CryptoReflexions#10 - The obligation to declare crypto accounts

UPDATE 18/02/2025: my position and the reading of the legal texts seem to be confirmed by the new government which stated in the federal coalition agreement that “Cryptocurrency accounts will also need to be notified to the PCC.” In other words, if the regime was clear and straightforward before, why does the note use the future tense? This declaration announcement allows me to confirm my interpretation. Until further notice, crypto accounts do not have to be declared (nothing prevents you from trying to do so).

With a growing adoption rate of crypto-assets, the Belgian authorities are beginning to look more closely at the regulation of these assets.

The question for crypto-asset investors of whether they are subject to the obligation to declare foreign accounts, including those related to crypto-assets, to the Central Point of Contact (PCC) is recurring.

In March 2024, a parliamentary question was asked by a parliamentarian on the declaration of crypto accounts. The Minister responded in May 2024 (here).

This question is asked to me regularly, and I invariably answered that the declaration obligation as referred to in Belgian regulations stems from the status of the institution that provides the “crypto” account. See notably this and that

This answer was based on a strict interpretation of tax law, confirmed moreover by the Minister in his response to a question in 2022, recalled in the 2024 response in these terms:

“*As indicated in the response to parliamentary question No. 1069 of June 7, 2022, from Mr. De Caluwe (Written Questions and Answers, Chamber, 2021-2022, No. 91, p. 179), the question of whether a wallet needs to be declared or not depends on the status of the financial institution with which the wallets are opened.”

The crypto news of recent months has been eventful and I am only now putting pen to paper to inform you of what is said in this new response.

Here is what you need to know about this obligation and how it could apply to you.

The legal framework for declaring foreign accounts

Every Belgian taxpayer holding a foreign account must indicate it annually in their personal income tax return and declare it to the PCC.

The PCC is an electronic database that collects the account numbers and contracts held by Belgian residents with financial institutions abroad.

The obligation to communicate foreign accounts by the taxpayer is based on Article 307, paragraph 1/1 of the Income Tax Code 1992 (CIR92).

It requires a declaration of (1) accounts of any nature opened with (2) a banking, exchange, credit, or savings institution established abroad.

Two conditions must therefore be met:

1. having an account of any nature
2. opened with a banking, exchange, credit, or savings institution established abroad.

The question of whether a crypto wallet must be subject to this declaration obligation does not have a clear and definitive answer to date, as we will see below.

Reminder of wallet types

A wallet is a medium or application that allows an investor to store their cryptocurrencies. Technically, the wallet is merely an interface for signing transactions.

There are therefore no crypto-assets in a wallet in the strict sense of the term.

There are two categories of wallets:

1. Custodial wallet: In this case, a third party (generally an exchange platform) holds the private key of the wallet, and therefore technical control over the assets. The investor can only authorize transactions but does not have direct access to the private key.

2. Non-custodial wallet: Here, the investor holds the private key themselves, giving them total control over their funds. No third party can intervene.

Non-custodial wallets can be divided into two subcategories depending on whether or not they are connected to the Internet:

• Hot wallet: Always connected to the internet, this type of wallet is practical for quick transactions but exposes funds to a greater risk of hacking.
• Cold wallet: A wallet that is not connected to the Internet, making its use safer against online attacks, but less practical for frequent transactions.

Are wallets considered foreign accounts?

Current legislation (Article 307, paragraph 1/1 of the Income Tax Code - CIR) requires taxpayers to declare any foreign account, defined as “any account of any nature, held with a banking, exchange, credit, or savings institution abroad.”

This raises the theoretical question: is a crypto wallet a foreign account within the meaning of this definition?

According to the Minister’s latest response:

“The term ‘account of any nature’ has a very broad meaning and covers, among others but not exclusively, cash accounts, savings accounts, term deposit accounts, securities accounts, accounts linked to a mortgage or any other form of credit, etc. ‘Accounts of any nature’ therefore also cover cryptocurrency wallets.”

This response seems questionable to me insofar as tax law is subject to strict interpretation. It is therefore not permissible to say that this expression has “a very broad meaning” in order to include everything one would want to include.

This would negate the principle of strict interpretation of tax law.

Considering the Minister’s latest response, we must note that the Tax Administration apparently believes that crypto wallets (custodial or non-custodial) “fall within” the notion of an account “of any nature.”

However, the 2nd condition, relating to the status of the institution, is there to serve as a “safeguard.”

Account opened with a banking, exchange, credit, or savings institution established abroad

The second condition to be met is therefore knowing whether the account is opened with a specific institution.

In his May 2024 response, the Minister answers that:

As specified in the Report to the King of the Royal Decree of June 23, 2019 implementing Article 307, paragraph 1/1 of the Income Tax Code 1992, banking, exchange, credit, and savings institutions established abroad are “institutions which, abroad, professionally provide financial services of the same nature as those of similar institutions established in Belgium.”

Consequently, it is only when, having regard to the activities and services offered by the online platform on which the wallet is opened, the latter can be considered as a banking, exchange, credit, or savings institution established abroad, that the account (i.e., the cryptocurrency wallet) must be mentioned by the taxpayer in their personal income tax return and communicated to the PCC."

In summary, according to the Minister, a crypto wallet is an account of any nature. It is therefore necessary to verify whether the platform offering this service is a platform that, abroad, professionally provides financial services of the same nature as those of similar institutions established in Belgium.

