Taxation on crypto currencies - please read before asking

241 posts in this topic

Anton.  Did you hodl for > 365 days?  If yes, you can potentially leave the info out of your tax return.  You're probably not 'supposed to', but it is not the end of the world.  I'm no tax person, but I went to someone.  If shit hits the fan (you get audited down to the very last penny and piece of paper) but you have hodl'd for > 365 days, you can show them that you do not have to pay any taxes on that, so the absence of the tx was, if anything, not criminal.  This was the tax person's advice.  Similar to inheritance or gifts from family.  Though you're supposed to report any gifts from anyone always, it only really matters (and people only report in practice) when the amount one received in gifts exceeds the amount allowed (or when a close family member dies).  

If you held for < 365 days, none of the above applies.  You are liable to report when you sell or trade into another crypto asset.  That's the gist of what I understood from the tax person I went to. 

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Hello everybody.

 

 

 

This is actually my first post and I am doing that because I really cannot get an hold on taxation for cryptocurrencies in Germany. I have several doubts I hope I can clarify here.

 

I would like first to make some essential introductory remarks:

1)     I do both trading and mining and therefore I'm registered as a Gewerbe as a cryptocurrency miner as it was not necessary to have a business in order to trade.

2)    I am in contact with a tax advisor which is supposed to be an expert on the cryptocurrency topic. He has knowledge of the topic for sure, however I do not fully trust his knowledge and I would like to "test" him by hearing opinion from other people like me which I found to be discussing on this thread.

As I was not able to find any match (for me an english speaking figure was a must) I found an agency (Ageras) which helped me to get in contact with experts on the topic. They did it for free as I think their business is kind of a brokerage for tax advisors (which they get money from I suppose).

 

3)    I have read the thread from post 1 till the very latest. Attentively.

 

I set up my business model to have an automated algorithm switching mining bot paired with a trading bot both developed by me (I am, on my daily life, an IT professional application engineer employed in a large corporation).

 

The idea was to mine the highest profitable coin with minute level granularity on several pools and feed the mined coin immediately to the exchange where my bot was connected doing trades every minute basing on several statistical analysis and other more humanistic coin evaluations (Market cap, Volume, etc..).

 

I have been using Cointracking.info to aggregate trades and mining income and to produce the Tax report to handle to the Finanzamt.

 

Last year I did not have any bot and did not so many trades. I had earnings up to € 3.500 with taxes around € 250.

 

I recently did the tax calculation this year and I am a bit shocked by the outcome.

 

According to Cointracking.info I have earned almost € 40.000 and therefore, being almost all minute/day/hour trades they are all taxed 25%.

The consequence is that I would have to pay around € 6700 according to that report.

 

We are talking about more than 50.000 trades and most of them are very low in value and certainly under the 1 year of tax free allowance.

 

Until now there is no unusual thing right?

 

The nitty gritty is that I never earned that amount of money. I invested around € 1500 and only started mining in June earning around € 30.

I actually lost money every month instead of gaining.

This makes me think that Cointracking.info calculates earning based on each trade value.

 

Therefore let me ask you, what would happen if one trades like the following:

 

Day 1:
Portfolio : 0.22 BTC = value  Eur 1500
Buy 1 ETH for 0.11 BTC ==> Tax 25%  (184 Eur), value of trans. Eur 750
Buy 0.11 BTC for 1 ETH ==> Tax 25% (184 Eur), value of trans. Eur 750
Buy 1 ETH for 0.11 BTC ==> Tax 25%  (184 Eur), value of trans. Eur 750
Buy 0.11 BTC for 1 ETH ==> Tax 25% (184 Eur), value of trans. Eur 750
Buy 1 ETH for 0.11 BTC ==> Tax 25%  (184 Eur), value of trans. Eur 750
Buy 0.11 BTC for 1 ETH ==> Tax 25% (184 Eur), value of trans. Eur 750
...
...
this x 5.000 times
 
Day 2:
Portfolio:
0.22 BTC = value Eur 1500
Taxes = 5.000 x 2 x 184 Eur = 1.840.000 ???
Sum of transaction values (earnings) = 5.000 x 2 x 750 Eur 7.500.000 ???

 

 

If that is true, that would prevent every day trader, forex maniac and trading bot owner to do ANY business in Germany! I cannot believe this system is enforced, I must have gotten/done something wrong!

