The Finnish Tax Authority considers cryptocurrencies “a medium of exchange” and does not recognize cryptoassets as currencies or financial instruments. Finland taxes both the acquisition and transfer of cryptocurrencies. How cryptocurrency is treated for tax purposes depends on how the asset was acquired or sold. For example, mined cryptocurrencies are treated differently than staked cryptocurrencies. Mined cryptocurrencies are treated as income from a hobby, whereas staked cryptocurrencies are taxed as capital gains, as the Finnish Tax Authority considers the staked asset value created on top of the cryptocurrencies already held. Losses are deductible following a Finnish Supreme Court decision in 2019. According to its guidance on taxation of virtual currencies, cryptoassets created through hard forks are not taxed at the time of creation but at the time of transfer. Thus, a forked cryptocurrency asset is valued at zero until it is transferred (sold or exchanged). The Finnish Tax Authority has not issued specific guidance for the taxation of airdrops. Depending on whether airdrops are considered most similar to a mined asset, a staked or forked asset, or a gift, such assets may be taxed as income either from a hobby or from capital gain, or not taxed, as the receipt of gifts are not taxed in Finland.
A. Regulation of Cryptocurrencies Generally
Finland does not recognize cryptocurrencies as a financial instrument or a currency, but recognizes their use as a “medium of exchange.” Companies that provide access to cryptocurrencies are separately regulated in a special Act on Virtual Currency Providers. The Act on Virtual Currency Providers defines virtual currency in the following manner:
For the purposes of this Act
1) virtual currency a value in digital form
(a) which has not been issued by a central bank or any other authority and which does not constitute a legal tender;
(b) which a person can use as a payment instrument; and
(c) which can be transmitted, stored and exchanged electronically[.]
However, the Act on Virtual Currency Providers does not address income taxation related to cryptocurrencies, which is governed by the Income Tax Act. Specifically, cryptocurrencies are subject to several income tax provisions, including 32 § (on capital gains), 45 § 1 para. (on transfer gain), and 46 § 1 para. (on calculation of transfer gain). Because cryptoassets are not recognized as legal monetary currencies, cryptocurrencies are not covered by the exemption to tax liability for currency gains of less than €500 (about US$610). Reportedly, in 2017, Bitcoins generated millions in tax revenue for the Finnish State.
B. Finnish Tax System
Finland taxes individual income from employment, self-employment, commercial activity, and hobbies. The distinction between hobbies and commercial activity is based on the size of the activity, and the purpose, i.e., whether the main goal is profit. In addition, Finland also taxes income from capital gains. Finland does not tax income received as gifts. Taxpayers are taxed at two levels, local and nationally. Whereas individuals pay both local and state tax on income derived through employment, tax on income from capital gains is only paid to the Finnish State. Capital gains are taxed at 30%.
II. Tax Treatment of Block Rewards
A. Overview of Taxation of Mined Cryptocurrencies
Finland taxes cryptocurrencies both at the acquisition stage and at the realization stage. It has been described as the “Crypto Tax Super Power.” In a March 2019 judgment, the Finnish Supreme Administrative Court held that a sale of the cryptocurrency Ether that had been purchased with the goal of making a profit was not taxable as a capital gain but as income from a transfer of property. The Supreme Administrative Court also found that costs associated with the mining of cryptoassets are deductible in relation to the income derived from mining. For example, mining generally requires a lot of electricity, and thus the electricity cost for mining is deductible, as are costs for computers and other equipment needed in the mining.
The Finnish Tax Authority has issued guidelines specifically for the taxation of virtual currencies. The guidelines were most recently updated on January 22, 2020, and apply to the 2020 taxation year. In the guidelines, the Finnish Tax Authority distinguishes cryptocurrencies based on their use and their method of acquisition. For example, mined cryptocurrencies are taxed as income derived from a hobby unless the mining is done for profit on a larger scale, when it may be treated as a commercial activity. The Tax Authority has also issued guidelines reminding taxpayers to specify the income received from virtual currencies in their tax returns. In accordance with the Tax Authority guidance, mined cryptocurrencies must be included as income in the current tax year and “substantiated by ‘proof of work’ protocols.”
