Taxation on crypto currencies - please read before asking

241 posts in this topic

First off, up till now, in Germany (source) cryptotoken are treated the same way cryptocurrency is.

This may change in the future.

 

42 minutes ago, karmakoma said:

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

 

You have a "purchase" price in €. When you sell you have a "selling" price. The difference between selling and purchase price is your profit, which will be taxable if you held them for a year or less.

 

45 minutes ago, karmakoma said:

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

 

Well, you have a "purchase" price, and you have different purchase dates. 

Taxation will only happen once you "sell".

What is your problem?

 

47 minutes ago, karmakoma said:

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??

 

Remember the basic rule: every transaction is seen as having been performed in €, i.e. you always go back to the basic, reference currency €.

 

You pay for a token with Bitcoin you already own.

So you have 2 transactions, the first is that you sell Bitcoin for €, the second that you buy token by paying for them with €.

 

Transaction 1:

You "sell" Bitcoin, which are worth a€ (= selling price for Bitcoin) on date ??? (= selling date for Bitcoin).

If that selling date is one year or less after the date you bought these Bitcoin, you now have taxable profit for the Bitcoin transaction. 

 

Transaction 2:

You then buy token at price a€ (= purchase price for token) on date ??? (= purchase date for token).

If you sell these token within a year of the purchase date, you generate a taxable profit (if the price of the token has risen in the meantime).

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52 minutes ago, karmakoma said:

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

 

Can't you get some "official" documents, i.e. something like Kontoauszüge from the exchanges?

If not, screenshots are better than nothing, yes.

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PandaMunich.  thank you for all your help answering questions. I have another

   

    -Is it possible for a US resident to have to pay double taxes on crypto when already paying a higher tax in Germany? From what I understand is that since Germany has a higher tax rate that the US will not be able to tax you anymore because of the double taxation agreement. Just not sure if there is changes over a certain amount

 

- I know this may be a silly question.  If one bought an ICO and sold 20% a month later and held the other 80% for over a year would the 80% be affected by my selling of the

20%. I am thinking about the 80% being tax free. Just dont know if there is anything about purchasing an ico and than selling a portion early would disqualify the rest of the stack since it was in the same wallet.  just tell me im being silly.

 

thank you

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5 minutes ago, cryptofun said:

-Is it possible for a US resident to have to pay double taxes on crypto when already paying a higher tax in Germany? From what I understand is that since Germany has a higher tax rate that the US will not be able to tax you anymore because of the double taxation agreement. Just not sure if there is changes over a certain amount

 

Sorry, but I have no idea about US taxation.

Paging @Straightpoop for an answer :)

 

6 minutes ago, cryptofun said:

I know this may be a silly question.  If one bought an ICO and sold 20% a month later and held the other 80% for over a year would the 80% be affected by my selling of the

20%. I am thinking about the 80% being tax free. Just dont know if there is anything about purchasing an ico and than selling a portion early would disqualify the rest of the stack since it was in the same wallet.

 

No, don't worry.

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Stupid question: when we say "year", we mean fiscal year?

 

Ex. I buy 1btc in 2017 and I sell it in the same year and I earn 599 euro (so under 600 :P )

 

Then in January 2018 I buy again 1 Btc and I sell it in December 2018 and I earn 601 euro.

 

In this case in 2019 what might be declared?? 1200 earnings or only "601" done in 2018??

 

I beg pardon if I do very basic question I am very far from being account :/

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In Germany the calendar year is the fiscal year.

 

1 hour ago, karmakoma said:

Ex. I buy 1btc in 2017 and I sell it in the same year and I earn 599 euro (so under 600 :P )

 

Nothing to declare in your 2017 tax return.

 

1 hour ago, karmakoma said:

Then in January 2018 I buy again 1 Btc and I sell it in December 2018 and I earn 601 euro.

 

You have to declare the 601€ profit in Anlage SO of your 2018 tax return.

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25 minutes ago, PandaMunich said:

In Germany the calendar year is the fiscal year.

 

 

Nothing to declare in your 2017 tax return.

 

 

You have to declare the 601€ profit in Anlage SO of your 2018 tax return.

 

All clear...and much appreciated!!!!

