Cryptocurrency staking is becoming increasingly popular as a method of generating passive income. Its effectiveness depends, among other things, on the associated tax burdens and poses real tax risks for those involved in staking.
Cryptocurrency staking
In general, staking is a process whereby digital assets are temporarily locked by their owners in order to actively participate in transaction verification and ensure the security of the blockchain network. This mechanism is specific to protocols based on proof-of-stake (PoS) consensus. In exchange for providing their capital, either individually or through staking pools, participants receive a reward in the form of additional units of cryptocurrency.
Unlike cryptocurrency mining, stakes are based on the amount of capital committed and the length of time it is immobilised, which determines the likelihood of receiving a reward.
Taxation of staking
Despite its economic similarity to interest or dividends, the legal and tax classification of staking remains unclear. In particular, there are doubts as to when the tax liability for stakes arises for income tax purposes – whether it arises at the time of the receipt of the reward or only at the time of the sale of its object (e.g. tokens).
An additional difficulty is the valuation of taxable income from stakes, which should be expressed in PLN. The lack of clear rules on the valuation of taxable income expressed in crypto assets (e.g. tokens) raises a number of doubts and may lead to disputes with tax authorities.
Approach of tax authorities
The Director of the National Tax Information Service (KIS) takes a position that can be described as fiscally restrictive. In individual tax rulings (including those dated 24 March 2023, No. 0112-KDIL2-2.4011.60.2023.1.AG, 29 November 2023, No. 0114-KDIP3-1.4011.882.2023.1.BS, and 19 April 2024, No. 0112-KDIL2-2.4011.146.2024.2.IM), he has stated that tax revenue is generated upon receipt of a cryptoassets. In accordance with the provisions of the income tax regulations, it is the task of the interpreting authority to classify this income as so-called income from other sources (in accordance with Article 10(1)(9) and Article 18 of the Income Tax Act) and therefore taxable according to the tax scale. According to the Director of the National Tax Information Service, this income should be valued at the market value of the cryptoassets at the time/date of their acquisition. At the same time, the interpretating authority allows for the subsequent recognition of such income as a tax-deductible cost of the sale of crypto assets.
Position of the courts
Administrative courts reject the tax authorities’ approach. In their opinion, Article 17(1f) of the Personal Income Tax Act is of key importance, which clearly states that the sale of virtual currency for consideration is subject to taxation in relation to virtual currency. The mere acquisition of cryptocurrency, e.g. through betting, does not meet the definition of „sale against consideration” and therefore does not give rise to a tax liability.
The courts emphasise that tax legislation must be precise and leave no room for interpretative speculation. They also point out that the lack of a statutory method for valuing cryptoassets, including those obtained through stakes, makes it impossible to consider the mere fact of their receipt as a taxable event. Moreover, the courts signal that the interpretations of the Director of the National Tax Information Service lead to unacceptable arbitrariness in determining the tax base (see judgment of the Provincial Administrative Court in Warsaw of 24 September 2024, ref. III SA/Wa 179/24).
Practical consequences for taxpayers
The Polish tax system does not provide clear, uniform rules for the taxation of staking, and each party to a dispute presents different arguments. In these circumstances, tax risk mitigation tools such as tax law interpretation (individual interpretation) become particularly important, as obtaining such an interpretation provides the taxpayer with legal protection against the negative consequences of a possible dispute with the tax authorities.
