Denmark is considering taxing unrealized gains on crypto assets to minimize the difference in tax treatment between digital assets and traditional asset holders.

The Danish Tax Law Council has released an exhaustive 93-page report outlining several recommendations regarding digital asset tax treatment.

The report’s overarching theme is to ensure that digital asset holders are treated similarly to holders of traditional assets such as stocks, real estate, and precious metals.

Among other recommendations, the report advocates for legislation taxing unrealized profits or losses on digital assets held by Danish citizens. Specifically, the proposed legislation would impose a 42% capital gains tax on unrealized profits.

If passed, the law could be enacted as early as January 2026. It would require Danish investors to pay taxes on their Bitcoin (BTC) and other holdings from the date of acquisition, regardless of whether they have sold their assets.

The Danish Tax Law Council explains that the proposed legislation is part of a broader effort to eliminate the “unfair treatment of cryptocurrency investors.” Commenting on the proposal, Denmark’s tax minister, Rasmus Stoklund, said:

Throughout recent years, there have been examples of Danes who have invested in crypto-assets being heavily taxed. The council’s recommendations can be a way to ensure more reasonable taxation of crypto investors’ gains and losses.

Notably, the proposed tax regime envisions a three-tiered tax system for digital assets – namely, Capital Gains Tax, Inventory tax, and Loss Write-Offs.

As mentioned earlier, the Capital Gains Tax aims to bring digital assets in line with the tax treatment of traditional assets by levying a 42% tax rate on unrealized digital asset profits.

Inventory Tax intends to make crypto investors pay taxes on their entire portfolio by a set of data every year, regardless of whether they sold any assets.

Finally, Loss Write-Offs will relieve taxpayers by allowing them to write off losses on profits to reduce their overall tax liability.

These newly proposed tax laws align with Denmark’s stance on digital assets. In 2022, the Danish Supreme Court issued a landmark ruling stating that individuals profiting from digital asset sales, whether acquired through donations or purchases, would be subject to strict tax policies.

Denmark’s decision to streamline crypto taxation mirrors procedures taken by other countries. For instance, Italy recently announced it was considering raising capital gains tax on crypto from 16% to 42%.

Similarly, in August 2024, the New Zealand government introduced a bill that outlined new checks and measures to ensure high tax compliance among crypto asset holders. 

In Japan, opposition party leader Yuichiro Tamaki has promised crypto tax cuts if elected to power. BTC trades at $67,486 at press time, up 2.1% in the past 24 hours.

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