Taxation on crypto currencies - please read before asking

241 posts in this topic

Hi,

 

Is anyone up to date on how Spekulationsgewinn is applied to crypto currencies. My understanding is that any gains you make on trades that are over 1 year are tax free. So if I bought bitcoin in 2015 and sold them tomorrow for cash then I don't pay anything. But if I sold bitcoin for cash that I bought 6 months ago, then I pay tax on any gains made.

 

Would this also apply to trading bitcoin for a different crypto currency. If I trade bitcoin I purchased 6 months ago for ethereum, would I be liable for tax on the gains I made? Or is this only for when cashing out?

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7 hours ago, jester said:

Would this also apply to trading bitcoin for a different crypto currency. If I trade bitcoin I purchased 6 months ago for ethereum, would I be liable for tax on the gains I made?

 

Yes, any change will mean a profit (the way these crypto currencies have been rising) that has to be taxed immediately and which is "calculated" via the reference currency €.

 

So changing Bitcoin into Ethereum less than a year after you bought the Bitcoin means:

  1. a sale of Bitcoin in which you get € --> profit (= [selling price in €] minus [purchase price in €]) from selling Bitcoin, has to be declared in Anlage SO, lines 41 to 46.
  2. a purchase of Ethereum paid with these same € - so now you have an € purchase price for those Ethereum, which you will need when you sell them again down the line.

The Finanzamt assumes a FIFO - first-in-first-out - order of using up the money, see §23 Absatz 1 Nr. 2 Satz 3 EStG.

 

Details in (that article is correct except that he says both FIFO and LIFO are possible, that's not the case, the law only allows FIFO, see above): http://www.gevestor.de/details/bitcoin-und-steuern-was-anleger-unbedingt-wissen-muessen-801380.html

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On 6/19/2017, 1:35:28, jester said:

My understanding is that any gains you make on trades that are over 1 year are tax free.

This applied to e.g. shares you bought on the stock market, but since 2009 this rule has changed. Now, it's only tax free if you bought the shares prior to 2009 and after that you pay 25% tax no matter how long you have the shares in your possession. I have some colleagues who are into this and the trading bank software automatically deducts the tax for the Finanzamt. They want their bit <_<.

 

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@LukeSkywalker

 

jester is correct.

This is about foreign currency, which falls under §23 Absatz 1 Nr. 2 EStG: https://www.gesetze-im-internet.de/estg/__23.html

Any profit from selling a foreign currency is not subject to income tax if the currency is held for at least 1 year (= Spekulationsfrist = speculation period).

This Spekulationsfrist is extended to 10 years if you got interest on that foreign currency, e.g. if you stuck it into a Tagesgeld account.

Any profit you make by selling the foreign currency before the Spekulationsfrist is over is part of "sonstige Einkünfte" and is taxed at your personal income tax rate, with no cap at 25%.

 

What you describe is something else entirely, capital income (= Einkünfte aus Kapitalvermögen) from selling shares, which falls under §23 Absatz 2 Nr. 1 EStG: https://www.gesetze-im-internet.de/estg/__20.html

Capital income is taxed at 25% or at your personal income tax rate, whichever is lower.

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Hi there,

 

What about any profit made from mining? How is that taxed? And how does it have to be reported in the tax declaration? Also, which EUR/Crypto rate is considered? A daily one?

 

Moreover, what if the mined crypto is still kept as crypto (not exchanged to fiat) by the time the tax declaration is due? Over time the crypto could have gained or even lost value. How does that impact taxes to be declared?

 

Thanks a bunch! :-)

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That would be income from self-employment (Einkünfte aus Gewerbebetrieb), that has to be declared in Anlage G, line 4: http://www.investopedia.com/articles/investing/043014/what-bitcoin-mining.asp

It will then be taxed together will all your other income.

You have to use the exchange rate on the day that you actually received that Bitcoin.

It doesn't matter in what form you keep it, it's income that you have to declare in the calendar year you got it.

 

If you change it into something, e.g. Bitcoin into €, or into Ethereum, within a year of having got it you will have made an additional profit that is part of "sonstige Einkünfte" and has to be declared in Anlage SO, line 46, see above answer.

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Hi PandaMunich,

 

Thanks for your reply, very clear and informative indeed!

 

22 hours ago, PandaMunich said:

If you change it into something, e.g. Bitcoin into €, or into Ethereum, within a year of having got it you will have made an additional profit that is part of "sonstige Einkünfte" and has to be declared in Anlage SO, line 46, see above answer.

I suppose an additional profit would be made only if the currency I exchanged the mined cryptocurrency into is worth more at the time than the mined crypto was originally worth when mined? - But I do see your point. Any exchange into any other currency within the first year of mining would have to be declared, right?

 

Lastly, I suppose all this tax liability on mining applies to German residents independently of whether the crypto has been mined in Germany or not? i.e. it applies to mining worldwide? Or how is it if the mining has actually been done in another country (with a double taxation agreement with Germany)?

 

Thanks once again!

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If you live in Germany, your worldwide income is taxable by Germany, it doesn't matter in which country the server stood.

 

You're resident in Germany - you're taxable in Germany.

By the way, the double taxation treaties all say the same thing, too, so no help for you there.

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Thanks for the invaluable advice Super-Panda!

 

How about taxes on Bitcoin trading/arbitrage generating profits/losses on a daily basis? Does AnlageSO 41-46 section needs to be repeated for each day of trading?

What kind of documentation needs to be provided to Finanzamt (each trade proof in detail like dates/prices obtained from Bitcoin exchanges OR just an excel sheet showing data entered by the taxpayer but no proof from exchanges)?

