Not All Crypto Profits Have to Be Taxable
Opinion
Crypto is still treated as something of a neglected stepchild. This is also true in taxation. Nowhere, in our view, is this more apparent than in the haste with which it is assumed that income from crypto, and more specifically from onchain staking, must necessarily be taxable. Our position, however, is clear: in the case of native onchain staking, we believe that the statutory conditions for taxing rewards as investment income are not met and that, under the current tax legislation, such income is therefore not taxable.
Let us clarify from the outset what this article is about. What concerns us is not that the Belgian Ruling Commission, tax inspectors or the Special Tax Inspectorate take positions on the tax treatment of crypto. That is, of course, their role. What does concern us is the apparent self-evidence with which certain positions are sometimes adopted and subsequently repeated, without any thorough examination of whether they have a sufficient legal basis.
An administrative position, an advance ruling or an established practice cannot replace a legal analysis. The facts must first be correctly established, after which it must be examined whether the statutory conditions are actually met. Only then can a tax conclusion be drawn.
The prime example is advance ruling no. 2025.0061 of 18 March 2025. Since then, we have heard the reasoning adopted in that ruling repeated by virtually every tax inspector with whom we discuss staking. Among tax practitioners too, the position appears to be accepted remarkably easily. What is particularly concerning is that the conclusion is often repeated without any substantive reasoning or critical examination of the analysis on which it is based.
The advance ruling thus appears to be gradually evolving from an individual position into a perceived tax certainty, even though its legal and factual foundations are particularly open to debate.
The Problem Starts with the Facts
The Belgian Ruling Commission defines staking as follows:
“‘Staking’ cryptocurrencies means, in principle, that investors lock up cryptocurrencies for which the ‘staking process’ is supported in a particular contract, or simply on an exchange, and are periodically rewarded for doing so.”
The words “in principle” alone should already raise alarm bells in a tax analysis. Native onchain staking is not simply a matter of locking up cryptocurrencies in exchange for a periodic payment.
The stake enables a validator to participate in the consensus mechanism and functions as an economic guarantee. Locking up the cryptocurrencies does not, in itself, create a periodic claim against a counterparty.
The validator receives rewards in accordance with the rules of the protocol for participating in the validation process. A fundamental distinction must therefore be made between staking the cryptocurrencies and validating transactions. Staking itself does not simply generate a reward because the coins are locked up for a certain period of time. The stake is the condition for participating in the validation process and, at the same time, serves as the economic guarantee for proper behaviour.
The rewards, by contrast, are linked to participation in the consensus and validation process. The former, staking, enables the latter, validation. Conflating the two is precisely where, in our view, the Ruling Commission's analysis goes wrong.
That distinction is important for the tax classification. Moreover, the Ruling Commission appears to assume that staking cryptocurrencies as such gives rise to periodic payments. This too is an overly simplistic representation of what technically occurs. In native onchain staking, the mere passage of time does not create a periodic payment obligation on the part of any counterparty.
Rewards arise within the validation process, including when a validator proposes and validates a new block in accordance with the rules of the protocol.
Taking the technical analysis one step further illustrates just how difficult it is to maintain the traditional notion of a “payment”. A validator proposing a new block includes the allocation of the new coins in that block itself, in accordance with the protocol rules. There is therefore no other person paying the validator a reward out of their own assets. The new coins are created and allocated through the operation of the protocol itself. More specifically, they are often allocated by the validator to itself.
This is far removed from the traditional concept of a debtor periodically paying compensation for the use of someone else's capital.
When the factual analysis starts from the wrong premise, it is hardly surprising that the legal classification also raises questions.
“It Most Closely Resembles Interest”
The Ruling Commission takes the view that staking rewards “most closely resemble interest”. According to this reasoning, the staker makes their coins available to the network and receives rewards in return, by analogy with someone lending capital and receiving interest. But that analogy raises more questions than it answers.
To whom are those coins made available?
Who obtains the use of the capital?
Who is the debtor?
Where is the agreement under which someone undertakes to return the capital and pay compensation for its use?
The protocol developers are also put forward as a possible counterparty. But this too raises fundamental questions.
