4.Losses and Reporting
Under the current crypto tax framework, losses from the disposal of crypto-assets are subject to specific limitations.
What Is Considered a Crypto Loss?
A crypto loss arises when the disposal value of the asset is lower than its acquisition cost. A disposal includes:
Converting / Selling crypto for fiat;
Swapping one cryptocurrency for another;
Using crypto to pay for goods or services;
Gifting cryptocurrency.
The loss is calculated as: Disposal value – Acquisition cost - Transaction fees = Gain or Loss
Important Limitations
Crypto losses:
Can only be offset against crypto gains;
Can only be offset within the same tax year;
Cannot be carried forward to future years;
Cannot be offset against other income (e.g., salary, rental income, dividends).
This means tax planning within the same calendar year is important. If you realise gains early in the year and later incur losses, those losses may reduce your taxable base — but only within that same year.
Cost Basis & Record Keeping
To correctly calculate gains or losses, individuals must determine:
Acquisition date;
Acquisition value;
Disposal date;
Disposal value;
Transaction fees.
Proper documentation is essential. Failure to maintain accurate records may result in estimated assessments by tax authorities. You should maintain:
Exchange statements;
Wallet transaction history;
Trade confirmations;
Transaction hashes;
Screenshots where necessary;
Proof of fiat deposits and withdrawals.
Practical Example
Bought BTC for €100,000;
Sold for €150,000 → €50,000 gain;
Later sold ETH at €20,000 loss.
Taxable amount = €50,000 – €20,000 = €30,000 (if in same year). If the €20,000 loss occurs in the following tax year, it generally cannot reduce the previous year’s gain.
Reporting Obligations
If you are a Cyprus tax resident and you realise crypto gains during the year:
The gains must be declared in your annual tax return.
Even if losses offset gains to zero, proper disclosure is recommended.
Supporting documentation should be retained in case of audit by Cyprus tax authorities.
Crypto exchanges operating under EU regulations may report user information to tax authorities under DAC8 and related transparency frameworks. This increases the importance of accurate reporting.
Why Planning Matters
Strategic year-end planning can significantly reduce tax exposure. Because losses cannot be carried forward for the future periods, individuals with high-value crypto portfolios should:
Monitor gains and losses throughout the year;
Consider timing of disposals;
Ensure correct classification (investment vs business activity);
Maintain full transaction history.