Taxation on crypto currencies - please read before asking

241 posts in this topic

Hello guys,

 

just stumbled across this topic and remembered I got an account here from the time i was living in Germany. Will appreciate if someone can answer my particular question.

 

I used to be a foreign student in germany until quite recently for ca. 5 years. During that time- in the end of 2016 i begun mining Eth.  and even bought some Eth. most of this Eth is still with me but some of it was used to buy other coins which i still hold today.  The questions are:

 

1. Will I have to pay taxes  for the mined Eth or the bought one?

2. Will i have to pay taxes for converting the eth to other coins and still holding them?

3. What about PoS rewards and rewards from Master Nodes? does this count as the zinsen thing and i will have to pay? If yes only for the gains from PoS/MN or for the initial stake /locked coins too?

4. I do not have a german passport  but have a bank account. I was never in contact with the finanzamt. I was a foreign student. does this even apply to me? (It would be favorable  since germany's crypto laws are fairly good)

5.in general is there any way around that for me? i,e to have to pay taxes in germany because I was living there, but to be extempt from them due to whatever rules exist such as the 1 year + no tax?

 

P.s my country of residency does have a double taxasion agreement with germany.

Thanks!

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Great thread. Very informative. Thanks Panda and others!

 

A few questions:


1. How is the holding period calculated if you buy into an ICO that doesn’t release the tokens immediately (Polkadot, Cosmos etc)? For example: if you made the purchase over 18 months ago and can confirm it, but didn't actually receive the tokens until a few weeks ago, can you sell them now and enjoy the 12 month discount?
2. What is the percentage chance the crypto laws likely to change 6, 12, and 24 months, and what is the percentage chance they implement a retroactive tax?
3. If Germany changes their crypto tax laws and you moved to a treaty country before the law was enacted, could you eliminate the possibility of being taxed retrospectively?
4. Can you move from a treaty country (Country x) to Germany, establish residency correctly, sell some or all of your cryptos tax free, and then in 6-12 months move to another country (that may or may not have a tax treaty with Country x but does with Germany) without any German or Country x tax consequences assuming you stay in the new location for 2-3 years and properly establish residency in a way that is consistent with German and Country x requirements? 
5. If you buy international shares, businesses, property or gold with the proceeds of your crypto sales while a resident in Germany and then leave to a German tax treaty country, will Germany tax those assets upon departure? Is there anything about changing residency from Germany to another country that requires concern?

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Thanks. A friend recommended a Steuerberater and Ill certainly consult one, but I wanted to better understand the situation based on my own research and validation first. 

 

Perhaps you can offer some guidance on this question as its not crypto related: If you buy international shares, businesses, property or gold while a resident in Germany and then leave to a German tax treaty country, I assume Germany doesn't tax those assets upon departure, but do they make the process difficult by claiming tax on these items unless you spend, say, 2-3 years in the new country and full-fill other criteria over and above being a tax resident? Or is changing German residency a rather easy and straightforward process if you dont have any German based assets? 

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It's irrelevant to this thread.

That BMF Schreiben simply states that no additional tax in the form of VAT (= value-added tax) is due when you buy/sell cryptocurrency.

 

It has no bearing at all on the income tax that you have to pay when you buy/sell cryptocurrency, which is the topic of this thread.

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Regarding Germany changing the crypto tax laws, Austria just indicated they would implement massive changes. Is Germany likely to follow suit? 

