Taxation on crypto currencies - please read before asking

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Hi @PandaMunich, as the crypto landscape is developing rapidly, I now have some further questions. I'd be glad if you could help answer them as well :)

 

1. Some cryptocurrencies aren't traded in EUR on any exchange. They can only be converted to BTC/ETH etc. If I trade such pairs (i.e. both currencies being traded are not tradable against EUR), should I in turn use the equivalent amount of BTC/ETH as the reference, and then convert such amount to EUR?

 

2. There are multiple exchanges that offer EUR trading against cryptos and their prices vary. Can I just choose freely any one of the big exchanges as the reference price. If so, should that exchange be fixed throughout the whole tax declaration form then?

 

3. If I sold cryptos at a foreign exchange for a foreign fiat currency, I should calculate the profits by converting that foreign fiat currency into its EUR equivalent, correct? (I suppose the "use crypto price in EUR as the reference price" thing only applies to crypto-crypto trades.) What FX reference price should I use in this case then... Again any FX exchange, or is there a designated exchange rate provider in this case?

 

4. A question somewhat related to 3 though not necessarily to crypto. Say I obtained another currency by selling my cryptos in a foreign exchange. I want this money back in Germany as EUR some time later. One way is to buy EUR and wire the EUR from my bank account in that foreign country to my German bank account. However, that is subject to certain fees and perhaps restrictions. Another way might be to find somebody that has spare EUR but wants my currency, and we arrange to do a swap at an agreed price. I transfer my money to his bank account in the foreign country, and he transfers EUR to my bank account. Would this action violate any laws/regulations? If not, how would this event be considered from a tax perspective? Did we just perform a trade? If so, since the EUR I gained should be equal to the foreign currency I lost, does that mean I don't have any tax to declare. Or would it be considered as a "gift" from that other person to me and thus be subject to the EUR 20,000 tax-exempt limit?

 

Thank you!

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17 hours ago, PandaMunich said:

 

Yes, every time you "change" something within the 1 year holding period, you have to go back to the reference currency € and declare that profit.

And with every "change" the 1 year minimum holding period starts anew.

 

 

No, you could only offset the profit with a loss, i.e. if you had sold a crypto currency for less than you bought it for.

 

 

Yes.

And if you gift him the money, neither would he owe UK income tax - after all, it's just a gift.

 

 

Well, officially yes, since if one of your parents die within 10 years, the amount they already gifted you now would count towards the tax-free amount for inheritance tax of 400,000€ (per parent).

 

Example: Your mum gave you 15,000€ on 1.10.2017.

If she dies by 30.9.2027, your tax-free amount for inheritance tax is only 385,000€ (= 400,000€ - 15,000€)

If she dies after 1.10.2027,  your tax-free amount for inheritance tax is 400,000€

 

So ideally the Finanzamt would like to keep an account of all your gifts.

 

*************************************

 

Inofficially: nobody cares as long as you correctly declare that old gift in the inheritance tax return should a parent of yours die within the next 10 years.

 

Thank you!!

 

Any feeling on whether these regulations are likely to change in the next year? And, if so, I assume there would be a grace period of at least a year?

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3 hours ago, NathanCPFCD said:

Any feeling on whether these regulations are likely to change in the next year? And, if so, I assume there would be a grace period of at least a year?

 

Assuming anything would be a bad idea - they have a bad track record, i.e. they like introducing retroactive legislation.

 

For example, another category covered by §23 EStG is profit from selling real estate. In 1999, they retroactively prolonged the minimum period you have to keep a house/flat so as not to have income tax on the profit from 2 years to 10 years: https://www.gevestor.de/details/damit-ihr-verkaufserloes-steuerfrei-bleibt-so-vermeiden-sie-spekulationsgewinne-22585.html

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12 hours ago, SZJX said:

1. Some cryptocurrencies aren't traded in EUR on any exchange. They can only be converted to BTC/ETH etc. If I trade such pairs (i.e. both currencies being traded are not tradable against EUR), should I in turn use the equivalent amount of BTC/ETH as the reference, and then convert such amount to EUR?

 

Please read:

 

12 hours ago, SZJX said:

2. There are multiple exchanges that offer EUR trading against cryptos and their prices vary. Can I just choose freely any one of the big exchanges as the reference price. If so, should that exchange be fixed throughout the whole tax declaration form then?

 

I would choose the price at the exchange that you actually use.

 

On 12/8/2017, 6:14:14, PandaMunich said:

The BMF will at some moment in the future issue a letter with instructions on how to treat these "new" investment types, until then you just have to be transparent and consistent in the way you declare it, and the Finanzamt will be ok with it.

 

 

12 hours ago, SZJX said:

3. If I sold cryptos at a foreign exchange for a foreign fiat currency, I should calculate the profits by converting that foreign fiat currency into its EUR equivalent, correct? (I suppose the "use crypto price in EUR as the reference price" thing only applies to crypto-crypto trades.) What FX reference price should I use in this case then... Again any FX exchange, or is there a designated exchange rate provider in this case?

 

This further complicates things.

