Bitcoin Legality In Austria: What You Need To Know

Bitcoin is not illegal in Austria, but it is also not recognised as a currency. The Austrian government is generally receptive to digital assets and new technologies, and is drawing up cryptocurrency regulations. Bitcoin income is subject to a special tax rate of 27.5% and does not count towards the progressive thresholds for the taxation of other income.

Bitcoin is not prohibited in Austria

The Austrian government closely monitors developments and continues to foster new technologies such as blockchain, distributed ledger technology, and digital assets. The government's central concern is curbing the use of cryptocurrencies for money laundering. The Finance Minister, Hartwig Loeger, outlined several measures the government plans to implement, including requiring cryptocurrency market participants to identify all trading parties and to disclose trades of €10,000 or more to the government's financial intelligence unit.

The taxation of cryptocurrency in Austria depends on the profit generated, the holding period, and the type of asset. Income from cryptocurrency holdings is subject to a special tax rate of 27.5%. This includes current income from cryptocurrency holdings and income from realized increases in the value of cryptocurrency holdings, irrespective of whether any minimum holding period has been observed.

Cryptocurrency is taxed at a special rate of 27.5%

Bitcoin and other cryptocurrencies are not illegal in Austria. However, the Austrian Financial Market Authority (Finanzmarktaufsicht; "FMA") has warned investors of the risks of cryptocurrencies, stating that virtual currencies like Bitcoin and trading platforms for such instruments are neither regulated nor supervised by the FMA.

Austria has been working on new regulations for cryptocurrencies, using existing rules for the trading of gold and derivatives as a model. The government's central concern is curbing the use of cryptocurrencies for money laundering.

In Austria, income from cryptocurrency holdings (including both current income and profit from disposals) is subject to a special tax rate of 27.5%. This provision applies irrespective of whether the amount of tax due is withheld at source (i.e., as capital gains tax) or determined on the basis of the annual income tax return and/or assessment procedure.

The taxation of cryptocurrency holdings in Austria depends on several factors, including the profit generated, the holding period, and the type of asset. Here are some key considerations:

• Holding Period: In Austria, gains from the sale of cryptocurrencies held as private assets are generally only taxable if they are sold within a one-year speculation period. If held for more than a year, the sale of these assets is typically tax-free.
• Type of Asset: Different types of cryptocurrencies and tokens are taxed differently. For example, Security Tokens are subject to a special tax rate of 27.5%, while "asset tokens" underpinned by real assets, such as securities or property, are taxed according to general tax regulations.
• Income Calculation: The income from cryptocurrency holdings includes current income, such as remuneration for transferring cryptocurrencies, and income from realised increases in the value of the holdings. Operating costs or income-related expenses, such as electricity costs or the cost of acquiring hardware, may be deducted.
• Value Added Tax (VAT): The exchange of legal tender (e.g. Euros) for bitcoins or other cryptocurrencies is typically VAT-exempt. However, supplies or services paid for with cryptocurrencies are generally treated the same as those paid for with legal tender, and VAT is applied based on the value of the cryptocurrency used.
• Loss Compensation: According to Austria's general tax regulations, profits and losses associated with income from cryptocurrencies can be calculated together with profits and losses from other capital income, such as dividends or proceeds from disposing of shares.
• Commercial Activities: The special tax rate of 27.5% generally does not apply if generating income from cryptocurrencies is a core activity of a business. Revenues from commercial cryptocurrency trading or mining are taxed according to progressive income tax thresholds, which can be up to 55% for individuals.

The government is concerned about money laundering

Cryptocurrency is legal in Austria, and the government is generally receptive to digital assets, new technologies, and fintech. However, the government is concerned about money laundering, and there are strict regulations in place to address this issue.

The Financial Markets Authority (FMA) has issued Anti-Money Laundering (AML) regulations, which include fines of up to 200,000 euros for cryptocurrency-related businesses that fail to register with the FMA. The FMA's regulations follow Austria's implementation of the Fifth Money Laundering Directive (AMD 5), which defines crypto-assets as "financial instruments."

