Frankfurt There is good news for investors in the midst of the cryptocurrency crash: Investors who use their virtual currency occasionally no longer have to fear tax disadvantages. This may be the case, for example, if you lend them out to generate additional income. Such is an instruction to the tax authorities, which the Federal Ministry of Finance (BMF) published last week. The instructions apply immediately to all outstanding tax returns.
Crypto-investments are completely tax-free in Germany after one year. Anyone who exchanges their virtual currency for other coins before the end of the year, gets them paid out or buys goods or services from them must pay tax on their profits in the meantime – at their personal income tax rate. That is between 14 and 45 percent.
The only exception: the sum of the profits from all private sales transactions is less than 600 euros. This also includes income from gold, other currencies or art.
However, a draft of the current letter, which was published about a year ago, contained a restriction on the tax exemption: the draft included that additional revenue from coins before the end of the year would extend their retention period to ten years.
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This should apply, for example, if an investor lends her bitcoins and earns interest in the form of new coins (“lending”). Another option would have been to bet. The investor’s coins are randomly selected to validate transactions from other crypto investors. The owner also receives additional coins (“rewards”) as a reward.
Favorable regulation for private investors
At the time, there was an outcry in the crypto industry. Investors should choose between tax exemption and returns in the future, criticized Kai Kuljurgis, founder of the investment crypto platform Coindex from Bielefeld, for example. The exchange operators, but also tax experts and associations appealed to BMF for a more investor-friendly practice. With success.
In the last letter, the deadline extension is deleted again. Investors and operators are similarly relieved. “This clear regulation, which is beneficial to private investors, is extremely important for the crypto market in Germany and will be an accelerator for further innovative lending / investment opportunities for private investors,” praises Ralf Oetting, founder and CEO of crypto exchange Justtrade. This strengthens cryptocurrencies as a form of investment.
The letter contains further simplifications. Because especially when investors buy new coins at shorter intervals, it is difficult to determine the right taxation. If coins have been purchased several times, the so-called FIFO method – “first in, first out” is usually used. This means that the coins that were bought first must first be removed from the wallet, ie from the digital wallet.
Tax experts warn that careful documentation of the individual purchase dates and prices, the retention period and the sales data is extremely important. This is the only way in which income can be taxed properly or a tax exemption can be proved before the tax office.
assessment is made easier
What is new in the letter is that in addition to the FIFO method, it will also be permitted to use the average method in the future. The profit is determined on the basis of the average price, eg of all purchased bitcoins. This right to choose even applies per. currency and wallet. “If the two calculations are relatively different, it is doubtful to what extent this can be presented well and understandably in the reporting,” warns Pekuna’s CEO Werner Hoffmann. The Berlin company supports customers in the tax processing of their crypto transactions.
It is now easier to determine the respective purchase and sale price. The draft still talked about the “average value of three exchanges”, ie. three crypto exchanges, but the course of a trading platform or a provider like Coinmarketcap is now accepted.
BMF also distinguishes between private and commercial crypto investors. This primarily affects those involved in the creation of new coins and the validation of crypto transactions. Anyone who makes computing power available here will always be considered a commercial investor in the future. Investors must therefore set up a company and then pay trade, corporation and sales taxes accordingly.
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