Author: Ilia Ilinskii

Translated by: Odaily Planet Daily Golem

President Trump recently announced that he plans to hold talks with Putin to end the conflict in Ukraine. Trump's recent moves have caught European leaders off guard, and they are now concerned that potential peace negotiations may bypass them. In addition to security issues, the Ukraine conflict has had a massive economic impact on Europe. In this article, we will discuss how Trump's recent moves are affecting the European economy, including its crypto tax policies, and introduce the existing EU personal capital gains tax rates on crypto users.

EU Countries May Impose More Crypto Taxes

The two most important events at the Munich Conference were the speeches by US Vice President Vance and European Commission President Ursula von der Leyen. Although their positions differed in many ways, both spoke extensively about the EU's security spending. The EU will need to pay social benefits and increase defense spending in the coming years. At the recent informal meeting in Brussels in early February, EU leaders decided they need to invest around €500 billion in defense over the next decade.

At the Munich Conference, EU Commission President Ursula von der Leyen said she would propose activating the EU fiscal rule exemption clause to increase member states' defense spending. EU countries' defense spending currently accounts for around 2% of GDP, rising from €200 billion previously to €320 billion by 2024. Ursula proposed raising this figure to 3%, which would lead to an increase in defense spending of hundreds of billions of dollars, necessitating changes to the economic policies of EU member states. Some countries have also called for the issuance of European bonds to fund the increased defense spending.

Overall, any increase in defense spending is likely to be debt-financed, meaning significant tax increases that will impact all financial sectors, including the crypto industry.

According to the European Parliament, the EU's economic recovery after the 2019 pandemic has been negatively impacted by the Ukraine conflict. The budgetary impact alone increased by €175 billion in 2022, accounting for 1.1% to 1.4% of EU GDP. One direct impact is the rise in energy prices, leading to higher inflation. To curb inflation, the European Central Bank has started raising interest rates. While there has been some recovery, including rate cuts by the ECB, the EU economy remains in distress.

As Europe plans to increase defense spending, EU crypto companies and high-net-worth individuals are likely to be subject to higher taxes. The following is an in-depth study of the existing EU crypto tax landscape.

Current Crypto Tax Landscape in the EU

Here are the EU countries that levy higher crypto taxes.

Netherlands

In the Netherlands, a 36% tax is levied on the presumed return on crypto holdings from the previous year.

Denmark

In Denmark, crypto income is taxed across four tiers, namely national income tax of 12.1% to 15%, municipal tax of 24.982%, labor market tax of 8%, and church tax averaging 0.7%. Collectively, the effective tax rate is 37%.

Finland

Finland has complex crypto tax rules, including a 30% tax on all income above €1,000 and below €30,000. For any additional income, a 32.4% tax is levied.

Ireland

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

Germany

For short-term crypto trades, Germany's tax rate is 45%.

Average EU Crypto Tax Rate

For major European economies, crypto tax rates are already in the 20-30% range. France levies a 30% capital gains tax on cryptocurrencies, Italy and Spain tax crypto profits at 26% capital gains tax. Austria's rate is 27.5%, and Belgium's is 25%.

EU Crypto Tax Havens

However, there are some EU countries that have relatively lax personal crypto tax regulations, levying the lowest taxes on crypto sales. The following introduces four EU countries, but there are more.

Cyprus

Cyprus is known as a tax haven, being very friendly to both corporate and individual crypto activities. The country offers a 0% tax option for long-term individual holders and a 20% tax for short-term holders.

Romania

In Romania, all crypto investments enjoy a temporary tax exemption until July 31, 2025.

Germany

In Germany, individuals who hold crypto long-term are not subject to capital gains tax.

Czech Republic

In the Czech Republic, individuals who hold crypto for more than three years are not subject to capital gains tax.

Other Jurisdictions

Poland has a positive attitude towards crypto, with a 19% tax rate. Greece and Bulgaria have a 15% tax rate on individual crypto income. Additionally, Luxembourg and Portugal exempt long-term holders (holding for 1 year) from capital gains tax. Malta and Andorra also have low capital tax rates in Europe.

EU Countries' Bitcoin Reserve Developments

At a news conference on January 30, 2025, European Central Bank President Christine Lagarde rejected the idea of adding Bitcoin to the EU's reserves. She pointed out 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, managing over $1.5 trillion, has a massive indirect Bitcoin exposure. The Norwegian Central Bank Investment Management (NBIM) owns over $600 million worth of MicroStrategy shares.

Czech Republic

While the Czech Republic is not part of the Eurozone, it is a member of the ECB Governing Council. Central Bank Governor Aleš Michl acknowledged Bitcoin's volatility when discussing the potential inclusion of Bitcoin in the central bank's assets. Recently, the Czech central bank confirmed it has analyzed the case of adding new asset classes to its reserves, but it will not take action until the analysis is complete.

This initiative is taking place amid the Trump administration's proposal to establish a Bitcoin reserve. In the US so far, Texas and Utah have introduced legislation to include Bitcoin in their treasuries. Utah has passed an affirmative vote, while Texas has two pending bills.

Potential Future Scenarios

The European Central Bank may increase its crypto holdings in the coming months if the Trump administration continues to push its plan. However, this will not lead to a decrease in the effective tax rate for crypto investors, as the rise in crypto value triggered by central banks increasing their crypto holdings may result in higher tax revenues.

As Trump tightens the trade imbalance between the EU and the US, this may deepen Europe's economic difficulties, leading governments to consider new tax avenues. In addition to the US, the EU's economic relations with Russia and China have also deteriorated, which could also lead to increased taxes on EU citizens, with the potential outcome being that crypto investors will migrate to more friendly countries.

If the EU maintains its tax incentive policies, the high tax revenues of the aforementioned EU member states will lose their effect, and if military spending increases, the tax policies of the member states may be unified. However, even if this does not happen, the major donor countries of the EU's military budget will be forced to seek additional sources of revenue and further increase taxes.

In this sense, the risks may be relatively high for European countries such as Germany, France, Poland, Italy, Spain and the Netherlands. In addition, such measures may be extended 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 Eurozone.

From the perspective of the EU's interests, supporting innovation and capital inflows, including the cryptocurrency industry, is absolutely beneficial to the member states, but in the case of crises and increased military spending, the choices of EU countries are more limited.