Crypto Taxes in Germany
German cryptocurrency taxation: Bitcoin, Ether & Co.
Unlike the euro (considered fiat money), cryptographic currencies are not legal tender. A legal obligation to accept cryptocurrencies therefore does not exist. Since an issuer is lacking when mining cryptos, they can also not be classified as "e-money."
For the tax treatment of cryptocurrencies in Germany this means that they must be treated as ordinary intangible assets - at least for purposes of income tax law. The specific tax questions of crypto transactions are dependent on whether the transactions are made in the private domain or in the business sphere.
Crypto investors and companies are therefore asking themselves many questions about crypto taxes in Germany:
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How does Germany tax cryptocurrencies?
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How much tax do I pay on cryptos in Germany?
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When do I have to pay taxes on crypto gains?
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Do you need advice on the taxation of cryptocurrencies in Germany? Our crypto tax experts will be happy to advise you! Please fill out our contact form for this purpose.
Taxation on crypto transactions for private investors
For the private investor of Bitcoins, Ether and other coins, it is essentially relevant how the disposal is taxed. A sale is, for example, the sale of Ether against euros via a trading platform. However, the use of Ether as a means of payment also constitutes a disposal, i.e. if the Ether holder pays for the purchase of goods or services with the cryptocurrency.
In both cases, private sales transactions - also still known as "speculative transactions" - exist within the meaning of Section 23 (1) No. 2 of the German Income Tax Act (Einkommensteuergesetz, EStG), provided that the crypto assets were previously acquired. The question of acquisition therefore represents an essential aspect in the question of taxation, especially if the cryptos have been held for more than one year.
In fact, the classification as a speculative object for tax purposes means that capital gains are completely tax-free after a holding period of at least one year. However, not all cryptocurrencies that are sold were previously "acquired" within the meaning of this provision, as the sellers obtained them by means other than simply buying them on an exchange. In each individual case, it must therefore be examined whether Section 23 (1) No. 2 EStG applies at all. We will be happy to assist you in this regard and with any questions regarding cryptocurency taxes in Germany.
Frequent questions and answers at a glance
- What taxes are levied when trading with cryptocurrencies in Germany?
Income tax is levied on profits from trading in cryptocurrencies close to § 23 EStG (private sales transactions).
- How is the amount of tax calculated for cryptocurrencies?
One first calculates the profit from the acquisition price and the sale price. The amount of taxation of this profit is then based on the personal income tax rate (18 to 45 percent) + solidarity surcharge.
- Can gains on cryptocurrencies be tax-free?
If cryptocurrencies are held for more than one year, the profit from the sale is completely tax-free in Germany.
- Is the mining of cryptocurrencies taxed?
When mining as a hobby, profits are not taxable. However, when mining, you are often very quickly in the commercial sector. Here we summarize the taxation of mining.
- How are hardforks treated for tax purposes?
The profit on the sale of coins received via hardforks can be tax-free or subject to taxation. Here, it depends on the individual case. You can find out more about the taxation of hardforks here.
Crypto taxation according to income tax rate
Since the Fifo method is no longer explicitly regulated by law with the introduction of the final withholding tax, investors should carefully document their crypto transactions in order to be able to provide their tax office with suitable evidence of the transactions made in case of doubt. The tax rate is based on the ordinary individual income tax rate. The final withholding tax is therefore of no significance in this respect. All profits must be entered by private investors in Annex SO of the German tax return.
If the investor carries out extensive transactions - especially within the one-year period - there is a risk of classification as a commercial activity. In this case, the annual deadline of Section 23 EStG no longer applies.
What taxes do companies have to pay on their crypto transactions?
In contrast to private investors, persons and companies engaged in commercial activities cannot engage in private sales transactions. Instead, transactions with cryptocurrencies that are held as business assets generally lead to income from business operations pursuant to Section 15 of the German Income Tax Act (EStG). In this case, there is no minimum holding period after which tax exemption occurs. Depending on the legal form of the company, the profits generated in this way are then subject to income tax (sole proprietors and partnerships) or corporate income tax (GmbHs, AGs, etc.) - as well as trade tax in each case.
In addition to the income tax implications of crypto transactions, their VAT treatment remains important for companies. At the end of 2015, the ECJ issued its ruling in the Hedqvist case, according to which the commercial exchange of cryptos for conventional currencies (BTC/EUR, ETH/EUR, etc.) is not subject to VAT. This decision concerns the application of Union law.
So far, there is no decision of a German tax court or a ruling of the tax authorities on the subject. The VAT treatment of crypto transactions has thus only been partially satisfactorily clarified so far. In any case, it is always advisable to review the activities of the company in order to clarify the nature of the service provision and thus the question of VAT liability. You are welcome to contact us for such a review or any questions regarding crypto taxes in Germany.
"We guarantee legal compliance by clarifying unclear facts and filing tax returns on time."
Benjamin Kirschbaum
German Attorney at Law
Crypto tax consulting at WINHELLER means:
- Clarification of all unclear issues
- Reconstruction of lost trade details
- Advice on the choice of FiFo or LiFo
- Timely submission of the income tax return
- Full communication with the tax office by our experts
You need support and want to avoid tax evasion? We look forward to hearing from you! Please use our crypto taxation contact form.
ICO: Taxation of Initial Coin Offerings
Apart from the taxation of the simple purchase and sale of cryptocurrencies via an exchange, the question of the taxation of sales in connection with ICOs (Initial Coin Offerings), is increasingly arising. In particular, the development of the Ethereum Blockchain has created new opportunities for companies to use so-called smart contracts and issue digital tokens.
Tax advice for virtual currencies in Germany
If you have any questions on crypto taxes in Germany, we will be happy to provide you with the necessary assistance. Our range of services does not only include legal representation. As a full-service law firm, we also offer the entire spectrum of tax advice. Particularly the ongoing financial accounting can be demanding and time-consuming for crypto companies.
Your attorney for crypto taxation issues at WINHELLER
Want to know how your transactions, proceeds or crypto mining will be taxed? Are you looking for a crypto tax advisor for your tax return? You can contact our German crypto tax experts for all topics concerning the taxation of Bitcoin, Ether and other crypto assets by e-mail (info@winheller.com), by phone (+49 69 76 75 77 85 28) or via our contact form for the taxation of cryptocurrencies.