From 36% to Zero Tax: The "Trump Factor" Behind the EU's Divisive Crypto Tax Overhaul
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From 36% to Zero Tax: The "Trump Factor" Behind the EU's Divisive Crypto Tax Overhaul
Will the EU's surge in defense spending jeopardize crypto gains?
Navigating Web3 tides with focused insightsAuthor: Ilia Ilinskii
Translation: Odaily Planet Daily Golem
President Trump recently announced his plan to hold talks with Putin to end the Ukraine conflict. This recent move by Trump has caught European leaders off guard, who now fear that potential peace negotiations could bypass them. Beyond security concerns, the Ukraine conflict has had a significant economic impact on Europe. In this article, we will discuss how Trump's recent actions affect the European economy, including its crypto tax policies, and present existing EU personal capital gains tax rates for crypto users.
EU Countries May Impose Higher Crypto Taxes
The two most important events at the Munich conference were speeches by U.S. Vice President Vance and European Commission President Ursula von der Leyen. Despite their differing positions, both made extensive remarks on EU defense spending. The EU will need to pay social benefits in the coming years while increasing defense expenditures. After a recent informal meeting in Brussels in early February, EU leaders decided they need to invest approximately 500 billion euros in defense over the next decade.
At the Munich conference, European Commission President Ursula von der Leyen stated she would propose activating an exemption clause in EU fiscal rules to allow member states to increase defense spending. Combined EU defense spending accounts for about 2% of GDP, rising from 200 billion euros previously to 320 billion euros in 2024. Von der Leyen proposed raising this figure to 3%, which would result in billions of additional dollars in defense spending and necessitate changes to economic policies across EU member states. Some countries have also called for issuing European bonds to finance increased defense expenditures.
Overall, any increase in defense spending is likely to be debt-financed, meaning significantly higher taxes that would impact all financial sectors, including the cryptocurrency industry.
According to the European Parliament, the EU’s post-pandemic economic recovery in 2019 was negatively affected by the Ukraine conflict. In 2022 alone, budgetary impacts increased by 175 billion euros, equivalent to 1.1% to 1.4% of EU GDP. One direct effect was rising energy prices, leading to higher inflation. To curb inflation, the European Central Bank began raising interest rates. Although some recovery has occurred, including ECB rate cuts, the EU economy remains in difficulty.
As Europe plans to increase defense spending, EU cryptocurrency companies and high-net-worth individuals are highly likely to face higher taxation. Below is an in-depth analysis of the current EU cryptocurrency tax landscape.
Current State of Cryptocurrency Taxation in EU Countries
Below are EU countries with relatively high cryptocurrency tax rates.
Netherlands
In the Netherlands, a 36% tax is levied on presumed gains from cryptocurrency holdings from the previous year.
Denmark
In Denmark, crypto income is taxed in four tiers: national income tax of 12.1% to 15%, municipal tax of 24.982%, labor market tax of 8%, and church tax averaging 0.7%. Combined, the effective tax rate reaches 37%.
Finland
Finland has complex crypto tax rules, including a 30% tax on all income exceeding 1,000 euros but below 30,000 euros. Any additional income is taxed at 32.4%.
Ireland
Ireland applies a flat 33% capital gains tax rate.
Germany
For short-term crypto trading, Germany imposes a tax rate of 45%.
Average Crypto Tax Rates in the EU
For major European economies, crypto tax rates already range between 20-30%. France levies a 30% capital gains tax on cryptocurrencies, while Italy and Spain apply a 26% capital gains tax on crypto profits. Austria’s rate is 27.5%, and Belgium’s is 25%.
Crypto Tax Havens in the EU
However, several EU countries maintain relatively relaxed regulations on personal cryptocurrency taxation, imposing minimal taxes on crypto sales. Below are four such countries, though there are actually more.
Cyprus
Cyprus, known as a tax haven, is friendly toward both corporate and individual crypto activities. The country offers a 0% tax option for individuals holding long-term, while short-term holders pay 20%.
Romania
In Romania, all cryptocurrency investments enjoy temporary tax exemption until July 31, 2025.
Germany
In Germany, individuals holding cryptocurrency long-term are exempt from capital gains tax.
Czech Republic
In the Czech Republic, individuals holding cryptocurrency for more than three years are exempt from capital gains tax.
Other Jurisdictions
Poland takes a positive stance on cryptocurrency with a 19% tax rate. Greece and Bulgaria tax personal crypto income at 15%. Additionally, Luxembourg and Portugal exempt long-term holders (holding for 1 year) from capital gains tax. Among European countries, Malta and Andorra also have very low capital gains tax rates.
Progress on Bitcoin Reserves in EU Countries
At a press conference on January 30, 2025, European Central Bank President Christine Lagarde rejected the idea of adding bitcoin to EU reserves. She noted that bitcoin is too volatile and closely linked to money laundering. Despite this statement, some EU countries are still considering adding bitcoin to their reserves.
Norway
Norway’s sovereign wealth fund manages over $1.5 trillion and has significant indirect exposure to bitcoin. Norges Bank Investment Management (NBIM) holds MicroStrategy shares worth over $600 million.
Czech Republic
Although not part of the eurozone, the Czech Republic is part of the ECB’s General Council. Central bank governor Aleš Michl acknowledged bitcoin’s volatility when discussing its potential inclusion in central bank assets. Recently, the Czech central bank confirmed it has analyzed adding new asset classes to its reserves. However, it does not intend to take action before completing the analysis.
This move comes amid proposals from the Trump administration to establish a bitcoin reserve. So far in the U.S., Texas and Utah have introduced legislation to include bitcoin in their treasuries. Utah 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 advancing its plans. However, this would not lead to lower effective tax rates for crypto investors; instead, the rise in crypto value triggered by central banks’ purchases could result in higher tax revenues.
As Trump tightens trade imbalances between the EU and the U.S., this could deepen Europe’s economic difficulties, prompting governments to consider new taxation avenues. Besides the U.S., deteriorating economic relations between the EU and both Russia and China could also lead to higher taxes for EU citizens, potentially driving crypto investors to relocate to more favorable jurisdictions.
Meanwhile, if the EU maintains preferential tax policies, the high tax rates in the aforementioned EU member states would lose effectiveness. If military spending increases, there is a possibility of harmonizing tax policies among member states. But even if this doesn’t happen, major contributors to the EU defense budget will be forced to seek additional revenue sources and further raise taxes.
In this sense, countries like Germany, France, Poland, Italy, Spain, and the Netherlands may face greater risks. Moreover, such measures could extend to capital income and general financial transactions. Even if implemented gradually to avoid excessive investor panic, these measures would still harm the eurozone economy.
From the EU’s perspective, supporting innovation and capital inflows—including the crypto industry—is undoubtedly beneficial for member states, but under conditions of crisis and rising defense spending, EU countries have limited policy options.
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