This article was originally published in AGEFI Luxembourg, November 2025 and is reproduced with permission from the publisher.
Crypto currencies and other crypto assets are increasingly being adopted by investors. Over time, the legal framework applicable to this asset class has become more defined. Although Luxembourg does not yet have specific tax legislation dedicated to crypto assets, the Luxembourg direct tax authorities issued Circular L.I.R. n°14/5 – 99/3 – 99bis/3 on 26 July 2018, providing guidance on their tax treatment for Luxembourg tax residents (the Circular).
Types of investors and investment profiles
Under Luxembourg tax law, investors in crypto assets may be classified as individuals or corporations.
An additional distinction is made within the category of individual investors, based on their investment strategy – namely between traders (regarded as carrying out a business activity) and ordinary investors (considered as merely managing their private wealth).
Investing and trading represent two distinct approaches of participating in the financial markets, each carrying specific tax implications under Luxembourg law. Broadly speaking, ordinary investors typically follow a passive strategy, aiming for long-term returns through a buy-and-hold approach. In contrast, traders actively seek to capitalise on both bull and bear markets by entering and exiting positions over shorter timeframes, targeting frequent returns.
The aim of this article is to provide an overview of the Luxembourg tax regime applicable to each category of investor and investment profile, while acknowledging that this distinction is necessarily simplified and the qualification of each investor will depend on the specific facts and circumstances.
Luxembourg tax framework applicable to individual investors
As mentioned, the taxation of individual investors primarily depends on their investment strategy, particularly on whether the income generated qualifies as business income or as income resulting from ordinary private wealth management (ie miscellaneous income).
Taxation of a trader
An individual using a trading strategy will, in principle, be considered to carry out a business activity and thus fall within the scope of the business income tax regime. According to the guidance of the Luxembourg tax authorities, such activity is considered a business activity if it is carried out as an independent activity, of permanent nature, pursued with the intention of generating profits, and represents participation in general economic life. For example, an individual who actively trades stocks on a daily basis on behalf of third parties with systematic monitoring and the intent to generate short term profits should be considered as conducting a business activity. In such cases, profits generated from their crypto activity, irrespective of their nature, are taxed as business income at the trader’s progressive income tax rates. In addition, traders will be subject to municipal business tax (MBT). For further details, please refer to Section III.
The Circular set outs the following indicators for determining whether an activity in the crypto sector qualifies as a business activity:
- premises or organization dedicated to virtual currency operations;
- use of borrowed capital;
- frequent turnover of the inventory of virtual currencies; and
- trading on behalf of third parties.
Hence, a fact specific analysis will be required in each case to assess whether the activity of an individual qualifies as a business activity.
Taxation of ordinary investors
If the conditions for the business activity are not met, the individual will be considered as an ordinary investor and thus fall outside the business income tax regime outlined above.
Profits generated by these investors from buying and selling cryptocurrencies over short time frames, ie gains arising from the sale/exchange of crypto assets held for less than six months would qualify as a speculative gain. In such cases, the gain is subject to the individual’s progressive income tax rate, unless the total annual speculative gain remains below EUR500, in which case it is exempt from taxation in Luxembourg. Ordinary investors holding their crypto assets over a longer time horizon fall under the capital gains tax regime, provided the holding period exceeds six months. In such cases, capital gains realised upon the sale/exchange of the crypto assets are exempt from taxation in Luxembourg.
Crypto-related taxation is not limited to the buying and selling/exchange of cryptocurrencies. Various activities involving crypto assets can also generate taxable income, including the following:
- Mining: The process of validating and adding transactions to a blockchain on networks using a proof-of-work consensus mechanism. Miners are rewarded with newly issued coins (block rewards) and/or transaction fees in exchange for contributing computational power.
- Staking: The act of locking or delegating crypto-assets to support the operation and security of a blockchain network that uses a proof-of-stake (or similar) consensus mechanism. In return, participants earn rewards, typically in the form of additional tokens of the same cryptocurrency.
- Other crypto assets income: This includes income arising from blockchain events such as airdrops (free distribution of tokens, often for promotional or reward purposes) and hard forks (chain splits that may result in holders receiving additional tokens on the new chain).
i. Mining gains
From a Luxembourg tax perspective, cryptocurrency mining is generally treated as a business activity, notably due to the infrastructure needed to carry out such an activity (eg mining farm), thus the relevant investor being treated as a trader. However, the tax treatment depends on several key indicators outlined in the Circular, as previously discussed in the section II. A. titled “Taxation of a trader”.
In the hypothetical case where the mining activity does not meet the aforementioned indicators to be classified as a business activity, the income from such activity should be classified as miscellaneous income and be subject to progressive taxation.
ii. Staking gains
Staking gains are not explicitly covered by a specific legal framework in Luxembourg. staking income should be taxed as miscellaneous income and be subject to progressive taxation.
iii. Other crypto assets income
Several other types of incomes can be generated from crypto assets. Amongst the most common are airdrops and hardforks.
There is no clear legal or tax framework in Luxembourg for income from the above-mentioned crypto assets. As a result, the general provisions of Luxembourg income tax law should apply. Therefore, should the Circular’s criteria not be met, such remuneration would likely be taxed as miscellaneous income and taxed at the individual’s progressive income tax rate in Luxembourg.