Non-custodial wallet

This first consideration already allows us to affirm that non-custodial wallets do not need to be declared.

The Minister expressly confirms this in these terms:

“regarding non-custodial wallets (e.g., paper wallet, hot wallet, hardware wallet, etc.), insofar as they are not linked to any platform and no intermediary intervenes either in the custody of funds or in the management of private keys, these accounts (crypto wallets), in light of the above, do not need, under current legislation, to be mentioned in the personal income tax return or communicated to the PCC.”

Custodial wallet

For custodial wallets, the Minister’s response is unfortunately not very illuminating:

“It is common for the aforementioned wallets (editor’s note: custodial wallets) to be opened with institutions established abroad which, on a professional basis, do not provide financial services of the same nature as banking, exchange, credit, or savings institutions established in Belgium.

In this case, the crypto wallets in question do not fall within the scope of Article 307, paragraph 1/1, CIR 92 mentioned above and therefore do not need to be declared.

Therefore, regarding custodial wallets, insofar as an intermediary intervenes in the custody of funds and in the management of the wallet holder’s private keys and therefore in the security of their crypto-assets, these wallets should be considered as needing to be mentioned in the personal income tax return and communicated to the PCC when the intermediary abroad professionally provides financial services of the same nature as those of similar financial institutions established in Belgium.”

The Dutch version of the response does not give us any more clarity.

Based on this response, two diametrically opposed conclusions can be drawn:

1. Either the fact that the intermediary intervenes in the custody of funds and in the management of the wallet holder’s private keys and therefore in the security of their crypto-assets equates to the provision by this intermediary on a professional basis of financial services of the same nature as those of similar financial institutions established in Belgium;

2. Or the intermediary must professionally provide financial services of the same nature as those of similar financial institutions established in Belgium for the account declaration obligation to materialize.

In my opinion, one must indeed verify the services of the platform and/or intermediary to be able to answer the initial question, otherwise the entire debate would be pointless.

The provision of financial services

What is therefore determinative is the notion of “provision of financial services of the same nature as those of financial institutions.”

This notion of “financial services” is a concept defined by Belgian law as “any service relating to banking, credit, insurance, individual pensions, investments, and payments.”

These service provisions are services that are regulated by law. To deliver them, they therefore require a license or specific authorization.

In this case, custodial wallet service providers are not within the scope (except Revolut, for example, which is a traditional “banking” institution that offers custody services) since they do not provide financial services.

The notion of payment with regard to financial services in Belgian law

A thesis defended by certain legal scholars aims to use the notion of payment to link the custodial wallet offered by platforms as an account to be declared.

A first justification would be the offering of a Visa card by certain platforms. In this context, the notion of payment would be “met.”

This way of looking at things may seem logical insofar as we consider that the centralized platform offers a custodial wallet and a credit/debit card which, ultimately, allows making payments.

However, in light of the applicable legal texts, we must face the facts: this thesis is not “consistent” with the law.

The obligation to declare cannot stem from this reasoning because the notion of “payment transaction” is defined by law and refers to the notion of “funds” which is also defined by law.

A payment transaction is defined as “an action, initiated by the payer or the payee, consisting of depositing, transferring, or withdrawing funds, regardless of any underlying obligation between the payer and the payee;”

The notion of funds covers: banknotes and coins, scriptural money, and electronic money within the meaning of Article 2, 25, of the law of March 11, 2018.

Let us finally specify that electronic money is defined as “a monetary value that is stored in electronic form, including magnetic form, representing a claim on the issuer, which is issued against the remittance of funds for the purpose of payment transactions (…) and which is accepted by a natural or legal person other than the electronic money issuer.”

Based on these elements, it is difficult to see how custodial wallets or credit cards could be considered payment services within the meaning of the law (which would trigger a declaration obligation).

Why declare your crypto account?

Even if the legislation is not perfectly clear, some advise investors to opt for transparency and declare their accounts. Here is why:

1. Position of the tax authorities: The Federal Public Service (SPF) Finance has already expressed, through its spokesperson Francis Adyns, that “crypto accounts” must be declared. This reflects the authorities’ desire to treat these accounts as foreign accounts of any nature.
2. Transparency: Not declaring an account can be perceived as a fraudulent act. Declaring crypto accounts allows one to “comply” and show the authorities that you have nothing to hide.

Personally, I am not a “supporter” of this proactive approach. It is not about “pleasing” or demonstrating that one has nothing to hide. We live in a state governed by the rule of law, and everyone, including the State, is bound to apply the rules. For years now, crypto players have been asking the authorities for clarifications and the situation has not really evolved.

Note also that tax litigation is very significant, which demonstrates and reflects the fact that the Tax Administration can be wrong in applying the rules. Therefore, relying on the statements of a tax spokesperson, which have no legal value, is but a thin branch on which the administration will attempt to justify its position.

Conclusion

The obligations regarding the declaration of crypto accounts in Belgium are not yet entirely clear, but the authorities’ responses show a clear trend toward integrating custodial wallet accounts into the PCC declaration framework.

In the future, the DAC8 directive will also enable automated information exchange.

Hyper-transparency is coming, but as of today, this is not the case.

Each person will therefore make their own choices in light of these elements to determine whether or not they must declare their custodial wallet to the PCC, or will transfer all their crypto to a non-custodial wallet to avoid any discussion…

To go further: cryptomonnaie.be — The Belgian cryptocurrency blog | Newsletter CryptoBelgique — Stay informed of news and updates