 

"The Federal Ministry of Finance (BMF) is considering massive changes with respect to the tax treatment of cryptocurrencies. Also, according to the view previously held by the BMF, trading between cryptocurrencies held as private assets is only relevant in fiscal terms if the period between acquisition and disposal is not more than one year (speculative transaction). In future, the exchange between cryptocurrencies outside an operational context is not going to be relevant in fiscal terms any more (unless the respective cryptocurrency is a voucher or another investment vehicle) – similar to certain foreign currency conversions and regardless of the one-year speculation period. Only the conversion into euros or any currency with a stable exchange rate relative to the euro will constitute a taxable exchange subject to the special tax rate of 27.5 %."

https://www.tpa-group.at/en/cryptocurrencies-plan-regarding-income-tax/

 

However, a recent Bloomberg article suggests Austria will tax cryptos as they would gold and derivatives, allowing for a cgt free event after 12 months: https://www.bloomberg.com/news/articles/2018-02-23/austria-seeks-bitcoin-rules-based-on-gold-derivatives-controls

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Panda, you are a God.  No joke, I've been reading this thread like it's the new Harry Potter or something.  

 

Anyway, my musings: 

 

"Fiscal Year".. Buy 1000 € in bitcoin on 31 December, sell one day later (next year) for €2000, do I pay taxes on this 1000€ in profits?  Yes, correct?  No taxes only if you hodl for 366 days.  Yes?  
--------
FIFO and 'day trading' scenario:  
-I buy 1,000,000€-equivalent in bitcoin in 2010 before I move to Germany (and can prove ownership of the address if they ever want proof).  No idea on price, let's pretend 1 million euros, 1 million bitcoin
-move to DE 2011 and in 2012, on multiple trades (let's say I'm 'buying the dip', 'selling the peaks' BS or something), I profit enormously.  I sell exactly 1 million bitcoin, buy back 10 million bitcoin, and net another 10 million euros.  
-b/c I'm not sure on fiscal year question, let's say I take the next year off (2013) and wait on testing my luck until 2014 at which point I do the same thing.   
Do I really:
1) not have to pay any taxes on any of those trades
2) not even have to declare that I have the bitcoin or made that money?  
--------
Thoughts on PandaMunich's witty 0% loan payable in 50 years.  
-Is that a joke and I missed the humor or what?  Since in Germany, verbal contracts are binding, could you even just have a verbal contract stating that?  That one is mind-boggling to me.  What about loans from family.. can you loan your sister 10 million, no interest, 100 year term, with a clause stating that upon death, outstanding debt is gone?  If that loophole exists, I thank you panda for sharing it.  Not because I want to lie, but because I feel like Germans rarely share the good tricks (case in point real estate).  
--------
Retroactive Taxation:  
--This is unbelievable.  What was the outcome of the retroactive taxation?  Did 8 years of home sales really get retroactively get taxed?  I can't see how people (and businesses) would let this one happen without a general shutdown.  
--------
Declaration as receipt (where to)?:
-If one was to 'declare' their sale and profit of bitcoin held for more than one year (say, to 1-explain large bank transfers or the 2-purchase of property, or because they are avoiding (legally) tax in their own state and want a record to help them in possible future 'difficulties' with their home or resident country), would one do it with the Anlage SO (https://www.buhl.de/steuernsparen/wp-content/uploads/sites/16/2017/01/anlage_so_16_sw.pdf) form?  
Musing:  Is this like talking to the police (don't do it because it will never ever ever help you https://www.youtube.com/watch?v=d-7o9xYp7eE) or is it smarter to get it written down asap so it looks like you've tried to be as fully transparent as possible?  (Same thought applies to gifts, which panda seems to imply are not necessary to declare until they max out).  
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9 hours ago, jbabel said:
"Fiscal Year".. Buy 1000 € in bitcoin on 31 December, sell one day later (next year) for €2000, do I pay taxes on this 1000€ in profits?  Yes, correct?  No taxes only if you hodl for 366 days.  Yes?  
--------
FIFO and 'day trading' scenario:  
-I buy 1,000,000€-equivalent in bitcoin in 2010 before I move to Germany (and can prove ownership of the address if they ever want proof).  No idea on price, let's pretend 1 million euros, 1 million bitcoin
-move to DE 2011 and in 2012, on multiple trades (let's say I'm 'buying the dip', 'selling the peaks' BS or something), I profit enormously.  I sell exactly 1 million bitcoin, buy back 10 million bitcoin, and net another 10 million euros.  
-b/c I'm not sure on fiscal year question, let's say I take the next year off (2013) and wait on testing my luck until 2014 at which point I do the same thing.   
Do I really:
1) not have to pay any taxes on any of those trades
2) not even have to declare that I have the bitcoin or made that money?

