Guide to Crypto Taxes in Germany

The German tax code is friendly to cryptocurrency, but some transactions are still taxable. We outline what you need to know.

Arthur Teller
ByArthur Teller, CPAUpdated on September 8, 2022 · minute read

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Key Takeaways

  • Individuals in Germany do not have to pay capital gains tax on crypto assets held for more than a year.

  • However, this exemption does not apply to businesses.

Guide to Crypto Taxes in Germany

Germany offers attractive tax treatment of individual long-term cryptocurrency holdings. Some of its friendlier crypto 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

In this guide, we’ll go over the specifics of the German Federal Central Tax Office’s (Bundeszentralamt für Steuern or BZSt) and German Finance Ministry’s (BMF) guidance for individuals, and outline how it differs for businesses.

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 under 600 EUR example

  • You purchased 100€ of bitcoin.

  • You sold it several months later for 150€.

  • Your 50€ profit would not be taxable, as long as your total profits for the year haven't topped 600€.

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.

Short-term trades over 600 EUR example

  • You purchased 1500€ of ETH.

  • You sold it 4 months later for 2300€.

  • your 800€ of profit would be taxed as ordinary income, according to your tax bracket.

For example: If you purchased 1500€ of ETH and sold it 4 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.

Long-term trade example

  • You purchase 100€ worth of bitcoin.

  • More than a year later, you sell the bitcoin for 400€

  • Your 300€ earnings are not taxable.

Crypto as payment for goods and services

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

Crypto payment examples

  • You acquire 8,000€ worth of BTC.

  • Three months later, its value has increased to 10,000€.

  • You purchase a motorcycle with that BTC and owe income taxes on the 2,000€ net gain on that bitcoin.

  • However, if you waited to buy the motorcycle until you had held the BTC for over a year, you would not be taxed on the asset’s increase in value.

For example, if you acquire 8,000€ worth of BTC and purchase a motorcycle with that BTC three months later when its value increases to 10,000€, you will be taxed on the 2,000€ net gain on that bitcoin as if it were income. However, if you waited to buy the motorcycle until you had held the BTC for over a year, you would not be taxed on the asset’s increase in value.

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

Utility tokens

According to 2022 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.[1]

Crypto losses

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.

German income tax brackets

Income tax bracket (€) Tax rate
Below 10,3470%
10,347 < 58,59614% – 42%*
58,596 < 277,82542%
Over 277,82545%

(*) Geometrically progressive rates

Bitcoin mining

Crypto mining earnings are taxed as income net expenses.

The BMF's 2021 draft decree indicates that many privately-run mining operations could likely reasonably 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.[2]

Crypto staking and lending

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. [3]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.[4]

Accounting methods

According to the June 2021 BMF guidance, the First in First Out (FIFO) accounting method is appropriate for determining cryptocurrency’s cost basis.[5]

Crypto taxes for businesses

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.

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References

Last reviewed by Arthur Teller, CPA on September 8, 2022 · Sources

Arthur Teller
Arthur TellerCOO at TokenTax
Arthur came to TokenTax after 12 years at KPMG. A specialist in partnership taxation and enterprise tax software, he is a licensed CPA in both California and Illinois and a member of the AICPA.

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