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Hello, and thank you for the help you are providing.

I have read the whole post and I have some doubts that I hope you can help me with.


I am from Spain, and in 2017 I was working and living there for more than half of the year so I pay my taxes for that year there. In august I have moved to Germany with an international agreement from my company and I plan to stay here for the mid/long term, so I will pay my taxes here for 2018 and probably 2019.

In 2017 I have bought some ethereum, lets say 1, and I have been trading them with altcoins and now I have 5. I have never sold them for FIAT and most of the time they have been other altcoins. The profit obtained is more than 600€.

 

Based on the information you have provided, I believe I have these options:

-Wait one year, since the first purchase of ethereum, then that initial 1 eth is tax free. Is this a fiscal year, or 365 days?

-Convert them to FIAT during this year. I would pay the same percentage that is applied to my 'real' work's income: about 43%.

-Sell the number of ethereum I had by the end of 2017 and pay the taxes for them in my 2017 declaration, that is to be done in Spain, which has between a 19-23% taxation. I am not sure if this option is valid, because I didn't sell to FIAT, so I assume that this does not count as 2017's capital gain.

 

Thank you again for your time.

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2 hours ago, PablosOne said:

I am from Spain, and in 2017 I was working and living there for more than half of the year so I pay my taxes for that year there. In august I have moved to Germany with an international agreement from my company and I plan to stay here for the mid/long term, so I will pay my taxes here for 2018 and probably 2019.

 

So you have been posted to Germany and still have a Spanish employment contract and get paid by your Spanish employer, and not via a German permanent establishment (= Betriebsstätte) of your Spanish employer?

 

Sorry, even in that case you no longer fall under the exception in article 14 (2) of the double taxation agreement (DTA) between Germany and Spain, which would only allow you to pay your income tax to Spain instead of Germany after having moved to Germany if your stay in Germany was limited from the start to maximum 183 days.

You run foul of the first condition, condition a), which says that these 183 days are counted within a revolving 12 month period, not during the calendar year like you assume.

 

You moved to Germany in August 2017, and you intend to stay here until 2019, so within the revolving 12 month period of August 2017 to July 2018, you will spend more than 183 days in Germany

--> this exception does not apply to you, you have to pay German income tax on your worldwide income right from the date you moved to Germany, back in August 2017.

 

Since you are on a Spanish employment contract, you have to do a German income tax return for 2017 before 31. May 2018, in which you declare your Spanish employee income from August to 31. December 2017 in Anlage N-AUS, and the profit of 600€ or more from selling cryptocurrency in Anlage SO, for details please see the TT Elster wiki: https://www.toytowngermany.com/wiki/ELSTER

You also have to declare all the worldwide income you had in 2017 before moving to Germany in line 4 of the Anlage WA-ESt (it will not be taxed again by Germany, but it will raise your German tax rate on your other income, this is called Progressionsvorbehalt):

 

2 hours ago, PablosOne said:

In 2017 I have bought some ethereum, lets say 1, and I have been trading them with altcoins and now I have 5.

 

Please go back and re-read this entire thread - any trade you did between cryptocurrencies generates a taxable profit, not just when you sell a cryptocurrency and get € in return.

And with each new trade, the 1 year period starts running anew.

 

2 hours ago, PablosOne said:

-Wait one year, since the first purchase of ethereum, then that initial 1 eth is tax free. Is this a fiscal year, or 365 days?

 

Not if you traded that initial ethereum for another cryptocurrency, in that case the 1 year period (= 365 days) started running anew with each new trade.

Only if you had left that initial ethereum "untouched", could you sell it after 365 days and not have to pay any income tax on the profit you would make,

 

2 hours ago, PablosOne said:

-Convert them to FIAT during this year. I would pay the same percentage that is applied to my 'real' work's income: about 43%.

 

If 365 day period isn't yet up, yes, you would pay your personal income tax rate, though that won't be more than 42%, unless your yearly income is above 260,533€ ;).

From 54,950€, the marginal income tax rate (see blue line) is 42% (if you're unmarried):

5a535ff9b9a70_ekstDiagram(2).gif.ad5a818

 

2 hours ago, PablosOne said:

-Sell the number of ethereum I had by the end of 2017

 

I don't really know how you would manage to do a trade in 2017 when we now have 2018.

