Crypto Tax Legislation & Law in France

The Finance Act for 2019 introduced a specific provision in the French tax code (article 150 VH bis) dealing with the taxation of gains derived by individuals (French tax residents) from the casual trading of crypto-assets. The Finance Act for 2022 introduced a specific provision in the French tax code (article 92, 2. 1° bis) which particularly specifies the tax regime applicable to professional activities. Additionally, the French tax authorities issued guidelines on the taxation of gains derived by individuals.

The exchange of crypto-assets for FIAT currencies constitutes a taxable event under French tax law, even if these currencies remain housed on a platform.

Occasional gains are taxed according to a specific capital gains tax regime. An exemption applies when, during a year, the sum of the transfer prices on those assets is less than EUR 305 per household. Otherwise, a flat rate of 30% applies (12.8% income tax and 17.2% social security contributions on income from personal assets), but only on the net capital gain from casual operations (i.e. gains minus losses on digital assets occurred the same year). Individuals can also opt for the progressive scale of income tax on this net capital gain (0%-45% income tax rate, plus 17.2% social security contributions on income from personal assets).

NB: the net capital gain is equal to the difference between (on the one hand) the sale price and (on the other hand) the product of the total acquisition price of the entire portfolio of digital assets and the quotient of the sale price over the total market value of the portfolio at the date of sale.

The exchange of crypto-assets for goods/services constitutes a taxable event under French tax law, under the same condition as exchange for FIAT currencies (see the answer to Q2 above). As regards occasional gains, the exchange of crypto-assets for other crypto-assets (without cash payment) is not taxable (but in case of subsequent sale, the historical cost price of the crypto-asset exchanged must be taken into account when calculating the total acquisition price of the portfolio).

Since 1 January 2023 professional income is taxed according to the rules of non-commercial profits (previously the rules of industrial and commercial profits applied): a progressive scale of income tax on the net capital gain (0%-45% income tax rate), plus social security contributions on professional activities.

Gains should be treated as professional if the activity in question is carried out under conditions similar to those characterising a professional activity. The distinction between occasional/professional gains is based on a case-by-case analysis which relies on facts and circumstances. Distinction is generally made based more on qualitative (rather than quantitative) criteria, such as use of professional equipment, sophistication of transactions, proportion of income/gain on total income and earnings of the taxpayer.

1. gains of crypto-assets: capital losses may be offset against gains of the same nature on other crypto-assets derived in the same tax year
2. other income from other activities with crypto-assets or if the losses result from occasional gains: no (see above). Mining is not taxed in the same category as capital gains and losses, and other events such as staking, pooling etc are not addressed by law or guidance; indeed, capital losses resulting from occasional gains can’t be offset on such income
3. if the losses result from occasional gains, no (see above).

Losses cannot be carried forward, see above.

Regarding the taxation of individuals: uncertainty persists around the treatment of NFTs because of a lack of specific tax provisions or any guidance governing the legal qualification of NFTs. For occasional sales by individuals, applicable taxation should be significantly different depending on the retained qualification of the NFT:

• digital asset (such as crypto-currency): capital gain taxed at 30% or, under option, taxed at the progressive scale of income tax (0%-45%)
• movable intangible assets: capital gain taxed at 36.2% (including 19% personal income tax and 17.2% social security contribution)
• work of art: flat-rate tax of 6.5% of the sale price.

With regard to the remuneration of mining activity, the rules of non-commercial profits should apply: the progressive scale of income tax on the net capital gain (0%-45% income tax), plus social security contributions on professional activities.

The FTA published guidelines in August 2019 regarding mining and VAT which provide for a definition of mining. Based on this definition, they note that the attribution of crypto-currencies is random. In this context, the FTA consider that “it does not appear possible to identify the existence of an individualised service provided by the miner for the benefit of a specific beneficiary. Therefore, in the absence of a direct link between the consideration and the mining activity, the latter is not subject to VAT and the miner will not have to collect tax on the digital assets received as a reward. Correspondingly, the miner, who does not perform VATable transactions, is not entitled to benefit from a right to deduct VAT.”

Staking is not specifically addressed by law or guidance.  However, guidance states that non-commercial profits apply to “crypto-assets purchased either free of charge in return for taking part in the process of the system, or for consideration on Internet platforms meant for trading crypto-assets against currencies”. Since staking contributes to the process of the blockchain, it may fall within the scope of non-commercial income in the same way as gains from mining in the case of income. Yet, this solution needs to be confirmed.

Any kind of employment income should be subject to the progressive scale of income tax. The same rule should apply for payment in crypto-assets because of a lack specific provision. Other events such as lending, forks, airdrops or liquidity pools are not addressed by law or administrative guidelines; applying general tax principles, assets received by casual traders should not be a tax event. However, potential capital gains on the future disposal of these assets would be based on a nil tax cost (to be confirmed).

For occasional gains, a detailed calculation of capital gains or losses on disposals must be filed on form 2086, which also provides information on the overall value of the portfolio at the time of disposal; it is then necessary to fill out form 2042 C. French tax-resident individuals must also disclose each digital assets account opened, held, used or closed during the fiscal year (form 3916-bis). A EUR 750 penalty will apply for each undisclosed wallet, or EUR 125 for each omission or misstatement, within a total limit of EUR 10,000 per declaration. Penalties are doubled when the value of wallets exceeds EUR 50,000 at any time during the fiscal year.

The income tax treatment of capital gains realised in France by a non-resident depends on whether a tax treaty exists between France and the taxpayer’s country of residence. A case-by-case analysis is therefore necessary.