apply.
The tax treatment of virtual assets must be considered for each product/service. The name of the product or service does not affect this assessment.
Example
A return or expense can be considered interest, without it being interest income or interest expense with regards to taxation.
Realisation
Realisation means transfer of ownership rights in exchange for payment and cessation of ownership rights. Typical examples of realisation are sales or exchanges. For example, if you sell a virtual asset and receive settlement in another virtual asset, we consider this taxable realisation. Another example can be that an asset is lost or destroyed. A gift transfer is not considered realisation. See more information regarding realisation in the guide Skatte-ABC (only in Norwegian).
Income from realisation
In the event of a sale or other realisation of virtual assets, you'll have a taxable gain or deductible loss. For virtual assets such as cryptocurrency and other tokens, this means that all transactions between two or more parties will generally be one or more realisations.
The gain/loss on realisation is the difference between output value and input value for the applicable virtual assets, adjusted for any costs linked to the transaction. More information about how to calculate gain/loss.
If you operate an enterprise that trades virtual assets, you should not include the gain/loss on realisation when calculating personal income.
Other income
All income from virtual assets is taxable.
The mining of virtual assets by transaction verification is income regardless of which protocol is being used. Examples of this is proof-of-work (mining) and proof-of-stake.
Other income may arise from, among other things, DeFi (only in Norwegian) and non-fungible tokens (NFT).
If you’ve received virtual assets in connection with forks or similar, the market value at the time of receiving it will be considered income. The market value at the time of receipt can be zero, and this will then be the input value for later calculations of gain/loss on realisation.
Income from mining that is considered business activity will be included in the calculation of personal income for self-employed persons.
Expenses and deductions
If you have expenses in connection with your income from virtual assets, you may have the right to claim a deduction for them. Expenses that you incur when generating income from virtual assets are considered capital expenses. Such expenses can be deducted at a rate of 22 percent. The expenses are usually deducted from the calculated gain/loss or the calculated income from mining, which reduces the taxable income or increases the deductible loss.
You can only deduct expenses related to investments in or income from virtual assets if you can provide documentation of the expenses.
You can can claim a deduction for transaction costs linked to trading and income from virtual assets.
By transaction costs, we mean costs incurred to execute each individual transaction. For cryptocurrency, this may be a set amount or a percentage of the traded amount when you trade at a crypto exchange. Another example is the “gas fee” that you must pay in order to execute a transaction on the Ethereum blockchain.
In many cases, the transaction expenses will be added to your input value when you buy and deducted from your output value when you sell or transfer virtual assets. If the transaction expenses have not been included, you must include them in your gain/loss calculation.
You can deduct expenses incurred when generating income by mining.
Expenses related to mining could, for example, be purchasing machinery, software and electricity. These expenses can be deducted when you calculate taxable income from mining.
Other expenses related to trading and managing virtual assets may also be deductible.
Examples of other expenses are analyst services, software and platform fees.
You cannot deduct expenses that are mainly related to other/private use, such as a laptop.
If the use is divided between other use and activity generating income from virtual assets, you can get a proportionate deduction. This could be a deduction for expenses related to a broadband that you pay for and that is used both privately and for trading virtual assets. If the use linked to trading virtual assets is a quarter of the total usage, you’ll be able to deduct a quarter of the expenses.
If you have been defrauded, the loss may be deducted if you can provide documentation or substantiate that the investment is finally deemed to be lost. This means that you must have tried to recover all or part of your investment.
For us to assess the deduction for loss, you must provide an explanation and documentation showing what your investment was and when the investment was made. This could be contracts or correspondence confirming or substantiating the fraud and related loss.
Examples of relevant documentation could be your transactions in connection with the fraud, emails or other correspondence with the swindler, a police report and mention of the fraud in media or similar.
If you’ve suffered a loss owing to the bankruptcy of a service provider for virtual assets, for example, a crypto exchange, there are several issues that must be considered and resolved before you can claim a deduction for the loss in your tax return.
A precondition for the deduction of losses owing to a bankruptcy is that your claim must be confirmed as a definite loss. This means that both these issues must be clarified:
- the service provider is bankrupt
- you’ll not receive your values back
The service provider has invoked bankruptcy protection
If the service provider has invoked bankruptcy protection, for example, the so-called “Chapter 11” in the USA, this does not equal bankruptcy. All the values will be frozen, and a loss must be expected, but it is not considered a definite loss. Because of the uncertainty associated with the final confirmation of the loss, you cannot claim a deduction for your loss.
First after the service provider has been declared bankrupt and it has been confirmed that you’ll not receive back any of your values, you can claim deduction for your loss.
You cannot claim deductions for unrealised gains
The loss that can be deducted is the input value of your investment. You cannot claim deductions for unrealised gains. This means that any unrealised gains earned in the period up to the bankruptcy cannot be deducted. This is because you have not been taxed for this gain previously.
How to get documentation
For losses in connection with bankruptcy it’s especially important to procure the documentation for the loss. This is because you must be able to provide the documentation if we ask for it, and it’s very difficult to get hold of later.