Taxable event and tax filing
Income generated from crypto assets should generally be reported in the tax return of the taxpayer corresponding to the year in which the income is earned. Hence, it is key to determine when said income is considered to be earned for Luxembourg tax purposes, ie the taxable event needs be identified. In the context of the crypto assets, a taxable event typically arises in the following situations:
- Conversion of cryptocurrencies: The conversion/sale/exchange of a cryptocurrency to a fiat currency (eg EUR, USD…) or into another cryptocurrency will trigger a taxable event. Thus, the taxable gain (if taxable) would need to be assessed;
- Other crypto asset income: Income generated from crypto includes, but is not limited to, additional crypto assets received (eg through mining, staking, airdrops, hardforks or other rewards) and any transaction fees earned. Said income should, in principle, be taxable upon receipt based on their market value.
In order to ensure appropriate tax treatment, investors should retain and be able to provide sufficient documentation to the Luxembourg tax authorities in respect of the income generated, including proof of acquisition date (eg for the 6-months period for individuals), fair market value at the time of receipt, and the nature of the transaction. Trading platforms generally provide this documentation automatically on an annual basis, however, should such information not be provided by trading platforms, a self-track record of the trades performed should be observed. On the other hand, while traders should nonetheless maintain sufficient documentation to comply with their tax reporting obligations, the nature of the transactions should have no incidence on the applicable tax treatment.
Luxembourg tax framework applicable to corporate investors
Taxation of corporate investors
Corporate investors resident in Luxembourg carrying out an activity generating financial income based on crypto assets should, in principle, be subject to corporate income tax (CIT) and MBT.
For fiscal year 2025, any profits generated from crypto assets, irrespective of their nature, by a tax-resident and fully taxable corporate investor should be subject to CIT and MBT at the aggregate rate of 23.87% in Luxembourg city.
In addition, the fair market value of the assets held in the context of such activity should be assessed to determine a company’s taxable basis for net wealth tax (NWT) purposes. Specifically, the fair market value of crypto assets held at the end of the fiscal year is relevant for calculating the unitary value determination and the corresponding NWT charge as of 1 January of the following year. The unitary value will be subject to NWT at a rate of 0.5% for a net asset value of less than EUR500 million and 0.05% for any net asset value in excess of EUR500 million.
Additionally, for fiscal year 2025, a minimum NWT will apply as follows: EUR535 for a balance sheet total of up to EUR350,000, EUR1,605 for a balance sheet total exceeding EUR350,000 but not exceeding EUR2 million, and EUR4,815 for a balance sheet total exceeding EUR2 million.
Taxable event and tax filing
Our comments previously outlined in the section II. C. titled “Taxable event and tax filing” apply mutatis mutandis to corporate taxpayers. In this regard, and along the lines of our comments in respect of traders, while corporate taxpayers should maintain sufficient documentation to comply with their tax reporting obligations, the nature of the transactions should have no incidence on the applicable tax treatment.
Luxembourg VAT treatment
Cryptocurrencies
In line with CJEU case law, the Luxembourg VAT Authority confirmed that cryptocurrencies are to be subject to the same VAT treatment as any other currency. As such, the use of cryptocurrencies as a means of payment for goods or services falls outside the scope of VAT. However, the supply of goods or services paid for in cryptocurrencies remains subject to VAT on the value of the underlying transaction, ie the value of the cryptocurrency used as consideration for the supply.
The VAT Committee highlighted that mining activities warrant a distinct VAT treatment. Where miners receive remuneration randomly (eg via airdrops), such mining services do not constitute a taxable supply and should fall outside the scope of VAT. This is based on general VAT principles pursuant to which a transaction must be carried out in exchange for a consideration that it is ascertainable for it to fall within the scope of VAT. Accordingly, mining services that guarantee remuneration in cryptocurrency should be subject to VAT.
Ancillary services provided by wallet operators, such as the storage and transfer of cryptocurrencies are taxable supplies but may generally qualify for the VAT exemption applicable to financial services. In contrast, intermediation services offered by exchange platforms should be characterized as an electronically supplied service and should be fully subject to VAT.
DAC 8
To enhance tax transparency and tackle aggressive tax planning, the European Commission proposed a revision to Directive 2011/16/EU on administrative cooperation in tax matters, leading to the introduction of the eighth amendment, namely DAC 8. This directive extends the scope of automatic information exchange to include data reported by crypto-asset service providers regarding transactions involving the transfer or exchange of crypto-assets (including stablecoins) and e-money tokens. The proposal was presented on 8 December 2022 and adopted by the European Parliament on 13 September 2023. DAC 8 is expected to enter into force on 1 January 2026, with Member States required to transpose the directive into national law by 31 December 2025.
It is expected that DAC 8 will increase transparency in the field of crypto-assets, as well as improving the amount of information available to local tax authorities.
Conclusion
Despite Luxembourg’s proactive steps toward integrating crypto assets into its financial and regulatory landscape – the taxation of crypto assets remains a complex and evolving area. While certain favourable tax treatments may apply under specific conditions, the legal framework does not yet provide comprehensive or definitive guidance on all aspects of crypto taxation in Luxembourg.
Given this uncertainty, it is essential that each situation involving crypto assets be analysed individually to determine the appropriate tax treatment. Factors such as the nature of the transaction, the holding period, the type of asset, the valuation mechanic, and the taxpayer’s profile can significantly influence the tax outcome. In this regard, and considering the increasing amount of information being shared with and amongst tax authorities, it is of the essence that investors, and in particular, investors gather sufficient information to support the nature of the transactions undertaken.
To foster legal certainty and support the growth of the digital asset ecosystem, further clarifications and detailed guidance would be highly beneficial. A more precise and transparent legal framework would not only enhance compliance but also reinforce Luxembourg’s position as a leading hub for digital finance in Europe.
