Action: The Federal Treasury Department overturns 10-year crypto-holding period

Despite the bloody sale in the crypto market, a message from the Federal Ministry of Finance creates euphoria in crypto-Germany. Because the controversial ten-year holding period for bets and loans is a thing of the past. It announces BMF on its website.

Specifically, the letter is a guide to the tax authorities on how to register cryptocurrencies for tax purposes. The focus here is on the abolition of the ten-year holding period. Specifically, the document states:

In the case of virtual currencies, the extension of the sales period pursuant to section 23, subsection 1, point 1 no. 2 point 4 EStG not.

About a year ago, the then SPD-led BMF had insisted on the holding period. Cryptocurrencies generated from deposits and loans now have a one-year retention period. Therefore, there is relief within the German crypto scene. Werner Hoffmann, head of the firm specializing in cryptocurrency Pekuna, had previously worked closely with BMF. Compared to BTC-ECHO, he considers the letter to be “positive” in general.

Of course, it is particularly positive to see that several points have been improved, and in most cases it went in a positive direction for the crypto community. Especially the 10-year period for staking was a big topic.

Frank Schäffler of the FDP parliamentary group described the letter as a “milestone” for the German crypto industry, creating “more tax law clarity”.

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Cryptocurrencies are economic goods

What is new, for example, is that Bitcoin and Co. now clearly defined as economic goods, which makes it possible to classify them in German income tax legislation in the first place. In the past, there had been several lawsuits due to lack of definition. In general, the ministry again tightened several election periods.

There are also innovations in the valuation of cryptocurrencies. If the old draft from the SPD-led ministry assumed an “average value of three exchanges”, the course of a trading platform (such as Bitpanda, Coinbase or Binance) or a “value-based list” is sufficient. CoinMarketCap. Tax experts consider this step to be significantly more practice-friendly.

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Effort can become a tax trap

Although the crypto draft exempts staking from the 10-year retention requirement, BMF will in future distinguish between active and passive efforts. While the latter is considered “private asset management” and thus falls under “other income” in the tax return, active efforts are classified as commercial. The biggest difference is the creation of blocks. The BMF letter states:

Block formation does not represent private wealth management, both in mining and forging [BMF-Begriff für Staking] block creators receive the block reward and transaction fees in exchange for creating new blocks. The activity thus corresponds to the image of a service provider.

For example, anyone operating a staking node is considered a service provider according to the definition of the Federal Ministry of Finance and must therefore pay business tax on their income. Werner Hoffman sees a need for improvement here.

This is critical because there are completely different tax rules in the commercial sector that most people will not be aware of at the time.

For example, there is no tax-free period, and the cessation of activity also means that all capital must be taxed.

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In addition, other issues such as NFTs or Decentralized Finance (DeFi) are not yet adequately covered, the tax expert believes. A circumstance that should be tackled in further cooperation.

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