Well, not unless you can send that trade order at faster than lightspeed velocity, in order to have it travel back in time...

 

If you mean that you actually did do a trade between cryptocurrencies at the end of 2017, then, since less than 365 days have passed since you "bought" that cryptocurrency in the last swap you did, you have to declare the profit from that trade in Anlage SO in your German tax return if your total profit from trading cryptocurrency in 2017 wasn't less than 600€.

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Thank you for your answer :), almost everything is clear now. Just one last thing:

If I sell a part of my monthly profits to USDT (Tether- crypto) and store them in a cold wallet for a year. Would they be tax excent? Or would I have to still pay for the profits I have obtained during  the trading for obtaining those USDT? i.e for clarity:

-Start with 1 eth.

-At the end of the month i have 3.

-I sell 1 of those 3 eth to usdt for 1000 USDT.

-I store those 1000 USDT in a cold wallet and leave them untouched for a year.

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6 minutes ago, PablosOne said:

-At the end of the month i have 3.

 

How does that happen?

Where do they come from?

 

6 minutes ago, PablosOne said:

-I sell 1 of those 3 eth to usdt for 1000 USDT.

 

This is a taxable trade, and generates either a profit (or loss, but then you wouldn't have done the trade...) in the reference currency €.

 

7 minutes ago, PablosOne said:

-I store those 1000 USDT in a cold wallet and leave them untouched for a year.

 

If you then sell these 1000 USDT, the profit you make is free of income tax.

But take care that collect proof (account slips, screen shots, certifications, ...) along the way, both of the "purchase" price and date (= when you exchanged the 1 ETH into 1000 USDT) and of the "selling" price and date (1000 USDT into ???). You will need that proof so convince the Finanzamt that you really did leave these 1000 USDT "untouched" for a year.

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2 minutes ago, PandaMunich said:

 

How does that happen?

Where do they come from?

 

Same thing as in the other case: I trade them with other coins.

 

This is a taxable trade, and generates either a profit (or loss, but then you wouldn't have done the trade...) in the reference currency €.

 

 

If you then sell these 1000 USDT, the profit you make is free of income tax.

But take care that collect proof (account slips, screen shots, certifications, ...) along the way, both of the "purchase" price and date (= when you exchanged the 1 ETH into 1000 USDT) and of the "selling" price and date (1000 USDT into ???). You will need that proof so convince the Finanzamt that you really did leave these 1000 USDT "untouched" for a year.

 

So what I deduce from this is that I would pay taxes for all the trades done for increasing from 1 eth to 3, and for the trade of the 1 eth to USDT. I wouldn't pay taxes for the profit I would make in a year selling those 1000 USDT for EUR. Correct?

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19 minutes ago, PablosOne said:

So what I deduce from this is that I would pay taxes for all the trades done for increasing from 1 eth to 3, and for the trade of the 1 eth to USDT. I wouldn't pay taxes for the profit I would make in a year selling those 1000 USDT for EUR. Correct?

 

Correct.

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I find this taxation really inappropiate. Imagine an scenario in which you invested 1000€ in bitcoin. After a year of trading you have 50k€ worth in bitcoin. By the end of the year you sell in the exchange the equivalent to 10k€ and move it to your bank account and keep the rest in the online exchange for trading. In 2019 you would have to pay around 21k€ in taxes for the gains you have obtained. Then there is a price drop in btc and those 40k you had in btc in the exchange are worth nothing. At the end you have lost 11k€ for what you have payed in taxes. That does not make sense at all, when there is such a high risk. I think that the 42% should be applied to the amounts you move to your FIAT account and not to what you have in your trading account.

It just seems ludicrous, and if thats correct I will seriously consider returning back to Spain before expected, because there you only pay for what you transfer to your FIAT account.

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2 hours ago, PablosOne said:

I find this taxation really inappropriate. Imagine an scenario in which you invested 1000€ in bitcoin. After a year of trading you have 50k€ worth in bitcoin. By the end of the year you sell in the exchange the equivalent to 10k€ and move it to your bank account and keep the rest in the online exchange for trading. In 2019 you would have to pay around 21k€ in taxes for the gains you have obtained. Then there is a price drop in btc and those 40k you had in btc in the exchange are worth nothing. At the end you have lost 11k€ for what you have payed in taxes.