 

I also have some other thoughts:

1)     Most of my trades were done on Binance which is a Chinese exchange, does that change something on tax level?

2)     I recently implemented a trading bot on a decentralized exchange based on the Bitshares platform (CryptoBridge). As being decentralized and running itself on a blockchain...Does that change something on taxation level from the traditional, company backed exchanges?

I am asking because in that case somebody can trade Market Pegged Assets for examples which are assets backed by cryptocurrencies.

 

3)    Given the electricity prices here in Germany I am planning ahead to move my actual and future miners abroad in a country with lower electricity costs. Since I know I could open a company there and have my business running from there, I would like to know:

If I run my trading bot "there" as well (This is only a matter of moving a server), wouldn't I have to pay taxes in the country where I run it and only declare income here in Germany?

 

 

PS: Not sure if I can do it, as I wasn't able to find some ruleset in the forum, but if you plan to use any of the services I have linked above, you can check them through my affiliate links which are gonna give discounts to you as well (Actually only one of them does, sorry for that :>):

 

Cointracking.info = Crypto portfolio tracker, analysis and tax reporting with automated API imports from exchanges and wallets.

https://cointracking.info?ref=1370863

10% discount for all Account Upgrades

 

Binance = actually the biggest cryptocurrency exchange

https://www.binance.com/?ref=22973573

I could not find any discount for the referee.

 

Ageras = Steuerberater brokerage (free)

https://www.ageras.de/

No referral link here :)

 

BitShares = Decentralized exchange on a blockchain, very interesting project IMHO:

https://bitshares.org/

No referral link here - Decentralized, you know...

 

 

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Hi @FirstAeon

 

I cannot answer your questions since I have a similar case than you have with the results in Cointracking.info and have therefore stopped trading. I am wondering if it would help making the same question to Cointracking.info's support team. They may be able to confirm or review the example.

 

Also, would you recommend your tax advisor? I am struggling in finding one who could help me filling my report for 2017 using Elster or similar and for a fair price.

 

Best Regards

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On 7/12/2018, 11:52:18, FirstAeon said:

Day 1:

 

Portfolio : 0.22 BTC = value  Eur 1500
Buy 1 ETH for 0.11 BTC ==> Tax 25%  (184 Eur), value of trans. Eur 750
Buy 0.11 BTC for 1 ETH ==> Tax 25% (184 Eur), value of trans. Eur 750
Buy 1 ETH for 0.11 BTC ==> Tax 25%  (184 Eur), value of trans. Eur 750
Buy 0.11 BTC for 1 ETH ==> Tax 25% (184 Eur), value of trans. Eur 750
Buy 1 ETH for 0.11 BTC ==> Tax 25%  (184 Eur), value of trans. Eur 750
Buy 0.11 BTC for 1 ETH ==> Tax 25% (184 Eur), value of trans. Eur 750
...
...
this x 5.000 times
 
Day 2:
Portfolio:
0.22 BTC = value Eur 1500
Taxes = 5.000 x 2 x 184 Eur = 1.840.000 ???
Sum of transaction values (earnings) = 5.000 x 2 x 750 Eur 7.500.000 ??

 

 

 

 

@FirstAeon @RebelKoala If you've read the thread thoroughly, I don't think that's what the info in this thread has been suggesting at least. You're only taxed on the gains you make. e.g. say you bought 1 BTC on Thursday and use it to buy 20 ETH on Friday, you should look at the "Euro price" of the coin to decide whether you've made a gain. If on Thursday one BTC is worth 6000 EUR and on Friday it's 7000 EUR, you bought it with 6000 EUR and sold it in exchange for the worth of 7000 EUR (you then essentially used this 7000 EUR to buy the 20 ETH), thus you made a profit of 1000 EUR and will need to add this amount to your income. If on Friday one BTC is worth 5000 EUR, you didn't make any profit and don't need to pay any taxes.

 

Cointracking is just a third-party website and their focus might well not be on Germany, so it's very possible for them to make mistakes. For example maybe they only translated the interface but didn't actually study the German tax law.

 

Of course I'm also just a reader of this thread and there should be more qualified people to answer your questions. Why don't you contact Cointracking and point them to relevant tax laws and see what they say?

