Austria's Crypto Laws: What's The Verdict?

Cryptocurrency is legal in Austria, but it is not recognised as legal tender. The Austrian government is generally receptive to digital assets and fintech, and closely monitors developments in blockchain and distributed ledger technology.

The Austrian Financial Market Authority (FMA) has warned investors of the risks of cryptocurrencies, stating that they are neither regulated nor supervised by the FMA. However, the FMA has established a regulatory sandbox to assist with new business models requiring authorisation under Austrian financial services regulation.

In terms of taxation, cryptocurrency holdings are counted as income from capital assets and taxed at a rate of 27.5%.

Cryptocurrency is taxed as income in Austria

The new regulations only apply to those who permanently live in Austria or have their primary residence in the country. Cryptocurrencies that are considered income from capital assets include publicly offered cryptocurrencies that are accepted as a means of exchange, as well as "stablecoins", or cryptocurrencies whose value is tied to that of an underlying legally recognised currency or other assets.

Non-fungible tokens ("NFTs") and "asset tokens" underpinned by real assets such as securities or property are not covered by this definition and are taxed according to general tax regulations. Income from private loans made in cryptocurrency is also exempt from the 27.5% tax rate and is instead counted towards progressive income tax thresholds.

Austria's crypto tax breaks

Austria's Bundesministerium für Finanzen (Ministry of Finance) has released updated kryptosteuer guidance, reforming crypto tax. Here are some of the tax breaks available for Austrian crypto investors:

• Gains from legacy holdings are tax-free: If you've held your crypto for more than a year and acquired it before 28 February 2021, selling your crypto will be tax-free.
• Speculative trades allowance: If you made less than €440 in profit annually in crypto gains, this would be tax-free. However, if you exceed this limit, the entire amount becomes taxable.
• Crypto-to-crypto trades are tax-free: Under the new rules, trading one crypto for another is a tax-free event.
• Selling or otherwise disposing of crypto acquired before 28 February 2021 is tax-free: Any crypto acquired before this date is still subject to the previous tax rules.
• Moving crypto between wallets is tax-free: However, it is unclear how transfer fees may be viewed from a tax perspective.
• Staking rewards from PoS are tax-free: Staking as part of a consensus mechanism is now viewed as an acquisition from a tax perspective.
• Donating crypto may be tax-deductible: Donations to a registered charity are generally tax-deductible.
• Gifting crypto is tax-free: Austria has no gift tax, so gifting crypto to friends or family is tax-free.

Crypto mining in Austria

The Austrian Financial Market Authority (Finanzmarktaufsicht; "FMA") established a regulatory sandbox in 2020 to assist with new business models requiring authorisation under Austrian financial services regulation. The 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.

The taxation of cryptocurrency mining in Austria depends on whether it is done privately or commercially. If used for private purposes, gains are taxed at a rate of 27.5% upon receipt. Any subsequent increase in value at the time of sale is also taxed at 27.5%. Mining carried out commercially is taxed according to the progressive income tax thresholds, up to 55% income tax for individuals or a flat corporate income tax of 25% (from 2023: 24%; and from 2024: 23%) for corporations.

Crypto gifts and donations in Austria

In Austria, there are no specific laws or regulations governing the gifting or donation of cryptocurrencies. However, the Austrian government and financial regulators have implemented several policies and guidelines related to cryptocurrencies that individuals and organisations should be aware of when dealing with crypto gifts and donations.

Taxation of Crypto Gifts and Donations

The taxation of crypto gifts and donations in Austria is similar to that of other assets. When an individual gifts or donates crypto assets, they are disposing of those assets, and this is considered a Capital Gains Tax (CGT) event. The individual will need to determine the value of the crypto assets at the time of the gift or donation to calculate any capital gains or losses for tax purposes.

For organisations receiving crypto donations, it is essential to ensure they are set up to accept crypto assets. Additionally, the organisation should transfer the crypto assets into their legal name to comply with tax regulations.

To claim a tax deduction for a crypto gift or donation, the following conditions must be met:

• The gift or donation must meet the requirements for gifts and donations under Austrian tax laws.
• The recipient organisation must have a status as a deductible gift recipient (DGR). Social media or crowdfunding platforms are not eligible unless they have DGR status.
• Generally, there is no tax on capital gains when donating crypto assets to DGRs, but this depends on the specific circumstances of the donation.

It is important to maintain proper records of crypto asset transactions, including the date of the gift or donation and the market value of the crypto assets at the time. These records will be necessary for calculating and reporting CGT.

Other Considerations for Crypto Gifts and Donations

In addition to taxation considerations, there are a few other important points to note regarding crypto gifts and donations in Austria:

• The Austrian government does not recognise crypto assets, such as Bitcoin, as official currency. They are classified as other (intangible) assets not subject to depreciation.
• The mining of crypto assets is considered a "commercial activity" and is subject to taxation under Austrian law.
• The exchange of legal tender (e.g. Euros) for cryptocurrencies or vice versa is exempt from Value-Added Tax (VAT) according to European Court of Justice (ECJ) jurisprudence.
• Cryptocurrency transactions are subject to anti-money laundering (AML) regulations. The Financial Markets Authority (FMA) has issued AML regulations with fines for non-compliance.
• Cryptocurrency exchanges and service providers are required to conduct Know Your Customer (KYC) checks and report transactions to the Austrian Federal Ministry of Finance, which closely monitors crypto activities.

Crypto regulation in Austria

Austria has not adopted specific legislation regarding cryptocurrency-related business activities. Cryptocurrencies are not considered legal tender under Austrian law. However, the country has taken steps to regulate the industry and protect investors.

The Austrian government is generally receptive to digital assets, new technologies, and fintech. While there is no dedicated cryptocurrency or fintech-specific law, the Austrian Financial Market Authority (FMA) has issued warnings about the risks of cryptocurrencies and established a regulatory sandbox to assist with new business models.

Taxation

Austria implemented the Environmentally Responsible Tax Reform, which introduced specific regulations on the taxation of cryptocurrencies from March 1, 2022. Cryptocurrency holdings are considered income from capital assets and taxed at a special rate of 27.5%. This includes profits from exchanging crypto for fiat money and income from mining or lending. However, crypto-to-crypto exchanges are tax-free.

Anti-Money Laundering

The FMA issued Anti-Money Laundering (AML) regulations in 2020, imposing fines of up to 200,000 euros on cryptocurrency-related businesses that fail to register with the authority. These regulations follow Austria's implementation of the Fifth Money Laundering Directive (AMD 5), which defines crypto-assets as "financial instruments."

Other Regulations

The Financial Markets Anti-Money Laundering Act (Finanzmarkt-Geldwäschegesetz; FM-GwG) came into force in 2017 and was amended in 2019 to include virtual asset service providers. Other regulations focus on financial services, with the Austrian Banking Act (BWG), Austrian Securities Supervision Act (WAG 2018), Austrian Payment Services Act (ZaDiG 2018), Austrian E-Money Act, and Alternative Investment Fund Manager Act (AIFMG) being the main sources.

The FMA has released preliminary guidance on the Markets in Crypto-Assets Regulation (MiCAR) licensing process for crypto-asset service providers (CASPs). Applications for authorization can be submitted from October 1, 2024, with the regulation becoming applicable on December 30, 2024.

Additionally, virtual asset service providers are defined in Article 2 no. 22 FM-GwG, and certain activities such as direct sales of tokens, exchange, custody, borrowing/lending, and yield/staking services are regulated in Austria.

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