Bitcoin Loan Liquidated: Tax Consequences in Austria

Bitcoin Loan Liquidated: The Tax Consequences of a Forced Sale in Austria

Pledging Bitcoin as collateral to raise a loan: as long as the coins merely serve as security and are not disposed of in economic terms, there is generally no Bitcoin sale yet. The picture changes once the price falls and the lender liquidates the collateral.

If the pledged Bitcoin are sold or finally realised to settle the claim, a taxable realisation event can arise in Austria. The fact that the investor did not trigger the sale voluntarily generally offers no protection from taxation. Austrian crypto rules capture sales for fiat money in particular, as well as swaps for other assets or services.

A Liquidation Can Trigger a Bitcoin Gain

An example:

• Bitcoin acquisition cost: 15,000 euros
• the Bitcoin are pledged for a loan
• the market falls
• the lender liquidates the BTC at a value of 35,000 euros

If the liquidation is treated as a disposal for tax purposes, acquisition costs of 15,000 euros are set against a realisation value of 35,000 euros.

The possible taxable gain is:

35,000 - 15,000 = 20,000 euros

Taxable new crypto assets are generally subject to the special tax rate of 27.5 percent.

Bitcoin Tax Can Arise Even Without a Payout