From 36% to zero tax rate: The "Trump variable" behind the EU's crypto tax overhaul tear

Author: Ilia Ilinskii

Translation: Odaily Planet Daily Golem

President Trump recently announced his plans to hold talks with Putin to end the conflict in Ukraine. Trump's recent actions have 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 had a significant economic impact on Europe. In this article, we will discuss how Trump's recent actions affect the European economy, including his cryptocurrency tax policies, and introduce the existing EU personal capital gains tax rates for cryptocurrency users.

EU countries may levy more cryptocurrency taxes

The two most important events at the Munich Conference were the speeches by US Vice President Pence and Ursula von der Leyen, President of the European Commission. Despite their differing positions, both expressed extensive views on EU security spending. The EU will need to pay social welfare in the coming years and increase defense spending. Following the recent informal meeting in Brussels in early February, EU leaders decided that they need to invest around 500 billion euros in defense over the next decade.

At the Munich Conference, Ursula von der Leyen, President of the European Commission, stated that she will propose activating exemptions to EU fiscal rules to increase member states' defense spending. EU countries' combined defense expenditure accounts for approximately 2% of GDP, which is projected to increase from the previous 200 billion euros to 320 billion euros by 2024. Ursula proposed raising this figure to 3%, leading to an increase of billions of dollars in defense spending, necessitating a shift in economic policies of EU member states. Some countries are also calling for the issuance of European bonds to fund the increased defense expenditures.

Overall, any increase in defense spending could be debt financed, meaning significant tax increases, affecting all financial sectors including the cryptocurrency industry.

According to the European Parliament, the post-2019 EU economic recovery from the epidemic was negatively impacted by the conflict in Ukraine. In 2022 alone, the budget impact increased by 1750 billion euros, accounting for approximately 1.1% to 1.4% of the EU's GDP. One direct impact is the rise in energy prices, leading to an increase in inflation. In order to reduce inflation, the European Central Bank has started to raise interest rates. Despite some signs of recovery, including the ECB's rate cuts, the EU economy is still in distress.

As Europe plans to increase defense spending, EU cryptocurrency companies and high net worth individuals are likely to face higher taxes. Here is an in-depth study of the current EU cryptocurrency tax landscape.

Current Status of Cryptocurrency Taxation in EU Countries

The following are the countries in the European Union that impose higher taxes on cryptocurrencies.

Netherlands

In the Netherlands, a 36% tax is levied on assumed income from holding cryptocurrencies in the previous year.

Denmark

In Denmark, cryptocurrency income is taxed at four levels, namely national income tax 12.1% to 15%, municipal tax 24.982%, labor market tax 8%, church tax averaging 0.7%. Overall, the effective tax rate is 37%.

Finland

Finland has complex cryptocurrency tax rules, including a 30% tax on all income exceeding 1000 euros and less than 30,000 euros. Any additional income is subject to a 32.4% tax.

Ireland

Ireland has a 33% capital gains tax (flat tax rate).

Germany

For short-term cryptocurrency trades, the tax rate in Germany is 45%.

Average EU crypto tax rate

For large European economies, the cryptocurrency tax rates are already between 20-30%. France levies a 30% capital gains tax on cryptocurrencies, while Italy and Spain impose a 26% capital gains tax on cryptocurrency profits. Austria has a tax rate of 27.5%, while Belgium is at 25%.

EU cryptocurrency tax haven

However, some EU countries have relatively loose personal cryptocurrency tax regulations, with the lowest tax on the sale of cryptocurrencies. Below introduces four EU countries, but in fact, there are more.

Cyprus

Cyprus is known as a tax haven and is very friendly to both corporate and individual cryptocurrency activities. The country offers a 0% tax option for individuals holding cryptocurrencies long-term, while short-term holders are required to pay 20% tax.

Romania

In Romania, all cryptocurrency investments enjoy temporary tax amnesty until July 31, 2025.

Germany

In Germany, individuals who hold cryptocurrencies for a long period are not required to pay capital gains tax.

Czech Republic

In the Czech Republic, people who have held cryptocurrencies for more than three years are exempt from capital gains tax.

Other Jurisdictions

Poland is positive about 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 capital gains tax for long-term holders (holding for 1 year). Malta and Andorra also have low capital tax rates among European countries.

Progress of Bitcoin reserves in EU countries

At a press conference on January 30, 2025, Christine Lagarde, President of the European Central Bank, vetoed the idea of adding Bitcoin to the EU reserves. She pointed out that Bitcoin is too volatile and closely related to money laundering. Despite such a statement, some EU countries are still considering adding Bitcoin to their reserves.

Norway

Norway's sovereign wealth fund manages over $1.5 trillion in assets and has a significant indirect Bitcoin exposure. Norges Bank Investment Management (NBIM) owns over $600 million worth of MicroStrategy shares.

Czech Republic

Although the Czech Republic is not part of the euro area, it is part of the European Central Bank's Governing Council. Aleš Michl, the governor of the central bank, acknowledged the volatility of Bitcoin when discussing the possibility of Bitcoin joining the central bank's assets. Recently, the Czech central bank confirmed that it has analyzed the situation of adding new asset classes to its reserves. However, it does not intend to take action until the analysis is complete.

This move comes as the Trump administration proposed establishing a Bitcoin reserve. So far in the United States, Texas and Utah have introduced legislation to include Bitcoin in their treasuries. Utah has passed a favorable vote, while Texas has two pending bills.

Possible future scenarios

The European Central Bank may increase its cryptocurrency holdings in the coming months if the Trump administration continues to push forward with its plans. However, this will not lead to a decrease in the effective tax rate for cryptocurrency investors, as the increase in cryptocurrency holdings by central banks around the world may lead to more tax revenue due to the resulting increase in cryptocurrency value.

With Trump tightening the trade imbalance between the EU and the US, this may deepen Europe's economic difficulties, leading to governments considering new tax routes. In addition to the US, the economic relations between the EU and Russia and China have also deteriorated, which may lead to an increase in taxes for EU citizens, with the potential result of cryptocurrency investors moving to more friendly countries.

At the same time, if the EU maintains its tax preferences, the high taxes of the EU member states mentioned above will lose their effectiveness, and if military spending increases, the tax policies of the member states may be unified. But even if this situation does not occur, the main donor countries to the EU military budget will also be forced to seek additional sources of revenue and further increase taxes.

In this sense, countries such as Germany, France, Poland, Italy, Spain, and the Netherlands in Europe may face higher risks. In addition, such measures may extend to capital income and general financial transactions. Even if these measures are gradually implemented to avoid causing excessive panic among investors, they will still harm the economy of the euro area.

From the perspective of the EU's interests, supporting innovation and capital inflows, including the cryptocurrency industry, is definitely beneficial for member states, but in times of crisis and increasing military expenditures, the EU countries have limited room for choice.