What if I lost money on a cryptocurrency investment in Norway?

Cryptocurrencies in Norway are treated as formuesobjekter - ordinary capital assets. This means that gains from their sale are taxed as capital income (skattesats 22%). Likewise, documented losses on cryptocurrencies can be deducted from the tax base.

In other words, if you are a tax resident of Norway and, for example, bought cryptocurrency and sold it at a loss, you can report that loss in the skattemelding (tax return) and reduce your taxable base by its value. This applies to all trading platforms, including foreign ones - what matters is the investor's country of residence, not the country of the exchange or broker.

Basics: gain taxed, loss deductible

In practice, this means that income from cryptocurrencies (the difference between the sale price and the purchase price) is treated as ordinary capital and subject to 22% tax.

Skatt explains: if a sale (realisation) produces a gain, it is taxed; if it produces a loss, it can be deducted (fradragsberettiget tap). Any acquisition costs, transaction costs, selling costs and the difference between the sale and purchase price, if negative, may be deducted.

It is important that it is always the realisation that counts - that is, the sale of the cryptocurrency (including swapping it for another one), not mere ownership. Unrealised losses (for example, if the price falls but you do not sell) cannot be taken into account until the transaction has been completed.

Loss, theft and other exceptional situations

If cryptocurrency was lost as a result of fraud or theft, you can also report the loss provided you have documentation confirming its final nature. The authorities require the investor to document that attempts were made to recover the funds and that the investment is not recoverable - completely lost. Useful documents include transaction logs, emails, a police report or other evidence of communication with the fraudsters.

Similarly, in the event of the bankruptcy of an exchange or broker: you can deduct the value of the investment if it is clear that the platform has gone bankrupt and the funds will not be returned to the user. Remember that the deductible amount is the cryptocurrency's purchase or investment value (the so-called inngangsverdi), not, for example, any unrecorded potential value before the bankruptcy.

Documentation and reporting in the tax return

To obtain the deduction, keep detailed documentation: invoices, exchange statements, proof of deposits/withdrawals, transaction confirmations. It is worth keeping evidence of the purchase and disposal of cryptocurrencies and any correspondence related to the investment (including police reports or statements regarding theft). You do not send these documents automatically, but you must be able to present them on request in the event of a tax audit.

In the tax return (skattemelding), you enter the sale and purchase values in Norwegian kroner, and the difference as a gain or loss. If you are not sure how to do this exactly, you are very welcome to use our help:

• Basic tax return - most deductions included in the price!
• In addition, cryptocurrency tax return - this is an additional service to the basic return, thanks to which we will also handle your cryptocurrencies.

For example, if you bought 1 ETH for 100 000 NOK and later sold it for 70 000 NOK, you show a loss of 30 000 NOK. This amount can be deducted, which at a rate of 22% means a lower tax by about 6600 NOK (22% of 30 000).

• Documentation - exchange transaction logs, transfer confirmations, correspondence with service providers (e.g. emails), police reports, etc. - everything that confirms when, where and how you lost the funds.
• Loss calculation - exit value minus entry value at the NOK exchange rate. You enter the resulting loss in full in the tax return, which will automatically give a tax relief of 22% of that loss.

Calculation examples

• **Example 1:
  **You bought 2 bitcoins at 50 000 NOK each (total cost 100 000 NOK, very cheap by today's standards :)). A month later you sold them for 40 000 NOK each ("should not have sold...") - here the loss is 20 000 NOK. The difference is -20 000 NOK. At a rate of 22%, your tax falls by 4 400 NOK (22% of 20 000) - that is exactly what you recover thanks to the loss deduction.
• **Example 2:
  **As a result of a break-in on your exchange account, you lost cryptocurrencies worth 30 000 NOK. You have all the transaction statements and reported the matter to the police. In the tax return you show this loss of 30 000 NOK. You receive a tax relief of 22% of 30 000 = 6 600 NOK - that is how much less tax you have to pay.

What about companies?

In principle, both private individuals and companies in Norway report cryptocurrencies in a similar way - as ordinary assets subject to tax.

For a company, cryptocurrency transactions are recorded in the accounts (for example as other financial income/costs or assets) and calculated in accordance with accounting rules. If the company makes a profit - it pays tax on it, just like any other profit. Similarly - if it makes a loss - this reduces the company's income. If you do not keep accounts or your office is unable to report income/loss from virtual currencies, you are very welcome to come to us at Efirma Regnskap AS!

Income from the sale of cryptocurrency is taxable income, and losses are a tax-deductible cost that increases the negative result (that is, reduces taxable income).

The key here is also tax residence - regardless of which exchange the transaction was made on, if the company (or person) is registered in Norway (or is a resident of Norway), Norwegian reporting rules apply. All crypto transactions must be included in the Norwegian tax return.

Summary

In summary, if you are a tax resident of Norway and lost money on a cryptocurrency investment, you are entitled to deduct that loss in your tax return. This will reduce your tax by 22% of the value of the loss incurred, provided of course that you have documents confirming the costs incurred or the theft. This means that even an unfavourable scenario (fraud, hack or sale at a loss) has its tax relief in the Norwegian system.

Do you have questions about cryptocurrencies in Norway?

Contact us: +47 21 38 38 21.
We are available Monday to Friday from 9:00 - 21:00 and will be happy to help!

Author of the article: Marcin - marcin@efirma.no