Sweden’s tax agency said Wednesday that it had identified irregularities at 18 local companies, saying they had hidden their involvement in cryptocurrency mining.
The investigation, which covered the years 2020-2023 and focused on data center operations, found that the companies were intentionally taking advantage of tax incentives from which they did not qualify.
Patrik Lillqvist, head of the agency’s intelligence unit, explained that the companies’ actions were an attempt to secure undue tax benefits. In response, the agency is demanding an additional SEK 990 million ($91 million) in taxes, including value-added tax (VAT) and surcharges.
The report underscores the difficulties investigators have encountered in determining the true purpose of the data center and the identity of those using the computing resources. In a significant number of cases, investigators faced challenges in determining the nature of the activities carried out at these facilities.
Undeclared income from cryptocurrency mining in Sweden
In addition, the report details cases in which cryptocurrency mining data centers have provided misleading or incomplete information about their business operations.
“There is an incentive for unscrupulous entities to conceal their cryptocurrency mining operation and instead maintain that they are conducting a business subject to VAT. In this way, tax revenue disappears from the country in the form of improper payments from the state, unpaid VAT due and undeclared crypto assets,” Lillqvist added.
The tax authority further expressed concerns about potential money laundering activities. Due to the exclusion of cryptocurrency mining data centers from the AML law, they currently operate outside the scope of regulatory oversight. The lack of oversight increases the risk of illegal financial transactions.
It has also been found that it is difficult to quantify the total amount of cryptocurrency mined and subsequently sold, including related sales data. As a result, there is a significant risk of unreported sales leading to additional income tax losses for the government.
Deceptive tactics to hide cryptocurrency mining
According to the report, ten decisions were appealed to higher authorities. In eight cases, the courts upheld the initial findings and dismissed the companies‘ appeals. One appeal resulted in a partial victory for the company, and the court modified the ruling.
In one case, Datorhall AB reported to authorities its business activities, which included consulting services, data center operation and development of high-performance computing products. However, the investigation revealed one Datorhall customer – a foreign company with a related party. It is noteworthy that Datorhall’s computing infrastructure consisted solely of equipment for cryptocurrency mining.
Another company, Datacenter AB, reported that its business activities consisted of selling computing power for graphic design and artificial intelligence applications. However, the tax authority obtained Internet browsing history and chat messages from various company representatives. This analysis revealed a significant discrepancy – 93% of the company’s online searches were related to cryptocurrency mining, while less than 1% were clearly related to graphic design.
In one chat message, a Datacenter AB representative wrote: “You can never control how computers are used, so they can ban them as much as they want, it won’t make any difference.”
A few days later, another representative wrote: “Yes, and crypto will be the last word we mention to anyone from day one. We are a data center with operations and computers that customers use for graphic movies and artificial intelligence.
The head of Sweden’s central bank is concerned about bitcoin integration
The governor of the Central Bank of Sweden last month expressed reservations about the widespread integration of Bitcoin into the country’s financial system. Their concerns stemmed from the speculative nature of Bitcoin and the potential for significant losses for investors.