 

On a related note, if someone has many transactions of huge amounts in his bank account for buying/selling Bitcoins on a daily basis, Does this invite scrutiny from Tax authorities or Bundesbank even before the Tax year has ended giving him a chance to pay taxes, will operating through Geschäftskonto (selbständig) help here?

Which is more beneficial: Paying taxes as Individual OR paying tax as a company paying corporate tax?

 

Thanks in advance!

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1 hour ago, dbinmunich said:

How about taxes on Bitcoin trading/arbitrage generating profits/losses on a daily basis? Does AnlageSO 41-46 section needs to be repeated for each day of trading?

 

Anlage SO is a yearly form, and is part of your yearly income tax return.

The tax year in Germany is the calendar year.

 

1 hour ago, dbinmunich said:

What kind of documentation needs to be provided to Finanzamt (each trade proof in detail like dates/prices obtained from Bitcoin exchanges OR just an excel sheet showing data entered by the taxpayer but no proof from exchanges)?

 

You need proof.

 

1 hour ago, dbinmunich said:

On a related note, if someone has many transactions of huge amounts in his bank account for buying/selling Bitcoins on a daily basis, Does this invite scrutiny from Tax authorities or Bundesbank even before the Tax year has ended giving him a chance to pay taxes, will operating through Geschäftskonto (selbständig) help here?

Which is more beneficial: Paying taxes as Individual OR paying tax as a company paying corporate tax?

 

As long as you are only investing your own money, this counts as private no matter how much money you invest or how quickly you turn it over.

 

If you are investing other people's money, this opens a whole new can of worms, since investing is regulated by quite a few other laws apart from tax law, e.g. by the KAGB.

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Sorry If my question was not clear enough, What I meant was that AnlageSO 41-46 section needs to be filled with data like buy-date, sell-date, profit/loss made, etc. per Buy/Sell of eg. fonds, shares, Bitcoin, etc. If someone makes 2 Buy/Sell in a year then he need to fill AnlageSO section 41-46 exactly 2 times per Buy/Sell, my question was about trading where someone does Buy/Sell 'n' times in a year, does he need to fill AnlageSO section 41-46 exactly 'n' times (which will be too much) OR just 1 time specifying total amount of Buy/Sell done in the whole year, off-course I am talking about annual tax filing but including 'n' number of capital gain instances during the year.

 

Does this perspective changes your other answers too?

Thanks once again!

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Attach a list of all trades on a separate piece of paper and transfer only the sum into Anlage SO. Leave the buy/sell dates empty in Anlage SO.

 

The answers don't change.

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I have never dealt with declaring taxation for income on trading. I have been in trading since start of this year but I am confused how am I gonna declare all my trades etc as I am a day trader and what I can declare easily is that I invested X amount at certain date and now I have X+Y amount at the end of the year. Isn't this enough for tax calculation?

I have couple of stupid questions as well. Feel free to answer or ignore.
1. I got into crypto in order not to pay any taxes (kinda rebellion nature). what could worse happen if I dont declare taxes at all?
2. What if I move my bitcoin to other exchanges (to anonymous account) or wallet and declare that they have been stolen from my account. (ofcourse a lie in order to not to pay taxes)
3. What would be roughly estimate of my taxes if I invested 10K euros and after day trading I have 70K Euros now? Just want to have a rough idea to see whether it is worth it to take risk of not paying taxes LOL

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Thanks for detailed reply. I must pay taxes then although I have to pay ridiculous amount of taxes. And I am not sure how am I going to list down all trades and calculate taxes.
Anyone knows how can I document my trades on Kraken exchange in order to submit for tax?

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A follow-up question to your post from 03 July, Panda. In the USA if, when you transfer your crypto into fiat ($, €, etc.), it is worth less than when you mined it, that constitutes a capital loss and can be declared as such. Is that true in Germany, and does Anlage SO allow for a loss as well as a gain?

 

Thanks for your information here. I am looking to get into mining cryptocurrencies and want to do so with my eyes open.

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Any loss you incur can only lower a profit you made in that same income category "sonstige Einkünfte", either in the preceding year (loss is carried backward), or in the folowing years (loss is carried forward): https://de.wikipedia.org/wiki/Privates_Ver%C3%A4u%C3%9Ferungsgesch%C3%A4ft#Ver.C3.A4u.C3.9Ferungsverlust

 

So that loss from selling crypto currency within a year of buying it will never, for example, lower your taxable income from employment or your capital income (= interest + dividends + profit from the sale of stocks/funds).

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5 minutes ago, PandaMunich said:

Any loss you incur can only lower a profit you made in that same income category "sonstige Einkünfte", either in the preceding year (loss is carried backward), or in the folowing years (loss is carried forward): https://de.wikipedia.org/wiki/Privates_Ver%C3%A4u%C3%9Ferungsgesch%C3%A4ft#Ver.C3.A4u.C3.9Ferungsverlust

 

So that loss from selling crypto currency within a year of buying it will never, for example, lower your taxable income from employment or your capital income (= interest + dividends + profit from the sale of stocks/funds).

 

So the loss will not affect the income made from the original mining gain, since that is declared in Anlage G. But assuming there would be gains reported in Anlage SO from the conversion of crypto currency into Euros, ant loss can be deducted from those gains in the same year, as long as the amount remains above 0. If the losses were to wipe out the gains, then the "loss is carried backward" and "loss is carried forward" scenarios would come into play for the remaining losses. Is that correct?

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