 

You forget about the fact that losses that are incurred within the 1 year period of the "purchase" date, are carried backward to the previous year (or forward to the following years, should you opt for that instead), according to §23 Absatz 3 Satz 8 EStG:

8Die Verluste mindern jedoch nach Maßgabe des § 10d die Einkünfte, die der Steuerpflichtige in dem unmittelbar vorangegangenen Veranlagungszeitraum oder in den folgenden Veranlagungszeiträumen aus privaten Veräußerungsgeschäften nach Absatz 1 erzielt hat oder erzielt; § 10d Absatz 4 gilt entsprechend.

 

If you sell within a year of "purchasing" that rest of your Bitcoin, then the 40k€ loss you incur in 2019 by selling the rest of your Bitcoin would be either:

  • carried backward (= default, this happens automatically) to the year 2018, i.e. your 2018 profit of 49k€ (remember, you initially bought them for 1k€) would be lowered by your 2019 loss of 40k€, i.e. from the 0.42*49k€ = 20,580€ in income tax you paid on them in 2018, you would get back 0.42*40k€ = 16,800€, i.e. you would end up paying only 3,780€ (= [49k€ - 40k€] * 0.42 = 9k€ * 0.42) in income tax, or
  • carried forward (if you explicitly choose so, i.e. you stop the Finanzamt from carrying it backward), i.e. it will be set against any profits from private sales that you will have in future years, and you will only start paying income tax again on such profits after the old 40k€ loss has been "used up".

 

Anyway, a wise investor will always sell investments in between and realise the profit:

When the end of a 1 year period approaches and you see that the price is going down, you're free to realise that loss (so that you can use it in your tax return), either by:

  • exchanging them into another cryptocurrency, or 
  • exchanging them into € and to then immediately rebuy them (should you still feel like speculating)

in order to restart the 1 year period.

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I was speaking to one german guy that's been into this longer than I have and he said that he converted a bunch of coins to a coin that was listed on anycoindirect. He held it there for 366 days and then sold it on their platform into Euro. He then made a screenshot of his wallet that had proof of the transaction and sent that off with his Steuerbescheinigung. Can anyone confirm that this method is legit?

 

 

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3 minutes ago, KaiserWilly said:

I was speaking to one german guy that's been into this longer than I have and he said that he converted a bunch of coins to a coin that was listed on anycoindirect. He held it there for 366 days and then sold it on their platform into Euro. He then made a screenshot of his wallet that had proof of the transaction and sent that off with his Steuerbescheinigung. Can anyone confirm that this method is legit?

Frankly speaking as I have understood well if sell off everything after 366 days from the last transaction, you do not pay any taxes.

let say that today u bought the last crypto, so starting from tomorrow, just count 366 days and on the 9th of next january sell everything.

 

I will use btway a fiscal advisor in order to avoid "pain in the ass"...:)

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2 minutes ago, karmakoma said:

Frankly speaking as I have understood well if sell off everything after 366 days from the last transaction, you do not pay any taxes.

let say that today u bought the last crypto, so starting from tomorrow, just count 366 days and on the 9th of next january sell everything.

 

I will use btway a fiscal advisor in order to avoid "pain in the ass"...:)

 

Yeah that's what he said. He even spoke to his financial advisor before doing it. According to him it was perfectly legal. Would like to know if anyone on here has also used this method. Not necessarily through anycoindirect. 

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11 minutes ago, KaiserWilly said:

 

Yeah that's what he said. He even spoke to his financial advisor before doing it. According to him it was perfectly legal. Would like to know if anyone on here has also used this method. Not necessarily through anycoindirect. 

 

I think it doens't matter if it is a wallet or an exchange...simple u have to sell everything after the last transaction activity, if everything said up to now is right. I know this feeling...it is very complicated to invest in ICO and this was my idea laso: collecting the transaction in case of request of evidence, but just submit the last in, and first out transaction, which might be over 365days +1.

 

I have serious doubts by the way that there is "skilled" people in the office about this topic...it is a mess for the consumer also!!!

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