B. Tax Treatment of Staked Cryptocurrencies
Staked cryptocurrencies are cryptocurrencies gained as a result of fighting off the mining of additional cryptocurrencies by others. Typically, the miner both protects the value of currencies already held and also gains additional cryptocurrencies. The Finnish Tax Authority has described the activity in the following way in its guidance on taxation of virtual currencies: “From the perspective of taxation, this is a direct gain on a previously held asset, and consequently, it is regarded as a capital gain.” According to the guidance,
[t]he point in time when income is realized for purposes of taxation is when the miner gains possession of the new units of virtual currency. The income is valued at the market value of the virtual currency at that time. The amount of income received is also the gross acquisition cost for the newly acquired virtual currency. The acquisition cost of the miner’s old virtual currency remains unchanged. The same principle can also be applied to other situations where a taxpayer’s income is based solely on a gain on previously owned virtual currency.
C. Tax Treatment of Tokens Received Through “Hard Forks,” “Airdrops,” or as Gifts
1. Hard Forks
The Finnish Tax Authority describes the creation of new virtual currencies through hard forks as follows:
Sometimes the blockchains of virtual currencies have become forked. In these circumstances, any owners of the original virtual currency are given new virtual currency that have a different denomination, which corresponds to their original holding or a percentage thereof, for free, without losing any of their original virtual currency, and without having changed or divided the value of the original virtual currency. Such an operation does not involve a distribution of actual assets or existing virtual-currency positions across various other virtual currencies. Instead, this is a process that generates an addition to the owner’s existing virtual currency.
From the perspective of taxation, the acquisition cost of the original virtual currency remains unchanged, and the acquisition cost of the new currency is €0.00. In situations like the above, if the taxpayer uses or exercises their new position (when taxes are assessed as provided in the act on income tax, i.e. the taxpayer is an individual or an estate of a deceased person), the tax calculation must be based on a deemed acquisition cost of the position.
Thus, cryptocurrencies created through hard forks are taxed at the time of transfer, using an acquisition cost of zero. A forked cryptocurrency is therefore not taxed at the time of acquisition, unlike the taxation of mining discussed above in Part II.A.
The Finnish Tax Authority has not issued specific guidance on the tax treatment of tokens received through airdrops. Treatment of airdrops for taxation purposes will depend on whether they are treated as mined cryptocurrencies, staked cryptocurrencies, forked cryptocurrencies, or as a gift. The Finnish Tax Authority specifies that the principle that applies to staked cryptocurrencies, discussed above in Part II.B., may also apply in other cases when the “income is based solely on a gain on previously owned virtual currency.” Thus, an airdrop offered only to current holders of a currency might be considered a gain on previously held property and treated as staked currency taxable as a capital gain.
The Finnish Tax Authority recognizes that cryptocurrencies may be transferred as a gift. Finland does not tax gifts or lottery winnings (provided the winnings come from a Finnish or European Economic Area lottery and do not require any work from the winner). For purposes of transfers of cryptoassets within a year of receipt as a gift, the value of the cryptoasset at the time of receipt as a gift will be determined by the value at the time when the giver acquired the asset. For example, if Person A acquired the asset when it was worth $10 dollars, and gave it to Person B when it was worth $20 dollars who within a year sells it for $15, Person B is required to pay taxes on a $5 profit.
Prepared by Elin Hofverberg
Foreign Legal Specialist
 Virtual Currencies Have Stabilised Their Role as Mediums of Exchange, Vero [Finnish Tax Authority], https://perma.cc/9NTN-37NE. For more on the regulation of cryptoassets in Finland, see Elin Hofverberg, Regulatory Approaches to Cryptoassets: Finland, Law Library of Congress (Apr. 2019), https://perma.cc/JQ7K-RVXV.
 Id. 2 §.
 Id. 32 §, 45 § 1 para., and 46 § 1 para.
 Id. 53 § 8 para.
 1 § IskL.
 Id. A successful hobby may over time develop into a commercial activity because of its size and duration.
 Id. 51 §.
 Id. 1 §.
 Id. 124 §.
 Id. See also Vero, Taxation of Virtual Currencies (Jan. 22, 2020), https://perma.cc/CP4W-5BZD (most recent English translation), https://perma.cc/T8Z4-CHJW (official version in Finnish), https://perma.cc/RDB3-JHQ5 (official version in Swedish).
 Id. ¶ 2.5.
 Vero, Taxation of Virtual Currencies, supra note 17, ¶ 2.8.
 Vero, Taxation of Virtual Currencies, supra note 17, ¶ 2.5.2
 Vero, Taxation of Virtual Currencies, supra note 17, ¶ 2.6.1.
 Id. ¶ 2.6.4.
 51, 85 §§ IskL.
 Vero, Taxation of Virtual Currencies, supra note 17, ¶ 2.6.4.
Last Updated: 02/05/2021