More and more companies want to do something with crypto. The popularity of this digital currency has been rising for years and companies do not want to jump in too late. If you have your own business, you may have considered investing in business cryptocurrencies. Of course, you can buy crypto like Bitcoin privately, but it is also possible to do this for business†
The tax authorities always see a difference between personal and business costs. As a company, you do not pay VAT on goods and services that you buy for business operations. And then other rules can also apply when the company wants to buy cryptocurrencies.
In this article I will tell you why you should invest in crypto for business and I will go deeper into it the rules that apply in the Netherlands for business investment† With the information you get from this article, you can draw your own conclusion on whether an investment in crypto is better for private or business purposes.
Why invest in crypto for business?
Let’s first look at some of the reasons you may have to invest in crypto for business.
Of course, anyone who trades in crypto wants to make money on their investment. This can also apply to companies. A company could ensure that they make even more profits by investing their already earned profits in, for example, crypto†
As with a private investment, it can also be unwise to invest money that is actually going to other things. The price of cryptocurrency can always fall and when the crypto has to be sold because there is a need to pay, a company loses on their investment.
2. Active protection
Money can become less and less worthwhile. In 2022, we saw that this could happen due to high inflation rates. The prices of products are becoming more expensive, so we have to pay more and more money to be able to buy the same thing. This applies not only to individuals, but of course also to companies.
Products, commodities and services that companies have to buy for their operations are also rising in price due to inflation† As a result, the profits they earn may become less valuable if they remain in a bank account. This can be a reason to invest in, for example, Bitcoin. Of course, it is important that the selling price of this crypto is not below the purchase amount.
In the video below, you will learn more about how you can protect your wealth against, for example, inflation.
Plans to use crypto in the company
More and more we see that companies want to do something with crypto. For example, they might start accepting payments with crypto† It allows customers to pay for their products with, for example, Bitcoin or Ethereum. Businesses must, of course, have a wallet on which they can receive crypto. There must also already be crypto in this wallet, for example for reimbursement.
If you want to integrate crypto into your business in the future, it may be a reason to move wealth to crypto now.
Can you invest commercially in crypto in the Netherlands?
According to Dutch laws and regulations, you can invest in various investment products for business purposes. Think of stocks, indices, ETFs, precious metals and of course cryptocurrency. Different laws and regulations may apply to each investment product. Therefore, it is important to obtain information in advance about the products you want to invest in. It is the only way to find out if it is wiser to invest in certain products for business or private purposes. If you find this difficult, you can of course also contact an accountant who specializes in this.
Is it tax wise to invest in crypto for business or private purposes?
It is important to distinguish between a self-employed entrepreneur, such as freelancer or freelancerand an owner of one BV (Limited Liability Company) or NV (Limited Liability Company).
Do you buy crypto as a self-employed entrepreneur?
If you are a self-employed entrepreneur and would like to invest in crypto, it does not matter whether you buy cryptocurrencies such as Bitcoin for business or private purposes. This applies to entrepreneurs with sole proprietorships and VOF. You will then have to pay tax on this crypto in box 3.
Box 3 is the tax category in which savings and investment funds are taxed. As the owner of a sole proprietorship, you are the legal entity of the business. This means that no distinction is made between private and business.
How much tax do you pay on cryptocurrencies as a self-employed person?
In 2022, the tax-free portion for Box 3 will be EUR 50,650† This means that you do not pay tax on the first 50,650 euros of all your capital (savings and value of your investments). You pay tax on capital that exceeds this amount:
- Disk 0 (first 50,650 euros) – 0% tax†
- Disk 1 (1 euro to 50,650 euros over the exemption) – 0.5636% tax†
- Disk 2 (EUR 50,650 up to and including EUR 962,350 over the exemption) – 1.3536% tax†
- Disk 3 (from 962,351 over the exception) – 1.7143% tax†
The moment you get one fiscal policy partner such as a fiancé or co-owner of VOF, is the tax-free part 101,300 euros†
Would you also like an extra exemption can get for green investments† The exception for green investments lies in box 3 to 61,215 euros per tax partner† You also get an extra tax deduction for green investments. Be aware that green investments are recognized by tax green funds. You can not decide for yourself whether something is a green investment.
