Cryptocurrencies in German Companies: Bookkeeping & Accounting
Cryptocurrencies have long since found their way into the business world and offer companies numerous opportunities. For some companies, such as mining companies that produce cryptocurrencies, commercial status is prescribed by official fiction in the German Federal Ministry of Finance's (BMF) circular on the tax treatment of cryptocurrencies from 2022.
However, companies that simply trade in cryptocurrencies as part of a corporation must also deal with the processing of crypto assets in company accounting.
The tax peculiarities in the crypto sector in Germany can be very diverse and range from the question of VAT liability and input tax deduction to the question of the method of profit determination and the special features of the valuation of exchange transactions. We would like to focus on the issue of accounting for crypto assets.
Valuation of crypto assets and documentation
One of the first challenges when processing cryptocurrencies in accounting is the correct valuation. Since cryptocurrencies are subject to strongly fluctuating prices, a daily updated valuation is required. In addition, crypto is often exchanged for crypto without a single movement in fiat money taking place. Nevertheless, accounting entries must be made in euros, which brings additional complexity. In addition, the principles of exchange valuations from Section 6 of the German Income Tax Act (EStG) must always be observed.
Another important issue is the documentation of transactions with regard to the requirement for individual entries. High-frequency trading in particular often results in thousands of transactions in just a few days, which makes manual booking hardly economical. Every transaction involving cryptocurrencies must be recorded precisely in order to meet the requirements of the German financial authorities. This includes not only buying and selling, but also the receipt of customer payments in crypto or the receipt of rewards such as in mining and staking. Complete and precise documentation is essential in order to meet tax requirements and to be able to answer any queries from the tax authorities.
Posting of crypto assets
Companies must also consider the tax implications of cryptocurrency transactions. The current value of cryptocurrencies must be checked for tax liability (income tax and VAT) both when they are received and when they are exchanged. When accounting for cryptos, the crypto assets remaining in the company must be examined for any partial impairment or reversals of impairment. This requires detailed records and careful bookkeeping to ensure that all tax obligations are met. In the business sector, LIFO (last-in-first-out method) is usually applied as the consumption sequence method, in contrast to FIFO (first-in-first-out method), which is common in the private sector.
CoinRacoon: Professional solution and bridge to Datev bookkeeping
There are already some very good solutions on the market for tracking transactions on the blockchain and in the wallets, but these are generally focused on private users. However, the software providers available on the market for calculating crypto tax reports are generally not sufficient to meet the requirements of statutory accounting regulations.
CoinRacoon, developed by the law firm WINHELLER, is currently one of the few software solutions capable of bridging the gap between blockchain transactions and Datev accounting. The software offers functions for the valuation, documentation and tax treatment of cryptocurrencies and makes it easier for companies to comply with legal regulations. If a company only has a few hundred crypto transactions per year, this can usually still be solved manually in one way or another. However, as soon as transactions run into the thousands, the need for automation becomes unavoidable. CoinRacoon is a valuable and indispensable tool for precisely these customers. Does this apply to you? Please get in touch with us. We will give you a non-binding offer.
Find out more about our solution for companies with large crypto transactions:
Your advisors for the bookkeeping of crypto assets
Our tax advisors will be happy to support you with your crypto accounting and the preparation of your annual financial statements. The easiest way to contact your experts for bookkeeping for crypto assets is by e-mail (info@winheller.com) or by telephone (+49 69 76 75 77 85 28).
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