Donnerstag, 23.03.2023
Last change: Donnerstag, 07.11.2024
Treatment of cryptocurrencies in private sales and exchange of one cryptocurrency for another cryptocurrency in income tax
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Dr. jur. Marc FornaufLawyer
Specialist tax lawyer
Specialist in criminal law
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Dr. jur. Dirk Lindloff
Lawyer
Specialist lawyer for intellectual property law
Specialist lawyer for information technology law
Give me a call: 0261 - 404 99 45
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After the tax authorities had already classified cryptocurrencies as assets in 2022 (BMF circular dated May 10, 2022), the Federal Fiscal Court (BFH) has now ruled in its judgment of February 14, 2023 - IX R 3/22 thatgains from transactions with cryptocurrencies are subject to income tax as private sales transactions if they are purchased and sold within one year.
The decision of the BFH is based on § 23 (1) sentence 1 no. 2 sentence 1 of the German Income Tax Act (EStG), according to which profits from the sale of "other assets" are generally subject to income tax. The BFH considers cryptocurrencies to be such "other assets" and thus follows the rulings of the Berlin-Brandenburg and Baden-Württemberg fiscal courts.
This decision has far-reaching implications for all taxpayers who invest in or trade in cryptocurrencies. This is because not only sales, but also the exchange of cryptocurrencies is now subject to taxation, provided that it occurs within one year. Thus, it is no longer possible to avoid taxation by exchanging cryptocurrencies within this period.
Factual basis of the decision
The decision was prompted by the question of whether the plaintiff's profits from the sale of various cryptocurrencies in 2017 were subject to taxation as private sales. Between 2014 and 2016, the plaintiff had carried out more than 17 transactions via the "bitcoin.de" trading platform and held 24.75825 BTC at the beginning of the year in dispute. On January 3, 2017, he exchanged 24.75825 BTC for 2,660.19 ETH and on June 13, 2017, he exchanged 2,660.19 ETH for 20,678.09 XMR. Between the end of November and the end of December 2017, the plaintiff successively converted the XMR back into BTC and sold it in smaller denominations via the trading platforms "bitstamp.net" and "bitcoin.de" in November and December 2017. The plaintiff realized a capital gain of €3,441,261.70. The plaintiff had not carried out any other transactions, such as the creation of a new block in the blockchain.
Application to NFTs
The BFH's decision should also apply to non-fungible tokens (NFTs), as these are also to be regarded as "other economic goods". NFTs are a new digital asset that has gained traction in recent years and are considered a unique, non-exchangeable good. Since the BFH classifies the sale of cryptocurrencies as a private sale, this is likely to apply to trading in NFTs as well.
It is important to note that the BFH's decision applies retroactively and is thus also relevant for tax returns from previous years. Taxpayers who have traded in cryptocurrencies in previous years should therefore check whether they have properly declared their profits. If not, they should correct their tax returns as soon as possible to avoid back payments or penalties.
For the future, the BFH's decision means that taxpayers who invest in or trade in cryptocurrencies must be aware of the tax consequences. It is recommended to inform oneself about tax obligations at an early stage and to seek professional support if necessary. When trading NFTs, taxpayers should also keep the tax consequences in mind and, if necessary, speak to their tax advisor at an early stage.
The decision of the Federal Fiscal Court is a further step towards a clear regulation of the crypto market.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.