An individual keeps getting question letters from the Tax Office about the course and size of his (crypto) assets. Apparently, his answers are not perceived as complete. The Inland Revenue demands a court order to provide information on pain of a hefty penalty.
Dispute and parties' positions
At its core, the dispute before the court is about whether the individual is obliged to provide full and unconditional information about the course and extent of his (crypto) assets.
This provision of information, according to the Inland Revenue, must take place by (a) answering outstanding questions, (b) the provision of evidence by the individual, (c) providing an oral explanation of the questions and evidence to be provided, and (d) answering follow-up questions orally and in writing. According to the Inland Revenue, these orders must be complied with on pain of a penalty.
According to the individual, he has fulfilled his legal obligation to provide information.
The law
Pursuant to the law, every taxpayer is obliged, upon request, to provide the inspector with data and information that may be relevant for his taxation, and/or, for example, to make available data carriers or their contents, if their consultation may be relevant for the determination of facts that may influence the taxation of his taxation. That crypto assets are relevant for taxation is not in dispute between the parties.
Judge's considerations
The tax authorities had to infer from attachments sent by the individual that he used a bank account for crypto transactions and that the individual therefore had crypto assets. The individual acknowledged that he made false statements on this matter and filed incorrect tax returns. That this was done out of clumsiness or carelessness, the court did not find credible.
There was a pattern in which the individual provides information at the request of the Inland Revenue, pretending to have provided all relevant information about his crypto assets, only to later have to admit that not all information was provided earlier. This leads to the fact that, to date, the Tax Office does not yet have an overview of the individual's crypto assets for the years 2012 to 2024. With this, verification of the tax returns submitted by the individual cannot yet take place.
About the number of Bitcoins the individual is alleged to have, he has repeatedly put forward new views. Most notably, in 2024, the individual made three declarations of his Bitcoin holdings as of 1 January of the years 2021, 2022 and 2023 within a span of a few months. These declarations vary significantly among themselves, between 37 and 300.
It is also significant that the individual repeatedly failed to fully answer questions about the exchanges and wallets he used.
Based on information provided by the individual and analysed by the Chainalysis programme, the Inland Revenue says it has a picture of thousands of the individual's transactions. The questions the Inland Revenue now has include the origin or destination of various deposits and withdrawals.
That the Tax Administration would be engaged in a fishing expedition, as argued by the individual, is not correct. The Tax Administration has shown a lot of patience in communicating with the individual, but the individual did not provide all relevant information of his own accord and repeatedly withheld information. It is therefore understandable that the Inland Revenue does not unquestioningly rely on the private individual's claim that he has now disclosed his crypto assets.
That the private individual could no longer provide some of the requested information has not become plausible. The court also follows the Tax Court in assuming that, based on the volume of transactions carried out by the private individual, there is little reason to assume that he does not himself have the correct knowledge of how to request and provide the requested information. Thereby, the submitted correspondence between the individual and the customer services of exchange Wirex shows that the individual closely monitored transactions and asked questions in case of irregularities. The tax authorities further pointed out that it was up to the individual to seek the assistance of an expert, if necessary, to answer the questions and provide the requested overview.
Conclusion
In conclusion, the Tax Authority's claims for full and unconditional disclosure are allowable. Since the Tax Office has good grounds to believe that not all questions have been answered to completeness, the individual will be ordered to provide all documentary evidence in support of those questions and will be ordered to provide an oral explanation of those (or further) questions.
The court rules that the private individual is liable to pay a penalty of €2,500 for each day or part of a day that the private individual remains in default of the obligations, with a maximum total of €1,000,000.
Note: Based on a bill, crypto service providers in the EU will be obliged to collect, verify and share certain data about their users with the Tax Authorities on an annual basis from 1 January 2026. In the meantime, as an individual, you should take the obligation to provide information about your cryptocurrencies towards the tax authorities very seriously, as this ruling shows.
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