Who exactly are those developers? What legal relationship exists between them and the validator? Has an agreement actually been concluded with them concerning the use of the staked cryptocurrencies? And what, for example, happens in the event of a fork, where it is not the original developers but the community that decides to take the protocol in a different direction? Simply asserting that “the developers” act as the counterparty therefore seems particularly difficult to sustain.
This is all the more so given that, at European level, the absence of an identifiable counterparty is considered a key element of the analysis for VAT purposes.
None of these questions are answered. Yet one might reasonably expect them to be addressed in a ruling with significant tax implications for hundreds of thousands of people.
A protocol is not simply a debtor. The fact that code allows new cryptocurrencies to be created and allocated under certain conditions does not turn that code into a counterparty that has obtained the use of the validator's assets. On the contrary, in certain forms of native onchain staking, it is technically the validator itself that, when proposing a new block, allocates the reward to itself in accordance with the protocol rules.
There is therefore no third party paying a reward out of its own assets or undertaking vis-à-vis the validator to make such a payment. In our view, this bears more resemblance to a unilateral allocation, insofar as one can even speak of a legal act in this context, than to a payment made by a debtor to its creditor.
As the Ruling Commission itself notes, interest is traditionally understood as the price paid by a debtor for the use of capital, as agreed with the person who invested that capital. In our view, that relationship cannot be identified in native onchain staking. Still less can it be said that the protocol obtains the use of the staked cryptocurrencies.
The network does not obtain the use of the staked cryptocurrencies. Those cryptocurrencies essentially function as collateral within the consensus mechanism.
Interacting with a Protocol Is Not Yet an Agreement
The other question is where the agreement on which the Ruling Commission bases its reasoning can be found.
The Ruling Commission itself refers to Com.IB 17/1.1. According to that administrative commentary, taxable proceeds must be the subject of an agreement concerning the disposal or use of the movable property. The income constitutes the price paid by a debtor for the use of the capital.
In the case of native onchain staking, the existence of such an agreement is far from evident. The Ruling Commission states that the staker “interacts” with the protocol through blockchain technology. But a technical interaction with a protocol is not yet an agreement. The fact that a validator follows the rules of a protocol, locks up cryptocurrencies as a stake and thereby becomes eligible for rewards does not demonstrate that an agreement concerning the disposal or use of those cryptocurrencies has been concluded with another party.
Here too, the tax administration's own position on VAT is difficult to ignore. In relation to mining, it expressly states that “there is no legal relationship between the ‘miner’ and the cryptocurrency network”. It also expressly distinguishes this from a situation in which a miner has “concluded an agreement for consideration with another party” and receives contractually determined remuneration in return.
For VAT purposes, the administration therefore itself acknowledges that participation in a decentralised consensus mechanism and the receipt of protocol rewards do not necessarily imply the existence of an agreement with the network.
Moreover, the staked cryptocurrencies function as an economic guarantee for participation in the consensus mechanism. It does not automatically follow from this that another party obtains the use of those cryptocurrencies. The Ruling Commission itself states that users are rewarded “for their contribution to the validation of these transactions”. If the reward is obtained for participating in the validation process, it must at least be explained why that reward should simultaneously constitute the price paid for the use of the staked capital.
In our view, a reference to an “interaction” with a protocol is insufficient for that purpose.
But Who Is the Counterparty?
This brings us to a second problem. Even if one were to assume that an agreement exists, it must still be possible to identify with whom that agreement is concluded and who the debtor paying the remuneration is.
Here too, the Ruling Commission's answer remains vague. It refers to “the protocol” and, in an earlier advance ruling, even to the developers of the blockchain. But a decentralised protocol is not automatically a legal person or debtor. Nor is it clear why the developers would legally be parties to every staking activity taking place on the network.
Remarkably, the Belgian tax administration itself acknowledges this difficulty for VAT purposes. In relation to mining, it expressly states:
“A characteristic feature of mining is often that the counterparty is unknown. Nor is there a legal relationship between the ‘miner’ and the cryptocurrency network.”
According to the same commentary, miners are moreover not remunerated by the parties to the transactions they validate, but by “the self-managing system”.
VAT rules obviously do not determine the application of income tax. However, this position does demonstrate that, in the context of decentralised blockchain validation, the existence of a counterparty and a legal relationship with the network is far from self-evident. Mining and staking are technically different, but within Proof of Work and Proof of Stake respectively they perform a comparable function in the consensus and validation process.
