How is Crypto-Lending Taxed in Germany?

What is Bitcoin and crypto-lending?

Crypto-lending is a loan transaction in which cryptocurrencies are lent. This lending transaction is usually processed via special lending platforms. Ultimately, this is nothing more than a crypto-based loan.

On the corresponding platform, the lender, i.e. the person who lends the cryptocurrency, and the borrower, i.e. the person who wants to borrow the crypto currency, are brought together.

How does lending work?

With lending, the lender allows other users of the respective platform to use part of his cryptocurrency for a defined period. In return, the lender receives interest in the given or another cryptocurrency. The amount of this interest is based on a predetermined percentage value, which in turn depends on the number of cryptocurrencies provided.

The following are agreed in advance

  • the amount of interest,
  • the amount of coins to be awarded and
  • the duration of the transfer of use.

After expiry of the agreed period of time, the lender receives back the cryptocurrency loaned, including interest.

What is deposited as collateral in lending?

Platform users or borrowers only need to define a cryptocurrency as collateral for lending. Which cryptocurrency the borrower can deposit as collateral depends on the platform in question.

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How is interest income from crypto-lending taxed in Germany?

In Germany, the taxation of interest received through crypto-lending has not been conclusively clarified. On the one hand, it is being discussed whether this is capital income according to § 20 Paragraph 1 No. 7 EStG (German Income Tax Act), as the cryptocurrency lending is a classic, interest-bearing loan. On the other hand, tax offices repeatedly assume that the interest income earned through lending is income from other benefits as defined in § 22 No. 3 EStG.

The cryptocurrency received in the form of interest is to be valued at the time of inflow. It is therefore not capital income, as the provision of the cryptocurrency does not represent a provision of capital, but rather a payment in kind. This is justified with the fact that a demand for capital must refer to a cash payment, however, not to a payment in kind, as it is the case with cryptocurrencies.

If the interest income received through crypto-lending is income from other benefits as defined in § 22 No. 3 EStG, a tax exemption limit of 256 euros applies. Furthermore, the subsequent sale of the cryptocurrency obtained through the lending would not be taxable as defined by § 23 Paragraph 1 No. 2 EStG due to the lack of an acquisition transaction.

No extension of the holding period for the lending

Another controversial issue is whether the lending of a cryptocurrency in Germany can lead to an extension of the holding period as per § 23 (1) no. 2 sentence 4 EStG. An extension of the holding period only occurs if an asset

  • was acquired after December 31, 2008,
  • is used as a source of income, and
  • to generate income.

Use as a source of income means that the assets in question form an independent basis of income. The question of whether income is generated with the cryptocurrency is therefore decisive.

In lending, however, income is usually not generated from the asset (the cryptocurrency) but from the lending business (as income from the receivable). Since there is no abuse in these cases, the holding period of one year can be maintained. The Bavarian State Office for Taxes has also confirmed that the interest received is not an outflow of the "other assets in foreign currency", but rather an outflow of the actual capital claims.

Your attorney for crypto-lending in Germany

Since the tax authorities have so far dealt differently with income from crypto-lending, crypto-investors should not declare lending income for tax purposes without advice. We would be happy to provide you with advice and assistance in your income tax return. Your contact persons are

The easiest way to contact us is by e-mail (info@winheller.com) or by phone (+49 (0)69 76 75 77 80). Please do not hesitate to contact us should you have any questions.

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