of MiCAR in the Luxembourg context?
With the MiCAR Regulation (Regulation (EU)
2023/1114), which became fully applicable at the end of 2024, the European
Union has introduced a common regulatory framework covering both the issuance
of crypto‑assets and the provision of crypto‑asset services. MiCAR notably
establishes an authorisation and supervisory regime for crypto‑asset service
providers (“CASPs”), transparency obligations for issuers (including the
publication of white papers), as well as governance and conduct rules
broadly comparable, in their underlying rationale, to those applicable to
traditional financial market participants.
In Luxembourg, the CSSF is the competent
authority. Presently, MiCAR constitutes the core regulatory framework
applicable to crypto‑assets in Luxembourg, supplemented by national regulatory
guidance and a significant body of European‑level guidelines, but without
directly addressing tax matters, which fall under separate instruments such as
DAC 8.
Does DAC 8 mean
the end of tax opacity for crypto-assets?
With the adoption and implementation of
DAC 8, the European Union has taken a decisive step by bringing crypto‑assets
within the scope of automatic exchange of tax information, following the model
long applied to financial accounts under the Common Reporting Standard (“CRS”).
DAC 8 constitutes the EU implementation of the OECD Crypto‑Asset Reporting
Framework (“CARF”) and aims to reduce the information asymmetry that
historically characterised crypto‑asset transactions, whereby transactional
information was available to taxpayers and crypto‑asset platforms but not to
tax authorities, particularly in cases involving foreign platforms or cross‑border
activities. By introducing systematic reporting obligations, DAC 8 seeks
to ensure that tax authorities receive relevant transactional data, in a manner
comparable to the automatic exchange of information applicable to financial
accounts under the CRS.
In Luxembourg, DAC 8 and the introduction
of a crypto‑asset reporting framework was implemented through the law of 27
March 2026, applicable as from 1 January 2026, which imposes structured
obligations on CASPs and equivalent operators in terms of due diligence, data
collection and reporting. In practice, CASPs are required to identify their
users through self‑certifications, collect detailed transactional data (crypto‑to‑fiat,
crypto‑to‑crypto, transfers and payments), and report this information annually
to the Luxembourg tax authorities, which subsequently exchange it automatically
with the tax authorities of the relevant jurisdictions of residence. The first
reports will be submitted in 2027 for the 2026 reporting period, within a
framework that includes a graduated sanctions regime and mechanisms designed to
avoid double reporting within the European Union.
DAC 8 does not introduce a new tax on
crypto-assets, as taxation remains a national competence, but it significantly
reshapes the level of tax control. Crypto-assets thereby leave the grey area of
limited transparency and become subject to a degree of traceability comparable
to that applicable to traditional financial assets. In this respect, DAC 8
complements MiCAR: while MiCAR governs market access and regulatory supervision
of crypto actors, DAC 8 represents its tax counterpart, providing tax
authorities with the tools necessary to verify the correct application of
existing tax rules.
What is the tax
treatment of virtual currencies in Luxembourg?
From the perspective of the tax treatment of
virtual currencies as such, Luxembourg has not enacted specific tax legislation
dedicated to crypto‑assets. The applicable framework still primarily relies on
two circulars, i.e., the Circular L.I.R. No. 14/5 – 99bis/3 of 26 July
2018 regarding the direct tax aspects (“Circular 14/5”) and the Circular
No. 787 of 11 June 2018 in relation to the VAT aspects (“Circular 787”).
The Circular 14/5 characterises virtual
currencies as intangible assets, rather than official currency (e.g., EUR),
meaning that currency exchange gain or loss treatment does not apply. As such,
the taxation of this asset follows the general income tax rules applicable to
assets, which depends on the nature of the activity and the taxpayer’s profile.
For individuals, the key distinction remains that between private wealth
management and professional activity. Gains arising from the disposal or
exchange of crypto‑assets held for private purposes may qualify as speculative
income where the transaction occurs within six months of acquisition, and are
then taxable according to the progressive income tax scale, although gains not
exceeding the aggregate annual exemption threshold of EUR 500 are exempt.
Conversely, gains realised after a holding period exceeding six months are, in
principle, tax‑exempt. Where the activity presents the characteristics of a
commercial activity — notably the frequency of transactions, the use of
borrowed capital, a structured organisation or transactions carried out on
behalf of third parties — income derived from crypto‑assets falls under
business profits and is taxed in accordance with ordinary tax rules, including
income derived from activities such as mining or certain forms of staking (i.e.
the locking or delegation of crypto‑assets to a blockchain network in exchange
for rewards).
For Luxembourg partnerships (e.g., SCS, SCSp),
which are in principle tax-transparent and therefore not subject to taxation,
particular attention must be paid to the nature of the activity carried out.
Where the activity of the partnership goes beyond the mere holding of virtual
currencies (e.g., active trading, mining, etc.), its activity may be qualified
as commercial, triggering taxation from a municipal business tax perspective,
unless the partnership is organised as an investment fund.
Luxembourg commercial companies (e.g., S.A. or
S.à r.l.), by contrast, are deemed to carry on a commercial activity by nature.
As a result, income and capital gains derived from transactions involving
virtual currencies are in principle fully taxable under ordinary corporate
income tax rules, unless such companies benefit from a specific status (e.g.,
investment funds or private wealth management companies).
From a VAT perspective, Circular 787 clarifies
that VAT exemption applies to exchange transactions involving virtual
currencies used as a means of payment. This VAT exemption does not, however,
extend to other crypto‑related services, including advisory or custody
services, which remain taxable.
The adoption of MiCAR and the implementation of
DAC 8 have not altered these substantive tax rules applicable to virtual
currencies. They have, however, significantly strengthened their practical
enforcement. MiCAR structures and supervises the crypto market ecosystem, while
DAC 8 introduces a comprehensive framework for tax transparency and automatic
exchange of information, granting tax authorities access to data that was
previously difficult to verify. As a result, while the Luxembourg tax treatment
of virtual currencies has remained formally unchanged since 2018, it now
operates within a far more robust regulatory and reporting environment, making
the tax qualification and proper documentation of crypto-asset transactions
more critical than ever.
Any questions? Don’t hesitate to reach out.
Authored by Jean-Philippe Monmousseau and Souldous Asquier.