Those who hold virtual currencies for at least a year do not have to pay taxes on profits.
(Photo: Reuters)
Frankfurt There is good news for investors in the midst of the crypto crash: Investors who use their virtual currency from time to time no longer need to fear any tax disadvantages. This can be the case, for example, if you lend them out in order to generate additional income. This is what an instruction to the tax authorities that the Federal Ministry of Finance (BMF) published last week says. The instruction applies immediately to all outstanding tax returns.
Crypto investments are completely tax-free in Germany after one year. Anyone who exchanges their virtual currency for other coins before the end of the year, has them paid out or buys goods or services from them must pay tax on any profits they have made in the meantime – at their personal income tax rate. This is between 14 and 45 percent.
The only exception: the sum of the profits from all private sales transactions is less than 600 euros. This also includes income from gold, other currencies or art.
However, a draft of the current letter, which was published around a year ago, included a restriction for the tax exemption: the draft provided that additional income from coins before the end of the year would extend their holding period to ten years.
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This should apply, for example, if an investor lends her bitcoins and earns interest in the form of new coins (“lending”). Another option would have been staking. The investor’s coins are selected at random to validate transactions from other crypto investors. The owner also receives additional coins (“rewards”) as a reward.
Advantageous regulation for private investors
At that time, there was an outcry in the crypto industry. Investors would have to choose between tax exemption and returns in the future, criticized Kai Kuljurgis, founder of the investment crypto platform Coindex from Bielefeld, for example. The stock exchange operators, but also tax experts and associations appealed to the BMF for a more investor-friendly practice. With success.
In the final letter, the extension of the deadline is deleted again. Investors and operators are correspondingly relieved. “This clear regulation, which is advantageous for private investors, is extremely important for the crypto market in Germany and will be an accelerator for additional innovative offers of lending/staking options for private investors,” praises Ralf Oetting, founder and managing director of the crypto exchange Justtrade. This strengthens cryptocurrencies as a form of investment.
The letter contains further simplifications. Because especially when investors buy new coins at shorter intervals, it is difficult to determine the right taxation. If coins have been bought several times, the so-called FIFO method is usually used – “first in, first out”. This means that the coins that were purchased first must first be removed from the wallet, i.e. from the digital purse.
Tax experts warn that careful documentation of the individual purchase dates and prices, the holding period and the data on the sale is extremely important. This is the only way the income can be properly taxed or a tax exemption can be proven to the tax office.
assessment is made easier
What is new in the letter is that in addition to the FIFO method, the average method will also be permitted in the future. The profit is determined based on the average price, e.g. of all purchased bitcoins. This right to choose even applies per currency and wallet. “If the two calculations are relatively different, it is questionable to what extent this can be presented well and comprehensibly in the reporting,” warns Pekuna Managing Director Werner Hoffmann. The Berlin company supports customers in the tax processing of their crypto transactions.
It is now easier to determine the respective purchase and sale price. The draft still spoke of the “average value of three exchanges”, i.e. three crypto exchanges, but the course of a trading platform or a provider such as Coinmarketcap is now accepted.
The BMF also distinguishes between private and commercial crypto investors. This primarily affects those involved in the creation of new coins and the validation of crypto transactions. Anyone who makes computer power available here will always be considered a commercial investor in the future. Investors must therefore set up a company and then pay trade, corporation and sales tax accordingly.
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