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No special tax rules for cryptocurrencies, says minister

No special tax rules for cryptocurrencies, says minister

by John MONAGHAN 24.02.2022 From our online archive
Existing legislation in Luxembourg does not contain any special provisions for virtual assets, says Yuriko Backes
Legislation is struggling to keep up with the explosion in the popularity of virtual currencies
Legislation is struggling to keep up with the explosion in the popularity of virtual currencies
Photo credit: AFP

There are no specific tax rules governing cryptocurrencies in Luxembourg, Finance Minister Yuriko Backes said on Thursday, despite the growing popularity of the booming - but controversial - market.

Existing legislation in the Grand Duchy “does not provide for any specific provisions for cryptocurrencies”, which are covered by general tax rules, Backes said, in response to a parliamentary question from opposition Christian Democrat deputy Laurent Mosar.

“In addition to income tax, profit generated by cryptocurrency may be subject to business tax and wealth tax,” Backes added, citing the example of rent payments made to a landlord. “Rent, regardless of whether it is paid in euros or in cryptocurrency, falls into the income category of rental income.”

Backes indicated that tax authorities are awaiting the introduction of further EU directives to provide guidance on the issue.

The EU is working to give its new anti-money laundering watchdog, expected to start operations in 2024, oversight of cryptocurrency firms amid concerns the currency’s anonymity is attracting money launderers.

The $2 trillion (€1.7 trillion) market for cryptocurrencies has boomed as companies and investors look to reap returns - and has attracted criminals and rogue nations in the process.

Cryptocurrency seized from criminals are also posing a problem for Luxembourg authorities because it is hard to preserve their value because of the high volatility of the market, the justice ministry said last year.

Luxembourg risked being held accountable for losses if a court ordered to restore their assets to a person who might than find that their cryptocurrencies had been sold at a loss, some parliament members have pointed out.

Luxembourg’s parliament is now in the third year of honing a law on how to deal with seized assets in the period before a court decision on whether they can be confiscated because they come from criminal profits. 

The European Commission criticised Luxembourg in 2019 for its delay in implementing a 2014 EU directive about how and when illegal proceeds are stripped from criminals.

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