Original article from hackernoon
Compiled by Odaily Planet Daily Golem ( @web3_golem )
President Trump recently announced that he plans to hold talks with Putin to end the conflict in Ukraine. Trump’s recent move caught European leaders off guard, and they are now concerned that potential peace talks may bypass them. In addition to security issues, the conflict in Ukraine has also had a huge economic impact on Europe. In this article, we will discuss how Trump’s recent moves affect the European economy, including its crypto tax policy, and introduce the existing EU personal capital gains tax rates for crypto users.
EU countries may impose more crypto taxes
The two most important events of the Munich Conference were speeches by US Vice President Cyrus Vance and European Commission President Ursula von der Leyen. Despite all the differences in their positions, both said a lot about the EUs security spending. The EU will need to pay for social benefits in the coming years and increase defense spending. After the latest informal meeting in Brussels in early February, EU leaders decided that they need to invest about 500 billion euros in defense over the next decade.
At the Munich Conference, European Commission President Ursula von der Leyen said she would propose triggering an exemption clause to the EUs fiscal rules to increase defense spending by member states. EU countries spend a combined 2% of GDP on defense, a figure that would rise from 200 billion euros previously to 320 billion euros by 2024. Ursula proposed raising that figure to 3%, which would result in hundreds of billions of dollars more in defense spending, necessitating changes in the economic policies of EU member states. Some countries have also called for the issuance of European bonds to finance increased defense spending.
Overall, any increase in defense spending will likely be debt-financed, which means a significant increase in taxes, affecting all financial sectors, including the cryptocurrency industry.
According to the European Parliament, the EUs economic recovery after the pandemic in 2019 was negatively affected by the conflict in Ukraine. In 2022 alone, the budgetary impact has increased by 175 billion euros, or about 1.1% to 1.4% of the EUs GDP. One of the direct effects is the increase in energy prices, which has led to higher inflation. In order to reduce inflation, the ECB began to raise interest rates. Despite some recovery, including the ECBs rate cuts, the EU economy is still in trouble.
As Europe plans to increase defense spending, EU cryptocurrency companies and net worth individuals are likely to be subject to higher taxes. Here’s a deeper look at the existing EU cryptocurrency tax landscape.
Current status of cryptocurrency taxation in EU countries
Here are the countries in the EU that impose higher cryptocurrency taxes.
Netherlands
In the Netherlands, a 36% tax is levied on assumed gains from cryptocurrency holdings in the previous year.
Denmark
In Denmark, crypto income is taxed at four levels, namely national income tax of 12.1% to 15%, municipal tax of 24.982%, labor market tax of 8%, and church tax of an average of 0.7%. In total, the actual tax rate is 37%.
Finland
Finland has complex crypto tax rules, which include a 30% tax on all income above €1,000 and below €30,000. For any additional income, a 32.4% tax is imposed.
Ireland
Ireland has a capital gains tax rate of 33% (flat rate).
Germany
For short-term crypto transactions, Germany’s tax rate is 45%.
Average Crypto Tax Rates in the EU
For large European economies, crypto tax rates are already between 20-30%. France imposes a 30% capital gains tax on cryptocurrencies, and Italy and Spain impose a 26% capital gains tax on cryptocurrency profits. Austrias rate is 27.5%, and Belgiums is 25%.
EU Cryptocurrency Tax Havens
But there are also some EU countries that have fairly lax cryptocurrency taxation regulations for individuals, with minimal taxes imposed on the sale of cryptocurrencies. Here are four EU countries, but there are actually more.
Cyprus
Cyprus is known as a tax haven that is friendly to both corporate and personal cryptocurrency activities. The country offers a 0% tax option for individual long-term holders, while short-term holders are subject to a 20% tax.
Romania
In Romania, all cryptocurrency investments enjoy a temporary tax amnesty until July 31, 2025.
Germany
In Germany, long-term cryptocurrency holders are exempt from capital gains tax.
Czech Republic
In the Czech Republic, people who hold cryptocurrencies for more than three years are exempt from capital gains tax.
Other jurisdictions
Poland has a positive attitude towards cryptocurrencies, with a tax rate of 19%. Greece and Bulgaria have a 15% tax rate on personal cryptocurrency income. In addition, Luxembourg and Portugal exempt long-term holders (holding for 1 year) from capital gains tax. Among European countries, Malta and Andorra also have low capital tax rates.
Progress of Bitcoin Reserves in EU Countries
In a press conference on January 30, 2025, European Central Bank President Christine Lagarde rejected the idea of adding Bitcoin to the EU reserves. She stated that Bitcoin is too volatile and is closely associated with money laundering. Despite such statements, some EU countries are still considering adding Bitcoin to their reserves.
Norway
Norway’s sovereign wealth fund, which manages more than $1.5 trillion, has significant indirect exposure to Bitcoin. Norges Bank Investment Management (NBIM) owns more than $600 million worth of MicroStrategy shares.
Czech Republic
While the Czech Republic is not part of the Eurozone, it is part of the ECB’s General Governing Council. Central bank governor Aleš Michl acknowledged Bitcoin’s volatility when discussing its possible addition to central bank assets. Recently, the Czech central bank confirmed that it has analyzed the case for adding a new asset class to its reserves. However, it does not plan to take action until the analysis is complete.
The move comes as the Trump administration has proposed a Bitcoin reserve. So far in the U.S., Texas and Utah have introduced legislation to include Bitcoin in their state coffers. Utah passed a vote in favor, while Texas has two pending bills.
Possible future scenarios
The ECB could increase its cryptocurrency holdings in the coming months if the Trump administration moves forward with its plans. While this would not result in a decrease in the effective tax rate for cryptocurrency investors, the rise in the value of cryptocurrencies caused by central banks increasing their cryptocurrency holdings could lead to more taxation.
As Trump tightens the trade imbalance between the EU and the US, this could deepen Europe’s economic difficulties, leading governments to consider new avenues of taxation. In addition to the US, the EU’s economic relations with Russia and China have also deteriorated, which could also lead to increased taxes on EU citizens, with the potential result that cryptocurrency investors will move to more friendly countries.
At the same time, if the EU maintains its tax incentives, the high taxes in the above EU member states will lose their effectiveness, and if military spending increases, the tax policies of the member states may be unified. But even if this does not happen, the main contributors to the EU military budget will be forced to find additional sources of income and further increase taxes.
In this sense, European countries such as Germany, France, Poland, Italy, Spain and the Netherlands may be at greater risk. In addition, such measures may be extended to capital income and general financial transactions. Even if these measures are implemented gradually to avoid excessive panic among investors, they will still damage the eurozone economy.
From the perspective of the EU’s interests, supporting innovation and capital inflows, including to the crypto industry, is definitely beneficial to member states, but in the context of the crisis and increased military spending, EU countries have less room for choice.
