Crypto Tax Guide Germany for 2023: [Kryptowährung Steuer]

Crypto is taxed in Germany. Short-term capital gains from crypto held for less than a year and all additional income from crypto (such as mining or staking) is subject to regular income taxes. Crypto held for over a year, however, is not subject to taxes, which strongly incentives long-term holds.

Germany offers attractive tax treatment of individual long-term cryptocurrency holdings. Short-term crypto tax in Germany is subject to regular income tax rates, up to 45% plus the 5.5% Solidarity Tax.

Some of the friendlier crypto Germany tax guidance includes:

• Individually held crypto is not taxed if held for over a year

• Individual cumulative crypto profits under €600 are not taxed

• Individually held crypto is exempt from VAT

Let’s look further at specifics around Germany crypto tax.

Germany views cryptocurrency as a private asset, as opposed to property, with corresponding tax implications. This means cryptocurrency gains for German taxpayers are subject to individual income tax rather than capital gains tax, with some caveats. The biggest benefit for German crypto holders is that crypto profits are not subject to taxes if a given currency was held for a year, which strongly incentives long-term holds.

If you hold your crypto for under a year, you’ll be subject to regular income taxes on the profits. This includes selling your crypto for fiat, trading it for another cryptocurrency, or using your crypto to make purchases. You’re allowed up to €600 per calendar year tax free.

There are further nuances to crypto taxes in Germany, so read on for clarity and specific examples around short- and long-term crypto trades, staking and lending crypto, utility tokens, and more.

Earnings under €600 EUR

In Germany, cryptocurrency is considered Privatvermögen or “private money.” This means that while crypto is not legal tender—vendors are not required to accept it— your cumulative profits are tax-free as long as they are under €600.

This is outlined in Section 23 of the German Income Tax Act (EStG), which covers the tax treatment of speculative transactions made with private money. Your crypto earnings are reported on the same income forms alongside your wages and any other sources of income.

Short-term trades when profits exceed €600 EUR

If your total profit for the year is over €600 of crypto and you held the assets for less than a year, any profit is taxed as income. Under Section 22 of the Income Tax Act, it is a taxable sale whether you are trading one cryptocurrency for another crypto or if you are trading crypto into fiat currency (like into EUR). You are also allowed to deduct fees as part of the cost basis.

For example: If you purchased €1500 of ETH and sold it four months later for €2300, your €800 of profit would be taxed as ordinary income, according to your tax bracket.

However, if your crypto transactions are considered financial instruments (such as swaps or futures), you may not be able to net your gains or losses against your passive crypto investments.

Long-term crypto trades

If you hold your crypto for over a year as an individual, you do not have a tax liability on your earnings. In other words, for long-term holdings over one year, any increase in the value of your cryptocurrency is tax free.

Bitcoin mining taxes in Germany

Germany taxes crypto mining earnings as income net expenses.

The BMF's 2021 draft decree indicates that many privately-run mining operations could likely reasonably be found to be commercial activities, which would make them subject to business tax. It notes that the regional fiscal authority of North Rhine Westphalia already presumes mining is commercial. If this presumption were to become a federal policy, it would have major tax consequences for the country's miners.

Germany considers rewards from crypto mining to be additional income and subject to Income Tax, less expenses. This means to calculate what you owe in taxes, you must take the fair market value of your coins on the day you received them (in EUR). You also need to calculate your expenses, for instance equipment and electricity. 

Crypto miners operating paying German taxes can anticipate paying the normal income tax rate on any profit after expenses as well as income tax on profit from mined coins held for less than a year.

Crypto staking and lending tax in Germany

Staking and lending rewards are also subject to income taxes; however, if you realize capital gains on your staking income, they will not be taxed as long as you held the assets for more than a year. This decision was a relief to crypto investors, as legislators had discussed extending the tax-free holding period for staking and lending income to 10 years.

Crypto payment for goods and services

Purchases of goods and services with crypto are treated the same as crypto-to-crypto transactions in Germany.

Note that if crypto is used as payment for goods or services, it is also exempt from the EU-zone Value Added Tax (VAT).

Taxes on Utility tokens

According to 2023 crypto tax guidelines from Germany's finance minister, using a utility token to perform an action on a platform does not affect one's income tax liability.

According to the guide, income tax rules do not apply when you redeem utility tokens that give you a particular right, say to receive a particular product or access to a certain network. The German finance ministry cited a 2018 court judgment pertaining to bearer bonds and declared that redeeming utility tokens does not count as a sale under existing German income tax law.

Crypto loss taxes in Germany

The German Tax Act allows you to offset gains with past years’ losses and/or carry losses forward to offset gains in future tax years.

So you should track any losses from crypto as you can later offset those losses against future profits and lower your tax bill that same or in future years. If during a given year you do not realize profits to offset your losses, you can carry those losses forward and offset tax liability on future gains.

You may also be able to claim lost or stolen crypto as a loss. This will require evidence, including wallet addresses, possession of hardware, your acquisition cost of the lost crypto, etc. Again, accurate record keeping is important year over year so you can minimize your Germany crypto tax.

All resident individuals in Germany are taxed on worldwide income. Non-resident individuals are only taxed on income that is German-sourced only.

Short-term crypto gains made within a year of acquisition and sale are subject to these rates, which strongly incentivizes crypto traders in the German tax system to hold for over a year.

