German Federal Fiscal Court announces crypto profits are taxable

Friday 3 March 2023 10:37 CET | News

The German Federal Fiscal Court (BFH) has announced crypto profits are taxable.

The Federal Fiscal Court (BFH) decided that profits from buying and selling cryptocurrencies are subject to income tax for the first time in a judgment published on 28 February 2023. In addition, the court confirmed the speculation period of one year. According to the BFH, virtual currencies are economic goods that have a market value and are bought and sold as a means of payment on trading platforms. The profits from this are therefore subject to the Income Tax Act as "private sales transactions".

The judges did not accept the argument of an unnamed plaintiff that virtual currencies such as Bitcoin, Ethereum, or Monero are ultimately only algorithms and not real economic goods. According to the Tagesschau, the plaintiff had reported a profit of EUR 3.4 million from private crypto transactions to the tax office in 2017 but resisted taxation.

German Federal Fiscal Court announces crypto profits are taxable

Classification as an economic good

According to the Senate of the Federal Fiscal Court, cryptocurrencies are a "different economic good" for tax purposes, such as vintage cars or event tickets. There is a profit tax on these if they are exchanged or sold within 365 days. According to the judges, the concept of an economic good should be interpreted broadly and technical details of virtual currencies are not relevant to their classification as an economic good. It is sufficient that the goods can be bought and "accessible to a separate independent evaluation", which is the case with cryptocurrencies.

Cryptocurrency transactions controllability

The BFH also did not accept the argument that transactions with cryptocurrencies are hardly controllable so income tax can not be levied across the board. The financial administration tried early on to subject such transactions to income tax and in the meantime, there are also far-reaching information obligations and control options.

UK offering crypto tax exemption

On the other hand, in January 2023, the UK announced enforcing a tax exemption for foreign investors purchasing crypto through local investment managers or brokers. Additionally, the Financial Services and Markets Bill, which, if passed into law, would give local financial regulators more control over cryptocurrencies, is currently being debated in Parliament. The UK Treasury also intends to begin a consultation on how the cryptocurrency industry can be regulated in the upcoming weeks.

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Keywords: cryptocurrency, crypto, crypto asset, cryptocurrency exchange
Categories: DeFi & Crypto & Web3
Countries: Germany
This article is part of category

DeFi & Crypto & Web3