 

I've gotten a bit tired of people thinking they can get full unpaid services from me.

 

I suggest that you choose a Steuerberater with experience in international cases, you can afford it. A slew of them advertise on Toytown, you can find their threads and reviews written by their clients pinned at the top of the Finance forum: https://www.toytowngermany.com/forum/forum/181-finance/

 

9 hours ago, jbabel said:
Thoughts on PandaMunich's witty 0% loan payable in 50 years.  
-Is that a joke and I missed the humor or what?  Since in Germany, verbal contracts are binding, could you even just have a verbal contract stating that?  That one is mind-boggling to me.  What about loans from family.. can you loan your sister 10 million, no interest, 100 year term, with a clause stating that upon death, outstanding debt is gone?  If that loophole exists, I thank you panda for sharing it.  Not because I want to lie, but because I feel like Germans rarely share the good tricks (case in point real estate).

 

In these strange times we have, with negative interest rates and even banks giving out loans with negative interest rates, this is no longer a joke.

 

Normally, for a loan between relatives to be recognised, the interest rate has to be the same as you would have to pay to a stranger (= Fremdvergleich). And since you can now get 0% loans from a stranger, there's no reason why you can't get the same interest rate from a relative.

About the loan agreement being verbal, yes, that's possible, but it's always advisable to put it in writing, as proof for the Finanzamt.

Details in: https://www.finanztip.de/vertraege-angehoerige/

 

9 hours ago, jbabel said:
Retroactive Taxation:  
--This is unbelievable.  What was the outcome of the retroactive taxation?  Did 8 years of home sales really get retroactively get taxed?  I can't see how people (and businesses) would let this one happen without a general shutdown.  

 

They didn't tax sales that had already happened, i.e. there was no "real" retroactive taxation (= echte Rückwirkung).

 

They just had to hold onto the real estate for longer than they had planned to, i.e. for at least 10 years if they wanted to get that profit tax-free. This is called "unreal" retroactive taxation (= unechte Rückwirkung).

Some people tried to sue, saying that at the time the new law was enacted they had already held the real estate for long enough for the profit to be tax-free, i.e. for longer than 2 years, and that therefore their sales should be processed under the old rules, but they lost.

The German constitutional court ruled that this change, which disdvantaged old owners, though iffy, was still "bearable": https://lexetius.com/2010,2665

 

9 hours ago, jbabel said:
Declaration as receipt (where to)?:
-If one was to 'declare' their sale and profit of bitcoin held for more than one year (say, to 1-explain large bank transfers or the 2-purchase of property, or because they are avoiding (legally) tax in their own state and want a record to help them in possible future 'difficulties' with their home or resident country), would one do it with the Anlage SO (https://www.buhl.de/steuernsparen/wp-content/uploads/sites/16/2017/01/anlage_so_16_sw.pdf) form?  

 

Be as transparent as possible.

 

9 hours ago, jbabel said:

Same thought applies to gifts, which panda seems to imply are not necessary to declare until they max out

 

Nope, I said that you will only owe gift tax once you pass the tax-free amount.

Officially, you have to report every gift to the Finanzamt so that they can start keeping a rolling list for the relationship "that gift giver --> you" for the next 10 years:

 

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15 minutes ago, PandaMunich said:

I've gotten a bit tired of people thinking they can get full unpaid services from me.

 

I suggest that you choose a Steuerberater with experience in international cases, you can afford it.

 

I understand your misgivings, Panda, and I respect that.  I am going to a Steuerberater.  I just wanted to know how the system works, especially since they don't seem to even want my business.  Because, though I used millions as an example, reality is several zeroes lower and millions just easily avoided the 600 (or 601) euro tediousness.  

