Official update on the taxation of cryptocurrency in Germany

Official update on the taxation of cryptocurrency in Germany

+++ CryptoTax helps to increase certainty in the field of cryptocurrency taxation. The German Ministry of Finance confirms the tax treatment of crypto assets under Sec. 23 German Income Tax Act. +++

The only official statement regarding the taxation of cryptocurrency in Germany resulted out of a request by Frank Schäffler (deputy of the German Bundestag for the German liberal party FDP) which he handed in at the German Ministry of Finance (“MoF”) back in July 2013. In the answer dated 07.08.2013 the German MoF declared bitcoin as an “independent commodity”. That results in bitcoins being treated by tax norms called: “private sale transactions” following § 23 German Income Tax Act (“ITA”). That tax norm also applies to foreign currency transactions.

Since the statement is only covering bitcoin, it was not clear for investors how to tax the other over 1.000 cryptocurrencies that are available today. This problem was also covered in a recent study, that was released by the Frankfurt School Blockchain Center in partnership with CryptoTax. According to the authors, Klaus Himmer and Philipp Sandner, the taxation of cryptocurrency in Germany is so complex and unclear, that a lot of private investors are in great danger of committing a tax crime “only” by being inactive. The estimations given in the study say, that up to 400.000 people in Germany could be affected by this tax situation and around 726 Million Euro of taxes can potentially be generated by the cryptocurrency sector in Germany in the year 2017 alone.

These alarming numbers caused Lisa Paus (deputy of the German Bundestag for the party Bündnis 90/Die Grünen) to hand in another request to the German MoF regarding value added tax and income taxation of cryptocurrencies in Germany. In the answer, the German MoF confirmed their statement from 2013 but used the term “cryptocurrency” now instead of only mentioning bitcoin. I.e. not only bitcoin but all of the other cryptocurrencies shall be treated by the tax norms of § 23 German ITA. This statement can be seen as a good first reference, but it is far away from a solid framework covering the taxation of Blockchain-based assets.

Image: “Berlin_05_2009_ 054” by Ralf Schulze is licensed under CC BY-NC 2.0

CC BY-NC 2.0