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The German state has a veritable interest in subjecting to taxation income generated from assets that entail an increased capacity of the taxpayer. Investment income is therefore typically taxed. However, this stands in the way of the unhindered growth of your assets.
Therefore, it seems reasonable to think about how to reduce tax access and to consider tax-optimizing arrangements. Planning wisely in this manner brings a reward of greater wealth at a later time.
With regard to saving on taxes in the context of your investments in cryptocurrencies, the options available to you depend on your specific case. The design options are varied, and each case is different.
Below we have listed a few examples of possible tax optimizations that many of our clients find helpful. Our crypto experts will gladly discuss with you in person whether these can also be applied to your case or whether entirely different approaches are advisable. We will also work with you to develop individual solutions to allow your crypto assets to grow undisturbed.
Germany is a crypto tax paradise - at least for HODLers. Surely you are aware that you can sell cryptocurrencies after a holding period of one year without having to pay tax on the gains.
Quite a few of our clients therefore deliberately move their tax residency from abroad to Germany in order to be able to sell their cryptocurrencies here tax-free.
The crypto market is not a one-way street. When prices go south quickly, it's time to think about the tax value of losses. Losses can, in principle, be applied towards taxes and thereby reduce your remaining tax burden.
Let's assume you bought 20 ETH in January and sold it at a profit in November. Since the one-year holding period has not been observed, you would have to pay tax on the profit made.
However, let's assume that you have already bought 20 ETH in August of the previous year, but they are in a different wallet. Then it would be convenient if the sale would apply to these 20 ETH from August. This is because the holding period would have expired in this case and the gain on sale would be completely tax-free.
This is exactly what is possible with the multiple wallets option. Some software programs allow a "wallet-wide" view of your portfolio. In individual cases, this can mean a large tax saving. In other cases, however, it may make sense to split the crypto assets between different wallets and save taxes in the "single wallet" mode.
As a crypto investor, you should be aware of the different calculation methods that are used when it comes to calculating the profit or loss you have earned.
For example, a trader who bought a BTC for EUR 30,000 in January and sells a second BTC for EUR 40,000 in November and then a BTC for EUR 50,000 in December will achieve very different results depending on the method used:
It is therefore worthwhile to "play" with the different methods and then convince the tax office of the correctness of the calculation method. You can learn more about FiFo vs. LiFo here.
For crypto investors who actively trade and do not hold their coins for long periods of time, the establishment of a trading limited liability company (GmbH) makes sense. In this, crypto profits are only taxed at about 30 percent (instead of up to 45 percent in private assets). Tax access is restored only in the case of distribution of the profits to the shareholder. It therefore makes sense to retain profits over a period of years in order to reinvest them. Assets can thus grow much faster due to lower taxation.
Another great advantage: Crypto investors who trade in crypto derivatives and futures can now only offset losses in the amount of EUR 20,000 per year. However, this restriction on offsetting losses does not apply with respect to the trading company. You can find all the information about a trading limited liability company here.
In some cases, moving to low-tax foreign countries can also be interesting, particularly for active traders. Since the turn of the year 2021/2022, the requirements for a (fiscally) successful departure have once again been significantly raised by the German legislator.
One thing is clear: Such a move affects much more than just tax issues. Important points to clarify before thinking about moving away include, for example:
WINHELLER is also the partner at your side when it comes to exit taxation.
Would you like to learn how to optimize your crypto assets for tax purposes? Would you like to ensure you know all the design options? We are happy to support you! Your contact persons are:
You can reach us by e-mail (info@winheller.com) and by phone (+49 69 76 75 77 80).