Crypto currency has been put under §23 EStG exactly because it is considered a foreign currency, so now you introduce a further foreign currency (this time one that exists in real life) transaction into the mix.

 

If that foreign currency is listed in here, use this monthly exchange rate to the €: http://www.bundesfinanzministerium.de/Web/DE/Themen/Steuern/Steuerarten/Umsatzsteuer/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html

 

12 hours ago, SZJX said:

4. A question somewhat related to 3 though not necessarily to crypto. Say I obtained another currency by selling my cryptos in a foreign exchange. I want this money back in Germany as EUR some time later. One way is to buy EUR and wire the EUR from my bank account in that foreign country to my German bank account. However, that is subject to certain fees and perhaps restrictions. Another way might be to find somebody that has spare EUR but wants my currency, and we arrange to do a swap at an agreed price. I transfer my money to his bank account in the foreign country, and he transfers EUR to my bank account. Would this action violate any laws/regulations? If not, how would this event be considered from a tax perspective? Did we just perform a trade?

 

Yes, you sold that foreign currency and got a certain amount of € in return - you now have a sale of foreign currency and a profit, if during the time you held that foreign currency which was less than 1 year, its exchange rate to the € rose (otherwise you have a loss):

  1. start time: you "bought" that foreign currency by selling cryptocurrency
  2. end time: you "sold" that foreign currency to a private person and got €
12 hours ago, SZJX said:

If so, since the EUR I gained should be equal to the foreign currency I lost, does that mean I don't have any tax to declare. Or would it be considered as a "gift" from that other person to me and thus be subject to the EUR 20,000 tax-exempt limit?

 

No and no.

 

Instead, go back to looking at it through the lens of "purchases" and "sales", and you will get it right.

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Thanks for spending your time answering all the questions @PandaMunich.

 

Most of my bitcoins were acquired in 2012-2013, when I was not living in Germany yet. Only proof I currently hold of my first purchases is a Facebook conversation with a seller, where I am asked to complete a buy trade of 18 BTC on bitcoinary.com, platform which does not exist anymore and where other buys were done with the same seller later. Being a paranoid guy in terms of security, the coins were moved every few months to new cold wallet addresses. I did not keep any of the old private keys, so can't sign messages to verify I owned the addresses where the coins have been stored. 

 

My 2 current biggest bags in terms of € value were bought in Cryptsy (now gone). Same procedure of moving coins to new cold wallet addresses every few months has been applied to this bag, but never converted to cash or other crypto using this.

 

I have proof of a few Bitcoins I bought around end of 2016 - beginning of 2017 (already living in Germany) through Bitstamp and Coinbase, and all my trades done in Poloniex and Bittrex in the last 2 years. But this represents just a min. amount of my current portfolio.

 

I did not convert to fiat a single coin yet, but starting to consider it. Now I'm realising not having kept proof of my early purchases or cryptographic proof of ownership of my cold wallet addresses has not been the most wise decision if I decide to cash out some of my early coins, but sadly can't go back in time to fix this. Last time I moved my coins to a new cold wallet address was 6 months ago.

 

Is considering a 0€ buy price for those coins (what is not too far from reality) and paying taxes on the whole amount a solution for my situation? 

 

Thanks.

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On 6/19/2017, 8:53:41, 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

 

This obviously applied if the capital gain is over 600 euro...Plus this is not clear for me:

 

profit (= [selling price in €] minus [purchase price in €]) -> It means that we need to calculate the value of the currency in euro at that specific moment...it is a bit crazy...

 

 

 

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Can Finanzeampt consider me a Gewerbe if I do day trades and invest my own private money into ICOS? My wife who is German keeps telling me that they may consider me a Gewerbe since I have no other employement and that the one year hold on a crypto may still be taxed? Please tell me this is wrong. thank you

 

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Thanks for the answers!

 

9 hours ago, PandaMunich said:

 

Please read:

 

I don't think the situation I mentioned (i.e. both cryptocurrencies involved don't have any listed price against EUR on any exchange) is covered by that response though. In that response, both BTC and ETH are extensively traded against EUR so there wouldn't be a problem. My question is if say I trade e.g. LSK against EOS, how should I calculate the gains. Of course, currently you don't really do that on an exchange. But if I do it against another person (OTC), should I look up the price of EOS/BTC, and as the next step, convert that BTC amount into EUR?

 

9 hours ago, PandaMunich said:

I would choose the price at the exchange that you actually use.

 

Fair enough. Though if I do it on a foreign exchange, I guess I'll have to convert that price in the foreign fiat into the equivalent price in EUR then.

 

 

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13 minutes ago, SZJX said:

should I look up the price of EOS/BTC, and as the next step, convert that BTC amount into EUR?

 

Until they publish a BMF letter telling you exactly what to do, just do what seems logical to do, be transparent in what you do and the Finanzamt will accept that.

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1 hour ago, dhayes said:

Thanks for spending your time answering all the questions @PandaMunich.

