Cryptocurrencies and taxes: What matters now?

Soon, you have to worry about your tax return. For many people it will also be the first time that profits from crypto trading have to be included in the taxes.

However, as many investors in this area are breaking new ground and honest citizens do not want to deprive the state of their committed share of their profits, there are a few rules to follow:

How are cryptocurrencies taxed for private investors?

First it should be noted that cryptocurrencies are not taxed in the same way as capital gains on securities transactions, such as stock or option transactions, in accordance with withholding tax (25% + 1.375% Soli + church tax). In Germany, Bitcoin, Ethers and other coins are not considered as legal tender but as intangible assets in income tax law. Accordingly, they are also considered tax-different from centrally issued currencies. In the private sector, taxation is primarily dependent on the sale of cryptocurrencies.

What type of business is this?

Private sale transaction is any action that exchanges a cryptocurrency for something. This can be done, for example, by converting into fiat currencies, trading against other cryptocurrencies, or paying for goods or services. When trading or paying, it is therefore important to pay attention to the sales.

How exactly is taxation calculated?

Decisive for the calculation of the taxable profit is the date of purchase of the cryptocurrency as well as the price at which the cryptocurrency was purchased. As an investor, it is therefore advisable to note down both key figures. The profit achieved by the crypto trade results from the difference between the purchase price and the selling price of a cryptocurrency. The so-called “first in, first out” method (FiFo method) is used as the benchmark. This states that those coins that were acquired first are sold first when sold. The difference between these two prices then represents the profit on which the tax is levied.


Which holding periods are there and how should they be selected?

If an acquired coin is held for more than 12 months without a trade being made, then the profit earned is no longer taxable. The winnings can then be fully paid upon sale or payment with cryptocurrencies. If the minimum retention period of one year, however, falls below, a tax must be paid on the profit accordingly. In the case of a sale within the one-year holding period, an exemption limit of 600 euros applies in the year in question – this does not only apply to crypto transactions, but to the entirety of the sales transactions during this period.

What can be deducted from the tax?

Since the crypto market is very volatile and not every trade is successful, it can also happen that no profit is realized in a sale, but instead a loss is. However, this can be offset with profits that have been incurred elsewhere. This can happen both in terms of past and future cryptographic gains. Also around the crypto trade incurred expenses, such as the purchase of a wallet, can be claimed in the tax.

Do taxes also apply to mining?

The mining of cryptocurrencies falls within the scope of commercial activity. Accordingly, taxes also apply here. This applies both to private miners and cloudmining providers who operate their services with a clear commercial intention. In the taxation of crypto profits, which have come through mining, the above-mentioned measures for private wealth taxation are obsolete, since there is a separate regulation for crypto taxation for companies.

What is the taxation on commercial crypto-trading?

The taxation of profits from commercial trading in cryptocurrencies differs fundamentally from that of private businesses. The taxation of income from business operations under § 15 EstG applies, whereby the type of tax depends on the legal form of the enterprise. In the case of sole proprietorships and partnerships, corporate profits are subject to income tax and, in the case of limited liability companies or corporations, corporate income tax. In addition a trade tax accrues for the enterprise of the commercial Bitcoin trade.

How do I correct my tax return?

As has already been mentioned several times in this report, it therefore makes sense to take care of tax matters in good time and in detail, keep a record of your own crypto transactions and state all taxable profits to the best of my knowledge and belief in the state tax audit. This is the only way to ensure that crypto trading is legal and that there are no unpleasant surprises.

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