Why there is no legal relationship with the network in the case of mining, while for income tax purposes a counterparty or debtor can suddenly be found in “the protocol” or its developers in the case of native staking, therefore deserves at least a legal explanation.
In our view, precisely that explanation is missing.
Staking Is Not a Risk-Free Provision of Capital
The comparison with interest also fails on another point. The administrative commentary describes the transactions covered by Article 19 BITC 92 as transactions involving “virtually no risk”, in which one party transfers a sum and the other undertakes to return a higher sum at a later date. Place that description alongside native onchain staking and the contrast is difficult to ignore.
With staking, risk is built into the system itself. The stake functions as an economic guarantee for proper behaviour. In Proof of Stake protocols, improper behaviour can be penalised by the loss of part of the stake, commonly referred to as “slashing”. That risk is not an incidental side effect, but an essential and fundamental component of the consensus mechanism.
No traditional debtor, no traditional loan, no guaranteed remuneration, no agreed repayment date, and assets that are instead used as collateral and may, in certain circumstances, be lost. Yet staking is still said to “most closely resemble” interest. In our view, that conclusion is far less self-evident than the Ruling Commission suggests.
Taxable First, Then Look for a Reason Why?
This brings us to the real problem. The impression is that the analysis does not begin with the question of what staking actually is, technically and legally, but with a much simpler premise: staking rewards must be taxable. A tax category is then sought into which those rewards can be fitted. That is putting the cart before the horse.
A tax analysis should proceed in exactly the opposite direction. First, the facts must be established: what exactly does the validator do, what happens to the staked cryptocurrencies, who can dispose of them, is there an agreement or a counterparty, and how does the reward arise? Only then should the tax question be asked: which statutory provision makes this particular income taxable? The starting point should not be that something must be taxable, followed by a search for the least implausible classification.
“Most Closely Resembles” Is Not a Taxable Category
The wording used by the Ruling Commission is revealing in itself: “The Ruling Commission takes the view that income from ‘staking’ most closely resembles interest. ‘Staking’ cryptocurrencies is, after all, a relatively passive activity.”
But “most closely resembles” is not a taxable category. This is not an academic question of semantics, but goes directly to the principle of legality in taxation. Article 170, § 1 of the Belgian Constitution provides that no tax for the benefit of the State may be imposed except by law. It is therefore not sufficient to establish that a new economic phenomenon most closely resembles an existing category. The statutory conditions of that category must actually be met.
This obviously does not mean that a new tax provision is required for every technological innovation. Existing tax rules can perfectly well be applied to new economic phenomena. Technological neutrality, however, cannot serve as a licence to stretch the conditions of a taxable category until a new phenomenon more or less fits within it.
This criticism is not new. Professor Michel Maus already raised the issue in 2023 and expressly questioned whether a classification by analogy could withstand legal scrutiny (P. VAN VELTHOVEN, M. MAUS and J.P. VAN WEST, “Belastingen in de metaverse”, T.F.R. 2023, issue 636, 147). Article 17 BITC 92 contains an exhaustive list of proceeds from movable property that are taxable as investment income.
His conclusion was therefore unequivocal: “And since income from staking cryptocurrencies is not included in this statutory list, it cannot be regarded as investment income.”
The debate surrounding staking is therefore not merely about which existing category staking most closely resembles. First and foremost, it concerns the more fundamental question of whether the law permits staking rewards to be taxed as investment income on the basis of such reasoning by analogy at all.
And If Investment Income Does Not Work, Then Miscellaneous Income?
The same reflex is not confined to staking. When crypto capital gains are classified as miscellaneous income, there sometimes also appears to be an underlying assumption that crypto must somehow be taxed. This is all the more remarkable since the introduction of the new capital gains tax.
In that context, the Minister of Finance expressly emphasised that a crypto investor is not automatically a speculator, that each situation must be assessed on the basis of its specific facts and that abnormal management should only arise in exceptional circumstances.
Unfortunately, our experience during tax audits still regularly points in a different direction. Fortunately, we have observed that an increasing number of tax inspectors, and particularly those within the Special Tax Inspectorate, have now developed an in-depth understanding of crypto and do take account of the specific facts and nuances of each case.
