Crypto Tax Legislation & Law in Germany

Currently, there is no crypto-specific tax law in Germany. The general German tax law is interpreted by tax authorities and fiscal courts. In May 2022, the German Federal Ministry of Finance published a decree regarding the treatment of virtual currencies and tokens under income tax law (Decree).

For a German resident, worldwide income is subject to income tax independent of whether gains are realised in Germany or elsewhere. The standard income tax rate is between 14%-45%, plus solidarity surcharge (basically 5.5% of the income tax) and church tax (8%-9% of income tax), if applicable. The tax authorities assume that crypto-assets or currencies and digital assets in general are to be treated as an asset (Wirtschaftsgut). This understanding was confirmed by the German Federal Tax Court in February 2023 regarding BTC, ETH and XMR as so-called payment tokens.

If crypto-assets for which the period between an acquisition for payment (e.g. not a gift, inheritance etc.) and sale does not exceed 1 year (holding period) are exchanged for FIAT, the difference between the sales price, the acquisition or production costs and income-related expenses is taxable as a gain or loss from a private sale transaction. If several acquisitions and sales are made, the First In, First Out (FIFO) method applies. Gains that have arisen outside the holding period, or that have amounted to less than EUR 600 in the calendar year, are tax free.

Yes.

If the activities of the individual exceed the threshold for a professional activity, trade tax is triggered besides income tax (7% to >17% depending on the individual’s municipality, but at least partially credited against the income tax burden), when the income derived exceeds EUR 24,500. Furthermore, when being qualified as professional, traders do not benefit from any holding periods but all realised gains are taxable independent of the time period between purchase and sale. According to the Decree, whether the purchasing and selling of crypto-assets leads to a professional activity is assessed on the basis of the criteria established by the German Federal Fiscal Court for commercial securities and foreign exchange traders. Thus, frequent purchases and sales do not constitute a professional activity in general, even if a larger volume is achieved; the taxpayer selects from numerous trading options (securities, interest-bearing securities, equity securities) in a yield-optimised manner and replaces bad trading options with good ones. Rather, it requires “typical banking” behaviour or activity “like a professional” and a business operation set up in a commercial manner (e.g. activity close to day-trading, leveraging by the use of debt capital).

1. losses from the sale/exchange of crypto-assets may only be offset up to the amount of the gain that the taxpayer has realised from exchanges or other private sale transactions. They cannot be offset with other kinds of income. Any losses not offset in a respective calendar year can be carried back 1 year or forward to following years (time unlimited)
2. see above: losses from the sale/exchange of crypto-assets may only be offset with gains from the sale of such assets
3. see above: losses from the sale/exchange of crypto-assets may only be offset with gains from the sale of such assets.

Exchanges or other private sale transactions for the offset need to be realised in the same calendar year, in the immediately preceding or any subsequent year.

Currently, neither the tax authorities nor the tax courts have published their understanding of the taxation of NFTs. Practitioners widely assume that NFTs will be treated the same way as other crypto-assets.

Mining is qualified as a professional activity which might trigger trade tax and income tax. The sale of the rewards is part of the professional activity.

Validated staking/forging is qualified as a professional activity which might trigger trade tax and income tax. The sale of the rewards is part of the professional activity. Delegated staking, platform staking or participation in a staking pool leads to miscellaneous income which is subject to income tax if all miscellaneous income exceeds EUR 256 per annum.

If an airdrop is caused by a professional activity, this constitutes income from professional activity at the market price at the time of the receipt. If the taxpayer renders a service (e.g. uploads own images, photos or videos or other personal data to a platform), the receipt is subject to income tax as miscellaneous income if all miscellaneous income exceeds EUR 256 per annum. The sale is subject to income tax under the requirements of the private sale transaction.

If the airdrop does not take place in the economic context of a service, a gift comes into consideration, for which the gift tax regulations must be observed.

If the crypto-assets are assets of a professional activity, the additional crypto-assets created under the hard fork are separate to the original crypto-assets. Acquisition costs need to be allocated separately but they do not constitute income. A hard fork is not subject to private income. The acquisition date of the crypto-assets under the hard fork corresponds to the acquisition date of the crypto-assets existing before the hard fork. Acquisition costs need to be allocated separately. If crypto-assets are given to an employee at a discount or free of charge, the crypto-assets can be qualified as cash or a non-cash benefit. A cash benefit is always subject to employment income, as is a non-cash benefit if it exceeds EUR 50 net per month. Income from farming, lending and other activities is generally subject to income tax as professional activity or miscellaneous income.

General documentation and declaration requirements apply. The tax authorities are currently working on a separate decree regarding documentation.

Not at this time.