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On 12.7.2018, 23:52:18, FirstAeon said:

being almost all minute/day/hour trades they are all taxed 25%

Where do the 25% come from? I thought such day trading (speculation) is taxed with the personal income tax rate which can be up to 45%. 

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You should check the instructions for the relevant declaration forms to confirm exactly what is needed in your case (KAP for capital gains, SO for other sorts), but I always declare this sort of stuff as capital income and so it's taxed at 26.25% (with the solidarity tax 5% of gain as well).  I only run in Germany and it's set up in my acounts, automatically deducted etc at that rate.  

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22 hours ago, SZJX said:

 

@FirstAeon @RebelKoala If you've read the thread thoroughly, I don't think that's what the info in this thread has been suggesting at least. You're only taxed on the gains you make. e.g. say you bought 1 BTC on Thursday and use it to buy 20 ETH on Friday, you should look at the "Euro price" of the coin to decide whether you've made a gain. If on Thursday one BTC is worth 6000 EUR and on Friday it's 7000 EUR, you bought it with 6000 EUR and sold it in exchange for the worth of 7000 EUR (you then essentially used this 7000 EUR to buy the 20 ETH), thus you made a profit of 1000 EUR and will need to add this amount to your income. If on Friday one BTC is worth 5000 EUR, you didn't make any profit and don't need to pay any taxes.

 

Cointracking is just a third-party website and their focus might well not be on Germany, so it's very possible for them to make mistakes. For example maybe they only translated the interface but didn't actually study the German tax law.

 

Of course I'm also just a reader of this thread and there should be more qualified people to answer your questions. Why don't you contact Cointracking and point them to relevant tax laws and see what they say?

 

Ok I think I will ask Cointracking.info and let you know the outcomes, however I have still a doubt tax-wise about what happens when day-trading or using trading bots.

 

If somebody here has experience on that, please comment.

 

Thank you.

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On 15/7/2018, 10:43:26, RebelKoala said:

Hi @FirstAeon

 

I cannot answer your questions since I have a similar case than you have with the results in Cointracking.info and have therefore stopped trading. I am wondering if it would help making the same question to Cointracking.info's support team. They may be able to confirm or review the example.

 

Also, would you recommend your tax advisor? I am struggling in finding one who could help me filling my report for 2017 using Elster or similar and for a fair price.

 

Best Regards

Hello,

 

 

I will ask Cointracking.info and let you know what they say about it...Maybe there is a bug in their software because of the very high number of trades (around 50k), who knows...

 

I am sorry to know that you stopped trading. I also have stopped my bot until I have a clear view on the taxes (and until I do not implement backtesting because I was actually losing money :)).

 

For the tax advisor I am not sure I can recommend mine because he is VERY SLOW in replying to my questions and I am not sure is that much of an expert.

 

If you use the service https://www.ageras.de/ you can specify your requirements and the broker will try to find a match for you.

It is free and in my case they called me immediatly after I submitted my request.

 

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I have another doubt.

 

Given that I am at loss, am I exempt from speculation tax given that my gains are under Eur. 600 per year?

 

How can I prove that I lost money ?

 

Maybe the easiest way is to attach an excel per exchange / wallet and let the Finanzamt calculate...

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If you are at a loss in a tax category you don't pay any taxes in that category, correct. It can make sense to declare that loss anyways so that you may reduce the tax burden on gains in the same category you make next year (Verlustvortrag).

 

I don't think you can do much more than create an Excel table and provide the public wallet keys. If the numbers are plausible the tax office will probably accept it.

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On 7/16/2018, 1:20:48, FirstAeon said:

Hello,

 

 

I will ask Cointracking.info and let you know what they say about it...Maybe there is a bug in their software because of the very high number of trades (around 50k), who knows...

 

I am sorry to know that you stopped trading. I also have stopped my bot until I have a clear view on the taxes (and until I do not implement backtesting because I was actually losing money :)).

 

For the tax advisor I am not sure I can recommend mine because he is VERY SLOW in replying to my questions and I am not sure is that much of an expert.

 

If you use the service https://www.ageras.de/ you can specify your requirements and the broker will try to find a match for you.

It is free and in my case they called me immediatly after I submitted my request.