At the same time, we are still too often confronted with audits in which crypto capital gains are treated almost automatically as miscellaneous income, after which it is left to the taxpayer to demonstrate why this should not be the case. Even where express reference is made to the Minister's position and to the burden of proof resting on the tax administration, that starting point sometimes appears to carry little weight.
In practice, the reasoning is thus once again reversed: instead of the tax administration demonstrating why there is speculation or abnormal management, the taxpayer is required to prove why their crypto investments constitute normal management of private assets. Here too, the underlying premise sometimes appears to be that crypto is taxable unless the taxpayer proves otherwise.
And Then There Are the Foreign Crypto Accounts
The same intellectual honesty is required in the debate concerning the reporting of crypto accounts as foreign accounts. During tax audits, we regularly see the tax administration relying on the failure to report historical accounts held with foreign crypto exchanges to allege fraud and thereby apply the extended assessment period.
Here too, the conclusion should not precede the legal analysis. To date, it is far from certain that an account with a crypto exchange must be regarded as a foreign account held with a banking, exchange, credit or savings institution within the meaning of Article 307 BITC 92. Crypto accounts are not expressly covered by the legislation, and there are strong legal arguments for disputing that every foreign crypto exchange can automatically be brought within those concepts.
Even today, the Belgian Central Point of Contact (CPC) expressly links the reporting obligation to the condition that the crypto account is held with a foreign banking, exchange, credit or savings institution.
This is all the more relevant for historical cases. Anyone who opened an account with a crypto exchange years ago did so at a time when hardly anyone was aware of a possible CPC or tax reporting obligation for such accounts and when their legal classification was far from evident.
To assume retrospectively today that failure to report such an account not only constituted an infringement but also demonstrates fraudulent intent, thereby triggering the extended assessment period applicable in cases of fraud, therefore requires a particularly thorough legal analysis.
Here too, what stands out is the apparent self-evidence with which the position is sometimes adopted. It is asserted that an account with a foreign crypto exchange constitutes a foreign account within the meaning of Article 307 BITC 92, without any legal reasoning being provided as to why this is the case. It is simply stated as fact. Yet that is precisely the question that must first be answered. An administrative position does not become legally correct merely because it is presented as self-evident without further justification.
The applicable legislation and the nature and activities of the exchange concerned must first be examined. Only then can it be determined whether a reporting obligation exists at all. And only if that question is answered in the affirmative can one examine the consequences that may attach to any failure to report, let alone infer fraudulent intent from that failure as a matter of course.
A Call for Intellectual Honesty
For the avoidance of doubt, this is not a principled argument against taxing staking rewards as investment income, although we believe that, for most forms of staking, and native onchain staking in particular, the statutory conditions for taxation as investment income are simply not met.
If, on the other hand, there are genuine legal and tax arguments for concluding that those conditions are met, then that income should of course be taxed accordingly. But those conditions must actually be demonstrated, all the more so where the administrative commentary itself clearly defines the contours of the income targeted by the relevant provisions.
And that is precisely where the problem lies today. In practice, we find that a substantive legal discussion about (onchain) staking is all too often dismissed by referring to a single advance ruling. That ruling is then repeated by tax inspectors and even tax practitioners as though the debate had thereby been definitively settled. Yet an advance ruling is not law, and repeatedly stating a position does not strengthen its legal basis.
Particularly not where, in our view, that ruling starts from a technically incorrect representation of staking and subsequently contents itself with formulations such as “in principle” and “most closely resembles”.
That is unfortunate. Crypto does not need preferential tax treatment, but it does deserve the same degree of legal rigour as any other economic activity. Particularly for a mechanism such as staking, which plays a fundamental role within Proof of Stake blockchains, more should be expected than an approximate classification. It deserves a genuine legal debate about the facts, the legal relationships involved and the precise conditions governing the application of tax law.
Perhaps that debate will ultimately lead to the conclusion that certain forms of staking do indeed generate investment income. Perhaps it will not. But that should be the conclusion of a legal analysis, not the premise with which that analysis begins.
That, ultimately, is our call for intellectual honesty.
