Tax-relevant facts in the field of cryptocurrencies include more than just buying and selling Bitcoin, ether and Co. In addition to mining, participating in ICOs and receiving airdrops, users can also operate so-called masternodes. This, of course raises the question as to which tax consequences these activities entail in Germany.
A so-called node indicates a node point of a decentralized blockchain network. In simple terms, a masternode is a special node of such a network.
Nodes are usually used to confirm transactions on the network. They can also perform special functions, such as enabling anonymous and immediate transactions. Depending on the design of the cryptocurrency, masternodes thus replace the classic miners, which provide hardware performance used to calculate new blocks on the blockchain.
Various cryptocurrencies feature different requirements for the use of masternodes. Sometimes you have to provide powerful and reliable hardware, sometimes it is sufficient to possess enough units of the respective cryptocurrency. For example, with the cryptocurrency Dash, you have to provide 1,000 Dash, hold a permanent IP address and be online 24 hours a day.
Some cryptocurrencies have integrated a voting system. To be able to set a masternode, one must first be selected by the network. For their work, masternode operators receive parts of the block reward, i.e. the cryptocurrency that is newly generated when a block is found.
How this process is to be assessed in tax terms always depends on the specific individual case. If the masternode is operated privately, the income received may be viewed as income from other services.
However, operating a masternode can quickly turn into a commercial activity similar to mining. In this case, not only the income would be taxable. The cryptocurrency used would also become part of the taxpayer's business assets. One of the consequences of this is that the tax holding period for private sales transactions no longer applies. Both the sale of the cryptocurrency and any subsequent withdrawal into private assets would be taxable.
If you are operating masternodes or considering doing so, you should have an expert check the individual tax consequences for your case. Our crypto team, consisting of
- Attorney Benjamin Kirschbaum,
- Attorney Philipp Hornung, and
- Senior Tax Accountant Jürgen Schwendemann,
will be happy to assist you. The easiest way to contact us is by email (firstname.lastname@example.org), by phone (+49 (0)69 76 75 77 80) or via our contact form for the taxation of cryptocurrencies. Do not hesitate to contact us with any questions.
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