Crypto Tax Germany: Guide for Bitcoin & Co [2024]
8 Sep, 2024 · 11 min read
Cryptocurrencies have become increasingly popular in recent years and more and more people are interested in investing in Bitcoin, Ethereum and Co. Investments can be lucrative and in addition to the potential profits, there are also tax aspects that investors need to consider. In this guide, we will provide a comprehensive overview of the tax regulations for cryptocurrencies in Germany and provide important information on how to comply with tax obligations.
VIDEO-GUIDE: Crypto taxes Germany 2024 – simply explained!
Taxing Cryptocurrencies as a Private Investor – What You Need to Watch out for!
Cryptocurrencies are considered “sonstige Wirtschaftsgüter” in Germany. As a private investor, capital gains from cryptocurrencies are treated as “taxable speculative transactions” and taxed at the personal income tax rate.
It is the investor’s responsibility to keep comprehensive documentation of crypto activities. A complete record is important in order to avoid estimates by the tax authorities and to ensure transparent tax treatment.
When must Profits from Cryptos be Taxed?
According to the current tax regime, gains from the sale or exchange of cryptocurrencies must be taxed. The time of receipt and sale is decisive.
The speculation period
As soon as the cryptocurrencies are exchanged for euros or other FIAT currencies or used as a means of payment within the one-year speculation period, a taxable event occurs. Resulting gains from sales after the one-year holding period are tax-free.
First in First Out (FiFo)
The tax burden is generally calculated according to the first in first out (FiFo) principle. This means that the cryptocurrencies acquired first are also sold or exchanged first. The acquisition costs of the cryptocurrencies acquired first are then used to calculate the taxable profit.
Example FiFo
To illustrate the FiFo principle, let’s assume that an investor bought a Bitcoin for EUR 10,000 in January 2022 and purchased another Bitcoin for EUR 25,000 in March 2023. If the investor sells a Bitcoin for EUR 30,000 in June 2023, the acquisition costs of the Bitcoin purchased first (EUR 10,000) are used to calculate the taxable profit. The profit therefore amounts to EUR 20,000.
Last in First Out (LiFo)
This method assumes that the most recently acquired cryptocurrencies are sold or exchanged first. It is important to note that this method is usually not accepted by the tax authorities.
Exemption limit
There is an exemption limit of EUR 600 per year for private investors. This means that crypto profits are tax-free up to this amount. If the profits exceed the exemption limit, they are taxable.
Example exemption limit
A private investor made profits from selling cryptocurrencies totaling EUR 3,000 in 2022. Since the exemption limit has been exceeded, the full profit must be taxed.
Difference between exemption limit (Freigrenze) and tax-free allowance (Freibetrag)
The tax exemption limit for private sales transactions means that gains up to an amount of EUR 600 are tax-free. However, if the total gains amount to EUR 601 or more and are therefore above this limit, the gains must be taxed in full.
In contrast, only the exceeding amount is subject to tax in the case of the tax-free allowance. With an allowance of EUR 600 and profits of EUR 650, only EUR 50 would have to be taxed.
Reduce Tax Burden – Offset Losses
The good news for crypto investors is that losses can be offset against gains from cryptocurrencies to reduce the tax burden.
Important: If cryptocurrencies are sold at a loss within a year, it is possible to offset these losses against gains. These losses can also be carried over to the following year. However, losses incurred after one year can no longer be taken into account for tax purposes.
Example calculation of losses
Assume that a private investor made profits from the sale of cryptocurrencies totaling EUR 3,000 in 2023. In addition, he has suffered losses of EUR 1,500 from the sale of other cryptocurrencies.
Calculation:
Total gains:
EUR 3,000
Total losses:
EUR 1,500
Taxable profits:
3,000 – 1,500 = EUR 1,500
The investor would therefore have to pay taxes on the amount of EUR 1,500.
It is essential to document and record all transactions precisely so that the calculations can be plausibly explained to the tax office.
Tax Impact on Income Generation
Up to this point, only the buying and selling of cryptocurrencies has been discussed. In addition to simply trading cryptocurrencies, there are various other ways to trade cryptos to generate income. Here are some examples and their tax implications.
Mining Tax
When mining cryptocurrencies, new coins are created as a reward for solving complex mathematical problems. The value of these newly generated coins at the time of receipt must be classified as taxable income. If the exemption limit of EUR 256 per year is exceeded, the income must be taxed at the personal income tax rate.
If the newly generated assets are sold at a profit within a year, further taxes are applicable. Sales of mining rewards are regarded as private sales transactions for which the general exemption limit of EUR 600 euros applies.
Liquidity Mining Tax
Liquidity mining refers to providing liquidity to decentralized financial platforms (DeFi) in exchange for rewards in the form of cryptocurrencies. The coins or rewards received are considered taxable income.
The process of adding assets to the liquidity pool is classified as a taxable sale, which is subject to personal income tax. The same applies to the withdrawal of the original assets from the pool or the sale of LP tokens. An exemption limit of EUR 600 applies.
Further information can be found in our tax guide for liquidity mining.
Staking Tax
If the exemption limit of EUR 256 is exceeded, staking is a taxable activity. The rewards received are considered “sonstige Leistungen” and are taxed at the personal income tax rate when received. The rewards are treated as purchased cryptocurrencies and are subject to the one-year speculation period.
A sale of the rewards within the one-year holding period triggers a private sale transaction. The increase in value or profit must be taxed at the personal income tax rate. An exemption limit of EUR 600 applies.
