Yesterday, May 11, the Federal Ministry of Finance (BMF) published a guide on income taxes on virtual currencies and tokens. The 24-page document contains legal definitions and tax classifications for virtual currencies and tokens, mining, betting, lending, airdrop, wallets, major tokens, hard and soft forks, and ICOs.
An official letter does not constitute a law, as it was not passed by the Bundestag or the Bundesrat, but it has a legal character nonetheless. This means that the tax office must adhere to the contents of the guide.
What remains, what comes?
Profits from exchanges with fiat currencies such as the Euro or US dollar and another cryptocurrency, for example, Bitcoin (BTC) or Ether (ETH) are included. private sales transactions It is subject to the personal tax rate plus church tax, if applicable.
Between buying and selling cryptocurrency More than a yearfull winnings, Tax-free. If you sell your crypto shares before this deadline, you must pay tax on your winnings.
As with all other private sales transactions, The exemption limit is 600 euros for each calendar year. As long as the taxpayer stays below this limit, his or her profit is tax-exempt and does not need to be declared on the tax return. But if profits exceed this exemption limit by only €1, the capital gain must be reported in full.
- New is that too medium method In addition, the FIFO (“first in – first out”) method is allowed. FIFO assumes that the taxpayer sells the coins that were purchased first. Using the averaging method, the profit is determined based on the average price, for example, of all purchased bitcoins.
In addition, this principle applies to these calculation methods Every wallet and cryptocurrency are applied.
When determining profits, the price of a trading platform (eg Coinbase, Bitpanda, Kraken) or a portal such as Coinmarketcap is accepted.
- Extension of retention period from 1 year to 10 years when using cryptocurrencies for storage and lending not translated. For example, if a private investor buys Cardano (ADA) and uses the cryptocurrency in his wallet for storage, he can sell it again tax-free after one year. There are no changes here, according to Parliamentary State Secretary Katja Hessel:
“For individuals, the sale of purchased bitcoin and ether is exempt from tax after one year. The deadline is not extended to ten years, for example, if the bitcoin was previously used for lending or the taxpayer provided ether as a stake to someone else to create their block.”
- However, there is still some news regarding the risks. So the BMF has a distinction active (rigged) And negative storage introduced.
Active betting: Counterfeiters, also known as validators, run staking contracts themselves and their earnings from this activity are classified as Commercial income In this case, the counterfeiter must register a transaction, create a profit account, and file a business tax return. The counterfeiter must pay tax on the profits of the sale or exchange.
Negative bet: Participants receive compensation from counterfeiters, who collect block reward and transaction fees. This type of stack, in which you do not participate in the creation of the block yourself (eg via pool providers or crypto-exchange platforms), is considered a private asset management. That is, profits are recorded as Another source of income tax.
- Sell profits through Lending The received coins, that is, when cryptocurrency units are provided for use for a fee, are also taken into account Another source of income Considered.
- Operation A master node Will commercial activities Considered.
- When generating income from Mining is also the BMF of commercial activities out of place. In the opinion of the BMF, newly created units are considered “earned” and taxed accordingly. The participants in the mining pool are co-entrepreneurs and therefore in the commercial sector as well.
The driving force for innovation or not?
The new BMF letter is now “binding on all tax offices across Germany” and is a “good and very important step” towards innovation and legal certainty, did Werner Hoffmann, co-founder of Pekuna, which specializes in crypto tax law, writes. (Passive) private investors in particular can breathe a sigh of relief now: The one-year holding period remains in place, so Germany remains attractive from a tax standpoint. “It is particularly positive to note how the administration and government have openly engaged with the crypto community and actually implemented the comments received,” Hoffman says.
On the other hand, the new BMF letter does not contain any legal classifications of non-fungible tokens (NFT) or decentralized finance (DeFi). Therefore, despite all the joy, writing cannot be understood as an impetus for the development of the German crypto industry.
Tax on Bitcoin, Ether and Co: What Private Investors Need to Know
Federal Ministry of Finance: A U-turn in Staking and Lending Taxes
Interview with Coinbase Germany Head – Why Germans Are Growing Interest in Cryptocurrency Despite Their Doubts
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