Germany's progressive tax rates are as follows for the 2023 tax year:

(*) Geometrically progressive rates

German corporations are taxed depending on their type of legal entity. If the company is a partnership, it is subject to income tax and its crypto holdings are taxed the same as for individuals, but with an additional trade tax.

Limited liability corporations, public companies and other corporate entities are all subject to corporate taxes and trade taxes on their crypto holdings. Therefore, it is appropriate to consider the tax implications of legal entity choice for companies that plan on having extensive crypto holdings or for companies or single proprietors who plan to engage in mining or staking.

However, regardless of legal entity type, the most important difference between tax treatment for businesses and individuals is that businesses do not have a tax exemption for crypto held over one year.

For more information on corporate taxation of cryptocurrency in Germany, Section 15 of the German Income Tax Act provides specific details. Additionally, Section 11 of the German Trade Tax Act may apply to cryptocurrencies. This section of the tax code discusses tax exemptions for de minimis corporate holdings.

The tax year in Germany matches the calendar year, from January 1st to December 31st. The deadline for tax returns is typically July 31st of the following year.

It’s essential to keep records of all your crypto transactions, including:

• The date of acquisition and disposal

• Fair market value (in Euros) at the time of each transaction

• The reason behind each transaction, and the counterparty (including wallet addresses when appropriate)

Our platform at TokenTax makes it easy to aggregate your crypto transaction data so you can efficiently organize and prepare to file your crypto Germany tax documents.

German crypto tax filing forms at a glance

There are at least two forms you’ll need to use if you have income to report from cryptocurrency.

Hauptformular ESt 1 A
If you’ve earned income or received capital gains as a German taxpayer, you’ll need to complete and file this form and report salary from your job and your German bank account.

Anlage SO
Use this form to report income and short-term capital gains from cryptocurrency.

According to current BMF guidance, the First in First Out (FIFO) accounting method is appropriate for determining cryptocurrency’s cost basis.

This means when you sell, the first coins you purchased are those first sold for purposes of calculating your crypto Germany tax liability.

Germany's crypto tax can, on its face, appear to be complex. This is why we created TokenTax, which is both a comprehensive crypto tax calculation software platform and a full-service crypto tax accounting firm.

With TokenTax you can simply import data from every crypto exchange, blockchain, protocol, and wallet and easily sync transactions via API or upload them in a supported CSV format. 

TokenTax takes the mystery out of your crypto tax Germany filing and ensures accuracy and thoroughness in your annual filing, so you can remain compliant and limit crypto tax liability. If you have doubts or questions, our team of experts is available to help.

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Germany’s long-term crypto policies are very attractive and incentivize you to hold your crypto for over a year in order to realize tax free gains. 

The crypto market is famously volatile, so if you’re looking to benefit from Germany’s crypto tax regulations, it’s important to understand that by purchasing a cryptocurrency at a given price, you’ll need to commit to a full year in order to reap tax free profits. This means not trading in and out of other cryptos once you’ve purchased a token. In other words, you must be be willing to play the long game with your crypto.

It can be difficult to time any market, much less one as volatile as crypto. One strategy crypto aficionados use is Dollar Cost Averaging, by which you slowly deploy capital to purchase a given asset over days, weeks, or even months in order to level out your risk and exposure over time.

Because of Germany’s FIFO accounting method, this allows you to slowly take profit, after a year or more, when the timing suits you. This gives you more flexibility than an “all in” approach, as you can wait for the market to present you a favorable return and methodically sell just as you methodically purchased crypto.

Here are some common answers to frequently asked questions around Germany crypto tax.

When will you pay tax on crypto in Germany?

Annual tax returns in Germany must be filed by the 31st of July of the year following the tax (calendar) year. The filing deadline expires on the final day of February of the second year if a certified tax adviser prepares it.

In general, you’ll pay taxes within one month of the date the final assessment is issued. If you have additional income not subject to withholding, you’ll be expected to pay in quarterly installments due on the 10th of June, September and December.

What is the difference between Income Tax vs Tax Free

For German taxpayers, short-term crypto gains are subject to regular income taxes. Long-term crypto gains on crypto held for over a year are not subject to Germany crypto tax and are thus tax free.

What is the German cost basis method?

Germany’s tax guidance is that first in, first out (FIFO) is the preferred method for calculating crypto taxes when units cannot be identified specifically, which means when you sell, the first coins you purchased are those first sold for purposes of calculating your Germany crypto tax liability.

When is the German tax deadline?

The German tax filing deadline is the 31st of July of the year following the tax (calendar) year. The filing deadline expires on the final day of February of the second year if a certified tax adviser prepares it.

What happens if I don't file my cryptocurrency taxes in Germany?

If you fail to meet the German tax filing deadline, you’ll be subject to a penalty of 0.25% of your tax liability at a minimum €25 per month for each month you are late.

Is cryptocurrency legal in Germany?

Yes. Germany treats Bitcoin, Ethereum and other digital currencies as private money for tax purposes.

Where can I find the Germany cryptocurrency regulation?

Germany crypto tax is overseen by Bundeszentralamt für Steuern (Federal Central Tax Office or BZSt), a branch of the German Federal Ministry of Finance. When in doubt, our team at TokenTax can help you get clarity around crypto taxes in Germany.