The Swedish tax agency conducted an investigation from 2020 to 2023 that focused on data center operations in the country. They identified irregularities in 18 locally operating companies that were involved in crypto mining but had been hiding this activity. These companies were found to have deliberately exploited tax incentives for which they were ineligible, resulting in the agency demanding an additional 990 million Swedish krona in taxes, including value-added tax (VAT) and surcharges. The investigators encountered difficulties in determining the true purpose of data center operations and the identities of those utilizing the computing resources, leading to challenges in establishing the nature of the business conducted at these facilities.
The report highlighted instances where crypto mining data centers submitted misleading or incomplete information regarding their business activities. This misleading information was used to conceal their cryptocurrency mining operations and falsely claim that they were conducting VAT-liable business activities. This had the effect of causing tax revenues to disappear from the country through incorrect payments from the state, unpaid output VAT, and unreported crypto assets. The tax authority also expressed concerns regarding potential money laundering activities associated with crypto mining data centers, as they currently operate outside the scope of regulatory oversight, raising the risk of illicit financial transactions.
The tax agency further emphasized the difficulty in quantifying the total amount of crypto mined and subsequently sold, including the associated sales figures. This lack of accurate reporting poses a significant risk of unreported sales leading to additional income tax losses for the government. The report highlighted that companies engaged in misleading tactics to hide their crypto mining operations, such as reporting their business activities as consulting services, data center operations, or the development of high-performance computing products when in reality their computing infrastructure was solely dedicated to crypto mining.
The report detailed specific cases where companies, such as Datorhall AB and Datacenter AB, were found to be misrepresenting their business activities to authorities. For example, Datorhall AB claimed to be involved in consulting services, data center operations, and the development of high-performance computing products when its computing infrastructure was solely dedicated to crypto mining. Similarly, Datacenter AB claimed to be selling computing power for graphic design and artificial intelligence applications, but investigation revealed that 93% of the company’s online searches were related to crypto mining, showing a significant discrepancy with their reported activities. This misleading behavior was aimed at evading taxes and concealing their true business operations from authorities.
In response to these findings, the tax agency had ten decision outcomes appealed to higher authorities, with courts upholding the initial findings in eight instances and rejecting the companies’ appeals. One appeal resulted in a partial victory for the company, with the court granting a modified ruling. The report also highlighted the concerns expressed by the Governor of Sweden’s Central Bank regarding Bitcoin’s extensive integration into the country’s financial system. The Governor cited the speculative nature of Bitcoin and the potential for significant investor losses as reasons for their reservations. As a result of the investigation findings, the Swedish tax agency is taking action to combat fraudulent activities and ensure compliance with tax regulations in the crypto mining industry.
