Swedish Tax Authorities Seek $90M in Unpaid Taxes from Crypto Miners

Key Takeaways

1. Tax Discrepancies Uncovered: The Swedish Tax Agency has identified significant tax inconsistencies within the cryptocurrency sector, resulting in a demand for over $90 million in unpaid taxes from crypto miners between 2020 and 2023.
2. Misleading Business Practices: Investigations revealed that 18 out of 21 crypto-mining firms provided incomplete or deceptive information to exploit tax benefits. Tactics included evading value-added tax (VAT) and finding loopholes to avoid paying import taxes or income tax on mining revenue.
3. Revenue Loss Concerns: The agency expressed concern over these practices leading to tax revenue loss for the country, attributed to incorrect VAT payments, unpaid VAT, and undisclosed crypto assets.
4. Obligations to Pay: Crypto mining firms are now required to pay over 990 million Swedish krona ($90 million) in total to the tax authorities, covering unpaid VAT and tax surcharges. Legal proceedings have upheld the agency’s demands for most firms.
5. Business Expansion Amidst Scrutiny: Despite the crackdown, some crypto mining companies, like Hive Digital Technologies, are expanding operations. Hive’s recent acquisition of a data center in Sweden emphasizes its commitment to sustainability and increasing Bitcoin production capacity.
6. Importance of Compliance: The Swedish Tax Agency’s actions underscore the necessity for compliance with tax regulations within the crypto mining industry. Despite legal challenges, the agency remains resolute in ensuring tax transparency and fairness.

Tax Evasion Tactics

The Swedish Tax Agency, also known as Skatteverket, conducted investigations into the operations of 21 crypto-mining firms over four years. It found that 18 of these firms had submitted misleading or incomplete information to take advantage of tax incentives.

Some crypto companies utilized deceptive business descriptions to evade value-added tax (VAT) on taxable operations. Others found loopholes to avoid paying import taxes on mining equipment or income tax on mining revenue.

According to the agency, these practices led to tax revenue loss for the country. This was due to incorrect payments of input VAT, unpaid output VAT, and undisclosed crypto assets.

The crypto mining firms are now obligated to pay over 990 million Swedish krona ($90 million) in total to the tax authorities. This includes unpaid total VAT of $85.4 million and tax surcharges of $5.3 million.

Despite appeals from the crypto mining firms against the tax demand, the administrative court upheld the appeals of only two mining entities. They rejected the rest. Adjustments were made to the demanded amounts following the court’s verdicts.

Business Expansion

In November 2023, Hive Digital Technologies, a crypto mining firm, expanded its operations. They acquired a commercial property and a data center in Boden, Sweden. Johanna Thornblad, Hive’s country president for Sweden, emphasized the company’s commitment to environmental sustainability with its new “green” energy-powered data center.

Hive Digital Technologies operates data center facilities in Canada, Sweden, and Iceland. They advocate for the use of renewable energy sources to mine digital assets such as Bitcoin. The company’s new property in Boden will house its upcoming generation of ASIC servers, further increasing its Bitcoin production capacity.

The Swedish Tax Agency’s crackdown on tax evasion within the crypto mining sector highlights the importance of compliance with tax regulations. Despite legal challenges, the agency remains steadfast in its pursuit of ensuring tax transparency and fairness within the industry.