Buy crypto with a BV or NV?
The moment you decide to buy crypto as BV or NV, it will be completely different from a tax point of view, because BV or NV is the legal entity. You must then place investments on the balance sheet as current assets† The tax authorities convert the value of cryptocurrencies into euros to calculate a profit or loss.
Once the crypto investments have made a profit, this profit is taxed by the tax authorities. The percentage of tax you then have to pay is significantly higher than the percentage in box 3. You then pay the same tax on this profit that you would pay for all other items shown on the balance sheet as current assets.
What happens if you make a loss with a crypto investment like BV or NV?
In the most favorable case, you earn nicely on the cryptocurrency you have purchased† You then have to pay tax on it, but of course there is a chance that you have more money left than before. However, it is not inconceivable that you will incur a loss on the investment you have made as a BV or NV. After all, crypto is unstable and there are lots of people losing money with their investment.
The moment you incur a loss, the tax authorities see this as a ‘non-business investment’† The tax authorities then see the investment as one private consumption, and it can have negative consequences. Loss is then not deductible in profitswhich means that in the worst case, you have to pay tax on the part you have invested.
And then the blackest scenario: a bankruptcy as a result of the failed investment. The bankruptcy will then be stamped as ‘result due to incorrect management’. You can do that be held personally liable for all debts which you have built up in business. Think of tax debts, but also debts that you may have outstanding with other companies.
With this information, you can probably decide for yourself whether it is wise to invest in cryptocurrency for business (on behalf of a BV or NV).† Of course, you must always weigh the advantages and disadvantages yourself and then make a choice yourself. If you have problems with this, you can always get help from an accountant.
What if customers pay for my crypto services and products?
Cryptocurrency is increasingly used as a means of payment. Maybe you accept payments with crypto yourself, or you have customers who only want to pay for your business with crypto. This can have various benefits, but of course also raises many questions. For what about tax technology when you receive payments in cryptocurrency?
Receive payments as self-employed
When you are a freelancer or self-employed and customers pay you with crypto, you pay tax on this in the same way as with fiat currency† You will need to convert the value of the cryptocurrency to Euros. This is done based on the exchange rate that was applicable at the time of payment. You then enter the value of the crypto in euros on VAT and income tax.
Receive payments as BV or NV
Even if you receive payments in crypto such as BV or NV, you must pass on the value of this crypto in euros to the tax authorities.† Then you pay tax on these euros, just like any other form of income.
Of course, the value of crypto can fluctuate a lot. It is therefore important to think carefully about this from a tax perspective. Suppose you receive a payment of 1000 euros in crypto on March 1st. You must then pay VAT on this at the end of the month. If the value of this crypto has dropped to 600 euros, you still have to pay tax on the 1000 euros.
It is also not wise not to report crypto to the tax authorities. Many people think that crypto is completely anonymous when it is not at all the case. The video below explains more about what can happen if you do not declare crypto to the IRS.
It is allowed to invest in businesses in the Netherlands, for example in cryptocurrency. When we look at the rules, we see one large difference between investments made on behalf of a sole proprietorship / VOF and investments made on behalf of a BV or NV.
As a self-employed person, you pay tax on investments in crypto† This is done in the same way as if you were to make such an investment privately: in Box 3. This changes as soon as an investment is made from a BV or NV. The profit achieved must be entered on the balance sheet as a current asset, after which the company must pay tax on the profit.
The moment a BV or NV loses on their investments in crypto, the tax authorities will refer to the investments as ‘non-business investments’† The loss can not be deducted from the profit and in the worst case, tax must be paid on the amount invested. If this leads to bankruptcy and the tax authorities see this as a ‘result due to inappropriate management’, the owner of the business can be appointed as liable.
After reading this article you will hopefully know more about what about cryptocurrency business investments† Want to know more about cryptocurrency or other forms of investment after reading this article? Then ask your questions in our AllesAboutCrypto Facebook group and our experts will answer all your questions.
Do you have other crypto-related questions? The easiest way is to look up your question in our FAQ. You can also google your question + “AllesOverCrypto”. You will then quickly come to one of our other articles dealing with that topic so you can quickly learn more about that topic.
Headline photo of Travelpixs