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Taxation of profits from the sale of cryptocurrencies

from
Lucas Bell
Lawyer
Specialist tax lawyer

Give me a call: 0261 - 404 99 761
E-Mail:

Cryptocurrencies have been the talk of the town lately. The exchange rate fluctuation offers opportunities but also risks. However, the risk of taxation should not be ignored when selling.

Put simply, cryptocurrencies are digital currencies with a specially encrypted payment system outside of state control mechanisms. These mechanisms limit access and at the same time assign a kind of proof of ownership to the holder. Unlike a simple image file, it is not possible to make a copy.

Taxation of the profit is usually considered in terms of income from private sales transactions. Among other things, the sale of movable assets within one year of acquisition is taxable.

Economic goods are all things and rights as well as financial benefits that have been obtained at a cost, that are amenable to a specific valuation and that can be transferred individually or in connection with a business.

This has recently been confirmed by the Baden-Württemberg Fiscal Court for the cryptocurrency. It regards this as an asset-related advantage because, in addition to its payment function, it can be subject to an increase in value due to the special encryption, which can be skimmed off by selling it. The current brisk trade also indicates that the other conditions are met.

Therefore, when selling, you should keep an eye on the disposal period. If you sell after one year, the profit remains tax-free. Patience is therefore worthwhile here, even if the attraction of making a quick buck is sometimes greater.

The appeal to the Federal Fiscal Court is currently pending. How this is decided is likely to be relevant for trading in other encrypted digital goods such as NFTs.

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.