The first question to be asked is what the legislature actually means by the term ‘income from cryptocurrencies’. This includes, in particular, income from the transfer of cryptocurrencies against payment, income from block creation (‘mining’) and income from realised increases in the value of cryptocurrencies.
According to the legislature, a transfer of cryptocurrencies exists if cryptocurrencies are transferred by the taxpayer to another market participant in return for payment, for example in return for a consideration similar to interest (‘lending’). Mining is the use of computing power to create a new data block in the blockchain. Income from realised increases in the value of cryptocurrencies constitutes income from their sale or exchange. This income from cryptocurrencies is now subject to the special tax rate of 27.5%. The difference between the proceeds of the sale and the acquisition costs of the cryptocurrency in question is taxed. In turn, the law provides for exceptions for certain income from cryptocurrencies (e.g. for income from ‘staking’), which must be examined on a case-by case basis and are, at best, not subject to taxation. In traditional staking, existing cryptocurrencies are made available as a service for transaction processing (‘proof of stake’), whereby the consideration (‘reward’) for correct transaction processing, in turn, consists of cryptocurrencies. The acquisition of cryptocurrency in traditional staking, for example, is not subject to taxation as income from cryptocurrencies.
This ‘exit taxation’ – i.e. the taxation of income upon exit from Austria – concerns income from realised increases in the value of cryptocurrencies. In general, tax liability arises in the event of a realised increase in value upon the sale or exchange of cryptocurrencies. In principle, taxable persons are those who have their domicile or habitual place of residence in Austria. However, exit taxation is intended to prevent a loss of the Republic of Austria’s right of taxation in the event of the taxpayer moving abroad by establishing a fiction of sale. Circumstances such as the transfer of residence abroad or the gratuitous donation of cryptocurrencies to a person who is not liable to pay tax in Austria should therefore be deemed to constitute a sale and trigger tax liability. The increase in value of the cryptocurrencies during the period of residence in Austria is to be taxed, or, in other words the difference between the value at the point of exit and the acquisition costs.
However, when moving to an EU or EEA member state, it is generally possible to apply for non-assessment of the tax debt. The consequence of this is that the tax debt incurred is merely agreed upon, but is not given a tax assessment notice and is therefore not yet due. Strict deadlines must be observed to ensure that the application is filed in a timely manner, otherwise this right is forfeited. If the cryptocurrencies are actually sold after the individual has exited the country, the tax liability is assessed. The circumstance of the sale and thus the actual realisation of the increase in value must be reported to the competent tax office, otherwise a financial offence under the Financial Crimes Act (e.g. tax evasion) may come to bear.
If there is a reduction in the value of the cryptocurrencies between the exit and the actual sale, the assessment basis for income tax can be reduced to zero. However, this can only be taken into account when determining the tax liability if a corresponding application for non-assessment was filed in the year of departure. A move to a country that is not a member of the EU or the EEA is also considered a sale and, in principle, immediately results in the tax liability being assessed. In this case, an application for non-assessment cannot be filed at all.
Therefore, moving out of Austria can no longer counteract the taxation of cryptocurrencies under Austrian tax law as of 1 March 2022. For complex questions regarding the taxation of cryptocurrencies, we recommend taking appropriate legal advice; we would be happy to support you in these matters.