Crypto Taxes in Germany: All you Need to Know!
German tax resident individuals are subject to tax on their worldwide income. German income tax law differentiates between different categories of income. The categories of income include income from employment, self-employment, investment, business and real estate income. When determining taxable income, income from all these categories may be combined. The sale of assets may attract Capital Gains Tax (CGT), however in German certain assets are not subject to tax if the individual holds them for more than one year. It should be noted that Germany does not have specific tax legislation to address the taxation of crypto assets. As a result, the general tax rules are applicable.
In February 2018, the Federal Ministry of Finance (BMF) published its views on the taxation of certain crypto assets transactions, however this publication was very limited and only addressed VAT treatment. Accordingly, there remains some uncertainty regarding the income tax treatment of crypto asset transactions.
Which taxes apply
The German Federal Central Tax Office or Bundeszentralamt für Steuern (BZSt) treats crypto assets as private money for tax purposes. Crypto assets are not treated as foreign currency, legal tender, nor as property under the German Tax Acts. For tax purposes, this means that converting cryptocurrencies into a fiat currency or vice versa is "a taxable miscellaneous benefit".
According to rule 23 of the German Income Tax Act, private sales that do not exceed 600 euros are tax exempt. Further to this, if the crypto asset is held for a period exceeding one year, the full gain on disposal will be exempt from taxation.
In Germany, the mining of crypto assets by individuals is taxed as other income under Section 23 of the Income Tax Act. Taxable amounts are the net profits on the crypto assets on disposal. It should be noted that the period for exemption is applicable to mined crypto assets as well i.e. where the mined crypto assets are held for a period of one year or longer, the resulting gain will be exempt from taxation.
How much tax do you have to pay on crypto assets?
The tax amount is calculated on the net gain or loss at the time of the sale i.e. the proceeds on sale less the acquisition cost (including the transactional costs).
Value Added Tax (VAT)
The BMF has confirmed that crypto transactions made by individuals are not subject to VAT.
Stamp Duty - Real Estate Transfer Tax (RETT)
German RETT is a transaction tax which can for example be triggered due to acquisitions (share and asset deals), mergers, reorganisations, contributions, demergers, spin-offs, etc. involving German real estate owning companies. It is unlikely that crypto assets will be subject to RETT.
A tax is imposed on transfers of property at death or by gift. The rates for German inheritance tax (Erbschaftsteuer) range from 7 % to 50 %, depending on the relationship to the deceased and the value of the recipients' share in net inheritance. The heir and/or beneficiary is subject to tax individually, not the estate itself. The inheritance tax thresholds range from EUR 20,000 to EUR 500,000. Crypto assets that are inherited exceeding the threshold may be subject to inheritance tax in the hands of the recipient.
Which tax forms do you report crypto on?
The German tax year is the same as the calendar year and returns (Einkommensteuererklärung or Einkommensteuererklärung für unbeschränkt steuerpflichtige Personen - Mantelbogen ESt 1A ) are filed for each calendar year. The deadline for paying taxes is 31 July of the following year.
- The BZSt has not prescribed a set of documents and information that crypto asset investors need to submit, however the crypto asset investors will need to maintain detailed records to support the information declared in their tax returns. This information will include:
- The date of the transaction;
- The value of the units bought or sold; and
- The number of units.