Austria has also introduced the Regulation on Markets in Crypto-assets ("MiCA"), which provides a comprehensive regulatory framework for the offering and provision of services related to crypto-assets. MiCA introduces transparency and disclosure requirements, authorisation requirements for service providers, and measures to prevent insider dealing, unlawful disclosure of information, and market manipulation.

The FMA is increasingly monitoring AML compliance and tightening requirements for registration as a virtual asset service provider (VASP) with the FMA. Any activities involving cryptocurrencies are subject to AML requirements, including know-your-customer (KYC) checks and AML prevention systems.

The Austrian government's concern about money laundering is also reflected in its taxation policies for cryptocurrencies. Earnings from cryptocurrencies are subject to taxation, and the exchange of legal tender for cryptocurrencies is exempted from VAT. The government has also implemented a special tax rate of 27.5% for income from cryptocurrency holdings, which is separate from the progressive income tax thresholds for other capital income.

Overall, while cryptocurrency is legal in Austria, the government is actively addressing the concern of money laundering through regulations, taxation policies, and increased monitoring and enforcement of AML requirements.

The Austrian government is supportive of new technologies

The Austrian Financial Market Authority (Finanzmarktaufsicht; "FMA") established a regulatory sandbox in 2020 to assist with new business models requiring authorization under Austrian financial services regulation. At the same time, regulators and the government stress that integrity, security, and investor protection must not be compromised. While Austrian law does not prohibit cryptocurrencies, the FMA has warned investors of the risks, stating that virtual currencies like Bitcoin and trading platforms for such instruments are neither regulated nor supervised by the FMA.

The government's central concern is curbing the use of cryptocurrencies for money laundering. The finance minister, Hartwig Loeger, outlined several measures the government plans to implement, including requiring cryptocurrency market participants to identify all trading parties and disclose trades of €10,000 or more to the government's financial intelligence unit. The regulation will also cover initial coin offerings (ICOs), with the government applying existing rules regarding market manipulation, insider trading, and front-running. Organizers will be required to submit "digital prospectuses" to the FMA.

As part of the Environmentally Responsible Tax Reform, specific regulations on the taxation of cryptocurrencies came into force on March 1, 2022. Under the new system, cryptocurrency holdings are counted as income from capital assets and taxed at a special rate of 27.5%. This definition encompasses publicly offered cryptocurrencies accepted as a means of exchange and "stablecoins." Income affected includes current income from cryptocurrency holdings and income resulting from realized increases in the value of cryptocurrency holdings, irrespective of any minimum holding period.

The EU is set to regulate crypto-assets from mid-2024

Bitcoin is not illegal in Austria, but it is not considered a currency either. Austrian law does not prohibit cryptocurrencies, but the Austrian Financial Market Authority (FMA) has warned investors of the risks, stating that virtual currencies like Bitcoin are neither regulated nor supervised by the FMA.

Austria is set to introduce new cryptocurrency regulations, modelled on existing rules for trading gold and derivatives. The government's central concern is curbing the use of cryptocurrencies for money laundering, and it wishes to extend oversight measures for traditional financial products to crypto assets.

The EU is also set to regulate crypto-assets from mid-2024. The EU documents state:

> By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector. It should also address the risks associated with these technologies.

The EU's Regulation on Markets in Crypto-Assets (MiCA) was finally adopted in April 2023 and will introduce a comprehensive regulatory framework for the offering and provision of services related to crypto-assets. MiCA will:

• Introduce transparency and disclosure requirements for the issuance, offering to the public, and admission to trading of crypto-assets on a trading platform.
• Set out authorisation requirements for crypto-asset service providers, issuers of asset-referenced tokens, and issuers of electronic money tokens.
• Implement provisions for the operation, organisation, and governance of crypto-asset service providers, as well as crypto-asset issuers.
• Introduce measures to prevent insider dealing, unlawful disclosure of inside information, and market manipulation related to crypto-assets, to foster integrity in crypto-asset markets.

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