 

 

Anyway, thanks for responding to the rest of my post.  You are enlightening as ever.  

 

If anyone's a US citizen over here, I'd be interested in their thoughts on this..

I was reading an article on Puerto Rico the other day here and checked into it.  They still tax you on capital gains (us-speak now) for any assets you had prior to your move there.  While lower, it's still not zero (as it is here in Germany apparently).  From what I'm reading here, if I had several (or several dozen) million dollars at stake, I'd go to Germany first for a year, sell all my (long-term) holdings one day prior to leaving Germany, then move to PR, establish residency, and re-acquire all my holdings.  Sounds easier said than done, but you could potentially avoid all federal income taxes (german and us) which would be great.  Too bad crypto is volatile, however..

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Hi,

    I have a few more questions.:) What is the tax percentage for trading in cryptos? Say for example I made 6000 Euros in Profit by trading in total. So is the tax 10% of my profit or is it higher? 

Also is there any Tax consultants in Munich who specializes in filing Tax returns for Cryptos?

 

Regards,

Bince

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You didn't read the thread I linked to, did you?

 

Please read that entire thread now, your answer is in there:

 

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Hey Panda, do you have perhaps for my inquiry from the previous page as well? I would be grateful :D

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Hi there everyone,

 

This might be a silly question but how do they calculate the 1 year period? 

If, let's say

 

I bought on 18.03.2017 at 10:00 o'clock

and

I sel on the 18.03.2018 at 14:00 0'clock

Can the TAX Office not accept this as being one year? Can they actually accept the 1 year period as being done only the first calendaristic day after the purchase date, in this case, the 19.03.2018?

Thank you. 

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On 19/06/2017, 20:53:41, PandaMunich said:

 

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

 

Panda - thanks for all your guidance in this thread. Quick question on this that I don't think has been covered:

 

Is FIFO also applied if the currency was only used as a "gateway" crypto? If I bought 1 BTC in April 2017, put it in cold storage, and plan to sell it in April 2018; but simultaneously bought 0.5 BTC in June 2017 to use to buy IOTA (because I couldn't directly purchase IOTA in Euros) and then purchased 0.5 BTC worth of IOTA; would the 0.5 "sale" of BTC for IOTA count as a taxable sale and therefore be liable for taxation, calculated as difference in price of 1 BTC between Apr 2017 and Jun 2017 * 0.5?

 

TIA!

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10 minutes ago, NathanCPFCD said:

would the 0.5 "sale" of BTC for IOTA count as a taxable sale and therefore be liable for taxation, calculated as difference in price of 1 BTC between Apr 2017 and Jun 2017 * 0.5?

 

I'm also really curious on this one. I would say 99% yes, taxable (ok, you want to invest in IOTA but you are buying new BTC instead of using your old ones which you already have).

I know, it s**ks .. :( , but let's see what Panda / others think.

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So it looks like Panda confirms that this is the case:

 

On 26/11/2017, 21:27:42, mihneasim said:

Thanks @PandaMunich! I did read the answers multiple times, only now have i understood the "pretending part".

 

Let me see i really got this: This means, the moment i sell ETH back to BTC, that is actually "selling ETH back to EUR worth", then "buying with that worth" the corresponding BTC, and declaring the difference in EUR-worth as profit, by buying and selling the ETH in less than 1 year. Whenever i sell those BTC (fifo rule applied), i pay profit again for the corresponding difference, since the day i got them by selling my eth.

Actually, each personal cryptocurrency "wallet" has its own fifo queue .. and every selling back <1yr is taxed (on corresponding altcoin-bitcoin-eur rate difference). And i also understand negative profits are carried.

 

Is there an official German Finanzamt approved source for daily euro rates to use? Exchange reports do not include btc-eur rate in altcoin transactions.

 

If the last point around each personal crypto wallet having its own FIFO queue, then I guess it's all good (as long as your coins were in personal storage. 

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Can anyone recommend a German accountant I can consult re crypto taxation in Germany? Do you provide consultancy services Panda?

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