 

 

Hi,

 

Thanks for your message and help. Very appreciated!

 

Looking forward to hearing the reply from Cointracking.info.

 

Best Regards

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Hi @jbabel

Thanks for clearing. I started to sell this year. Did not hold some for 365 days. I will do for some holdings. Seems, I should report the coins I sold with some euro profits. 

Cheers

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If a German tax resident transferred their cryptocurrencies into a trust (perhaps a foreign trust), I assume that would constitute a sale and potential cgt event? 

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Will this impact German taxation of crypto in the next 12 months: 

 

"The OECD official commented ahead of attending the the EU Economic and Financial Affairs Council meetings on Sept. 7 and Sept. 8 (2018) in Vienna. The group of finance ministers has taxation of the digital economy high on its agenda, he said. Rewriting tax rules for the burgeoning digital economy is a top priority for the OECD and the European Union. The OECD in March released a report on the issue, flagging the accompanying hurdles. The report followed an EU proposal to levy a 3 percent tax on large digital companies"

 

https://www.bna.com/oecd-weighs-crypto-n73014482374/

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Does anyone know if there is a case when exit tax apply to crypto (or specifically earning from crypto on behalf of natural person)? For example:

1. Having 50 BTC buried for some years and deciding to move to Germany

2. Getting a job and a flat

3. Converting whole amount to EUR tax free

4. Moving with EUR in the pocket back to whatever land in the next fiscal year

Is personal wealth earned this way subject to the exit tax?

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Here is a tricky one the relates to MAKERDAO laons:

 

Does anyone know the German tax implications of opening up a CDP using MakerDAO and using your Eth as collateral to get a "loan" in DAI?

 

Essentially you convert your ETH to PETH to collateralize the loan which should constitute a disposal under German tax law, but you never actually sell your ETH and remain fully exposed to its gains and losses unless the contract is closed and liquidated due to insufficient collateral (ETH price crashes).

 

Discussions continue on reddit/forums as still no clarity in the US. Germany may be different. I tend to think its not a CGT event but I'm no expert.

 

https://www.reddit.com/r/MakerDAO/comments/888una/poll_does_creating_a_cdp_cause_a_taxable_event_us/ 
 

 

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Hello,

I have a question regarding purchasing tokens from an ico using btc. Considering the btc was directly sent to an ico and no secondary exchange was used how is this event taxed? I read that Germany will not tax cryptocurrency when it is used for purchasing. I purchased tokens that are classified and patented as micro software licenses. Just want to know if this is a taxable event. say my btc I used was worth 1k when I purchased it and than when I purchased the ico token btc was valued at 1500. Is 500 taxable or is this a different situation considering the purchase of a software license and no use of secondary exchange was used. thanks

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14 hours ago, cryptofun said:

classified and patented as micro software licenses

"Classified" by whom? The German Finanzamt? If not, then good luck. ;)

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I refresh this topic in order to understand if something changed for the taxation of coin earned with Staking.

As far I understood this is subjected to normal income tax. If today I earn 1 coin from Staking, and the today value of this 1 coin is, for example, 500 euro, then for tax purpose sake I have to consider 300 euro. Let say I will pay 200 euro of income taxes when I will do my steuererklarung.

But if at the end of the year the coin has lost value, for example it has reached 100 euro I will be in a situation where I have to pay 200 euro of taxes over something that i can sell just for 100 euro.

Basically staking can be dangerous and bring you to spendin taxes more money of what you could have :) 

 

DO you know if something has changed since this discussion in 2018 ? I really hope so..

 

thanks

 

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Hello,

I am very interested in understanding also, if some changes have occurred in the current legislation.

My case very simple:

 

1) Portfolio 1: I purchased 2 times some portion of BTC in 2017, and ETH and never touched (Around 600 euro). If I want to re-sell now in EURO do I pay any taxes? The value is doubled in these 3 years (around 1200 euro)

 

2) Portfolio 2: I purchased an alt coin (BKN) in 2018 and it went very bad...so I converted in BTC 2 weeks ago. If I sell the BTC do I have to pay taxes? In this case the movement was this:

1000 EURO -> 60.000 BKN (2018)

60.000 BKN ->  0.00894457 Bitcoin (BTC) 

If I sell it now I will get "89.58 Euro "€" (EUR) "

 

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