 

Most of my bitcoins were acquired in 2012-2013, when I was not living in Germany yet. Only proof I currently hold of my first purchases is a Facebook conversation with a seller, where I am asked to complete a buy trade of 18 BTC on bitcoinary.com, platform which does not exist anymore and where other buys were done with the same seller later. Being a paranoid guy in terms of security, the coins were moved every few months to new cold wallet addresses. I did not keep any of the old private keys, so can't sign messages to verify I owned the addresses where the coins have been stored. 

 

My 2 current biggest bags in terms of € value were bought in Cryptsy (now gone). Same procedure of moving coins to new cold wallet addresses every few months has been applied to this bag, but never converted to cash or other crypto using this.

 

I have proof of a few Bitcoins I bought around end of 2016 - beginning of 2017 (already living in Germany) through Bitstamp and Coinbase, and all my trades done in Poloniex and Bittrex in the last 2 years. But this represents just a min. amount of my current portfolio.

 

I did not convert to fiat a single coin yet, but starting to consider it. Now I'm realising not having kept proof of my early purchases or cryptographic proof of ownership of my cold wallet addresses has not been the most wise decision if I decide to cash out some of my early coins, but sadly can't go back in time to fix this. Last time I moved my coins to a new cold wallet address was 6 months ago.

 

Is considering a 0€ buy price for those coins (what is not too far from reality) and paying taxes on the whole amount a solution for my situation? 

 

If you can scrap up some proof that you bought them more than a year ago, the profit is tax-free.

So go look again for proof.

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1 hour ago, karmakoma said:

It means that we need to calculate the value of the currency in euro at that specific moment.

 

Yes. Welcome to keeping exact accounts ;)

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1 hour ago, cryptofun said:

Can Finanzeampt consider me a Gewerbe if I do day trades and invest my own private money into ICOS? My wife who is German keeps telling me that they may consider me a Gewerbe since I have no other employement and that the one year hold on a crypto may still be taxed? Please tell me this is wrong. thank you

 

She's wrong, what you're doing is simple private Vermögensverwaltung.

Tell her to read this: http://www.maluck-steuerberatung.de/steuerberater_aerzteberatung_gruendungsberatung/service/steuern_und_sozialversicherung/gewerblichkeit_oder_private_verm%C3%B6gensverwaltung/index.html

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Thanks @PandaMunich.

 

Only proof I have of those purchases is a Facebook message. No proof of payment (was a p2p trade, paid in cash, total amount was under 200€ for sure by that time...). I'd be surprised if that's enough proof for the Finanzamt.

 

My question is how Finanzamt would react if I can't proof purchase event. Would they accept a 0€ price?

 

I don't mind paying the corresponding taxes, profit is being massive. 

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2 minutes ago, dhayes said:

Only proof I have of those purchases is a Facebook message. No proof of payment (was a p2p trade, paid in cash, total amount was under 200€ for sure by that time...). I'd be surprised if that's enough proof for the Finanzamt.

 

 

It's better than nothing. 

You could try it with that first.

 

4 minutes ago, dhayes said:

My question is how Finanzamt would react if I can't proof purchase event. Would they accept a 0€ price?

 

Why would you declare a 0€ price, when the lowest price within the last year period, i.e. starting with 4. January 2017 was 1,066.57351€?

So worst case the profit would be (selling price now - price 364 days ago).

 

source: http://www.xe.com/de/currencycharts/?from=XBT&to=EUR&view=1Y

5a4d522a3f4c7_Screenshot2018-01-03at22.5

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Tax authorities have no grip or whatsoever on the crypto market. I'm sure they don't like it at all.  If you don't declare it, then you don't. Your name and address are not attached to your key and electronic wallet. It's all very anonymous. Shrewd cryptomaniacs don't pay taxes.

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2 hours ago, PandaMunich said:

 

Why would you declare a 0€ price, when the lowest price within the last year period, i.e. starting with 4. January 2017 was 1,066.57351€?

 

So worst case the profit would be (selling price now - price 364 days ago).

 

 

What's the reasoning behind using a 2017 buy price for a 2012 trade?

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7 hours ago, dhayes said:

What's the reasoning behind using a 2017 buy price for a 2012 trade?

 

Because only profit from currency held for a year or less is taxable!

 

We now have 4. January 2018, so the profit would only be taxable if you bought the currency on 4. January 2017 or later.

And the exchange rate back on 4. January 2017 was 1,066.57351 €/Bitcoin and this was the lowest within the past year.

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Hello Guys..  I am approaching an ICO...so here the question:

 

1) token are sold at a specific rate in BTC and Euro -> how is it calculated the taxation in this case once sold??

 

2) they distribute the tokes among the investor every month (Parking) -> how do I calculate the taxation?

 

3) in case I buy token in BTC and then I sell in Euro and I earn euro but based in btc exchange I generate minus (like for and ETF)...how does it work the taxation??

 

 

It is becoming complicated And interesting? This technology is very disruptive and I see governments having fear in progress :)

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On 3/1/2018, 22:47:14, PandaMunich said:

 

Yes. Welcome to keeping exact accounts ;)

I am doing with screenshot and Excel but...will be enough?? :)

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