Please note: If the staking rewards lose value after receipt, the tax assessment basis is still the value at the time of receipt.
Staking has no influence on the holding period of the purchased cryptocurrencies. The one-year speculation period is not extended for cryptocurrencies used for staking.
Lending Tax
Lending cryptocurrencies can also generate taxable income. In principle, this is a crypto loan for which interest is paid out. The income is measured on the basis of the market value at the time of inflow. Amounts exceeding the exemption limit of EUR 256 are taxable.
This interest income is considered “income from other services”, which is taxed at the personal income tax rate of up to 45%.
Sales within the one-year speculation period are considered private sales transactions and are also taxed at the personal income tax rate.
Taxes Applicable when used for Goods or Services
If cryptocurrencies are used as a means of payment for the purchase of goods or services, this is considered equivalent to a sale or exchange. The one-year speculation period also applies. If cryptocurrencies are used for purchases that have already been held for more than one year, any gains are tax-free.
When is Trading Cryptocurrencies Considered Commercial?
The threshold at which trading in cryptocurrencies is considered commercial is not clearly defined and can depend on various factors. Tax authorities assess crypto trades based on criteria such as frequency, type and volume of transactions and profits made.
Commercial trading in cryptocurrencies has disadvantages, such as the loss of the one-year holding period, the obligation to register a business and the payment of commercial tax. Classification as a commercial trader realistically depends on whether entrepreneurial characteristics such as employing staff or renting office space are present. Crypto activities such as mining, staking, margin trading or the production of NFTs can be considered commercial activity under certain circumstances.
Trading Tax
Crypto profits generated through derivatives, margin trading or futures are considered “income from capital assets” in Germany and are subject to capital gains tax of 25%. No one-year speculation period applies here. If all capital gains do not exceed the exemption limit of EUR 801, they are tax-free.
Tax Differences Depending on the Type of Investment
The tax treatment of cryptocurrencies can vary depending on the type of investment. Here are some common types of investments and their tax implications.
Crypto tax: CFDs
CFD stands for “Contracts for Difference”. For tax purposes, they are regarded as forward transactions and are therefore taxed at a flat rate of 25% including solidarity surcharge and church tax.
Crypto tax: Crypto certificates
The purchase of crypto certificates is treated like the purchase of CFDs for tax purposes. The flat-rate withholding tax of 25% including annex taxes (solidarity surcharge, church tax) also applies here.
Crypto Tax: Crypto ETFs
Trading in crypto-ETFs is taxed as a debt deferral with capital gains tax at a rate of 25% including annex taxes.
Crypto tax: Purchasing real cryptocurrencies
The purchase of real cryptocurrencies such as Bitcoin or Ethereum is treated according to the above rules. Crypto sales are considered “private sales transactions” and are taxed at the personal income tax rate.
Crypto tax: NFTs
In contrast to cryptocurrencies, non-fungible tokens (NFTs) are unique and clearly identifiable, while bitcoins are interchangeable and indistinguishable from one another.
Due to their similarity to cryptocurrencies, the same tax regime applies to NFTs. The acquisition and subsequent sale within the one-year speculation period is to be considered a “private sale transaction”.
If the exemption limit of EUR 600 per year is exceeded, the profit is taxed at the personal income tax rate.
Declaration of Cryptocurrencies in the Tax Return
In the electronic income tax return (ELSTER), profits or losses from trading cryptocurrencies are treated as “private sales transactions” and reported as “sonstige Einkünfte” in the form “Anlage SO”.
Taxation of Cryptocurrencies Abroad
If investors hold or trade cryptocurrencies abroad, the tax regulations of the respective country apply. It is important to find out about the tax regulations of the country in which you are investing and to seek tax advice if necessary.
Crypto Tax in Austria
In contrast to Germany, profits from cryptocurrencies are considered capital gains in Austria and are taxed at a rate of 27.5%. The new tax reform (March 2022) no longer provides for a one-year holding period, which is why crypto gains are always taxable. However, crypto-to-crypto swaps are not taxed directly and only incurred when cryptocurrencies are exchanged for fiat currencies, goods or services.
Crypto Tax in Switzerland
In Switzerland, profits from private trading in cryptocurrencies are usually considered tax-free capital gains. However, capital losses are not deductible. For this reason, Switzerland is considered one of the most tax-friendly locations when it comes to crypto transactions.
6 Helpful Tips: Taxing Cryptocurrencies
Hold crypto for more than a year
If cryptocurrencies are held for more than a year, gains are tax-free.
Find a crypto tax advisor
It may be advisable to consult a cryptocurrency tax advisor in order to best meet tax obligations and take advantage of possible tax benefits. CoinTracking therefore offers Full service and works with tax experts.
Tax return with crypto tax calculator
Managing cryptocurrencies and calculating tax can be done using CoinTracking, which allows automatic generation of reports and tax documents.
Offset crypto profits against losses
Losses from trading cryptocurrencies can be offset against profits or taxable income.
Deduct transaction costs
Transaction costs incurred when buying or selling cryptocurrencies can be claimed for tax purposes. It is advisable to carefully document all transaction fees and costs.
Exemption limit
Gains up to an amount of EUR 600 are tax-free.
FAQ about the taxation of
cryptocurrencies in germany
Conclusion
The taxation of cryptocurrencies in Germany requires precise knowledge of the tax regulations and careful documentation of all transactions. In order to facilitate the management and calculation of taxes, CoinTracking can be a great help. The software offers extensive functions and creates clear reports that can be used to prepare tax returns.
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