Overview
In Germany, cryptocurrency taxation is determined by how long you hold the assets and the type of income generated from them. Here’s a comprehensive guide to understanding your tax obligations related to cryptocurrency activities in Germany.
Taxation of Short-Term Capital Gains and Income from Crypto
Short-Term Capital Gains:
If you hold your crypto for less than a year before selling, swapping, or spending it, any profit is subject to Income Tax.
The tax rate is the same as your regular Income Tax rate, up to 45%, plus a potential 5.5% Solidarity Tax.
Long-Term Capital Gains:
If you hold your crypto for more than a year, any profit from selling, swapping, or spending it is tax-free.
Specific Circumstances and Income Types
Additional Income (Mining, Staking):
Income from mining or staking is taxable at your regular Income Tax rate.
You only need to file a tax return if your additional income exceeds €256 per year.
Exemptions:
If your annual net gain from crypto transactions is less than €600, you do not need to file a tax return.
Reporting Capital Losses
Within One Year:
If you incur a loss from selling, swapping, or spending crypto within a year, you won’t pay tax on it.
Track these losses as they can be offset against profits to reduce your tax bill.
If you have no profits to offset, you can carry forward losses to future years if reported in your tax return.
Calculation of Capital Gain and Loss
Cost Basis:
The cost basis is the purchase price plus any transaction fees.
For crypto acquired through airdrops or forks, use the fair market value on the receipt date as the cost basis.
CashOut Methods:
Use the FIFO (First In, First Out) method for calculating taxes if units cannot be specifically identified.
A ‘wallet-by-wallet’ analysis is required for determining the sequence of sold units.
Lost or Stolen Crypto
Claiming a Loss:
You may claim lost or stolen crypto as a loss with the BZSt by providing evidence such as:
wallet addresses
acquisition and loss time of the key
the cost of acquiring the lost/stolen asset
proof you were in control of the wallet
the amount of crytocurrency held at time of loss
proof of ownership of the hardware where the wallet is stored
transactions to the wallet from an exchnage linked to the user's identity
Crypto-to-Crypto Transactions
Taxable Events:
Trading one cryptocurrency for another is taxable if the profit exceeds €600 within the same year of acquisition.
Transfer Management
Non-Taxable Events:
Moving crypto between different exchanges, wallets, or accounts is not a taxable event.
However, spending cryptocyurrency to pay the transfer fee is a taxable event.
DeFi and Liquidity Pools
Earning New Tokens:
Rewards from staking, liquidity mining, or yield farming are subject to Income Tax if above the €256 threshold.
Accrued Value Tokens:
Tax is due when withdrawing capital from liquidity pools if the original capital or liquidity pool tokens were held for less than a year.
NFTs
Transactions:
Selling, swapping, or buying NFTs with crypto held for less than a year incurs Income Tax.
Income from minting and selling NFTs as an artist may be considered artistic or commercial income and subject to additional taxes.
Mining and Staking Rewards
Mining:
Mining rewards are considered additional income and taxed based on the fair market value on receipt.
Expenses can be deducted, and taxes are due on profits if mined coins are disposed of within a year.
Staking:
Staking rewards are taxed based on their market value at receipt and subject to Income Tax on profits if disposed of within a year.
ICOs and IEOs
Taxable Events:
New tokens received in ICOs or IEOs are taxed if disposed of within a year, based on the initial crypto's value at the ICO/IEO date.
Purchasing Goods or Services with Crypto
Tax Implications:
Treated the same as trading crypto, taxable if the crypto was held for less than a year before the purchase.
Margin Trading and Derivatives
Taxation:
Profits from margin trades are capital income if no crypto is delivered; otherwise, they are private sales transactions.
Profits from derivatives depend on whether the investor acquires the underlying crypto asset.
Gifting and Receiving Crypto
Gifts:
Gifts are tax-free up to €20,000 for friends and €500,000 for spouses, with higher values taxed under “Schenkungssteuer”.
The tax rates for gifts range from 7% to 50%, depending on the recipient.
Hard Forks
Tax Implications:
No Income Tax on receipt of crypto from hard forks, but gains from selling within a year are taxable if over €600.
Financial Year and Reporting
Tax Year:
The German tax year runs from January 1 to December 31.
The tax return deadline is July 31, extended to September 30, 2024, for the 2023 tax return.
Reporting:
Use Elster, the BZSt's online platform, to file your taxes.
Report crypto on the Annex SO (Other Income) and main form ESt 1 A.