The profits made from trading cryptocurrencies are taxable. The Federal Fiscal Court decided that about two weeks ago. The court also confirmed the twelve month speculation period. Now it seems that Americans are also looking forward to a crypto tax. The government around President Joe Biden is said to be considering a 30% tax on mining proceeds.
Clear regulations regarding taxation of crypto profits
With their proposal, the US is specifically targeting mining revenue. First of all, we are not talking about income, but about energy consumption. The 30% should therefore be linked directly to consumption, which would increase the costs for Bitcoin miners by about one third regardless of profit or loss. However, there is no official confirmation or even a draft law yet.
Joe Biden is proposing a 30% tax for #Bitcoin Mining before and even for off-grid miners? Say today is April 1st? 🤡 Very bad news for many miners. Does anyone know how safe such proposals are? pic.twitter.com/gSeWO43Frw
— thisisTimo (@TimoThisis) March 10, 2023
The situation in Germany is completely different. The Federal Fiscal Court has now given a final judgment on this. This is the highest court in the field of tax and customs law. It is one of the five best courts in the country. About two weeks ago, the court decided for the first time on the tax regulations related to cryptocurrencies. The published judgment shows that profits from the purchase and sale of Bitcoin and Co. subject to income tax. Accordingly, this tax is due when the return generated is paid to traders.
This judgment is justified because cryptocurrencies are a virtual currency that can be used as a means of payment and have a market value. By buying and selling on the trading platforms, they are subject to the “private disposals” of the owners, who are subject to income tax.
Cause of action: Anonymous complainant
The process that led to this judgment began in 2017. A plaintiff, who is not named in the judgment, made a profit of 3.4 million euros with Bitcoin, Ethereum and Monero.
He reported this to the tax office through his tax return in the same year, but has so far refused to pay taxes for crypto trading. He justifies his actions by saying that coins are just algorithms and are not considered economic goods.
The case went to court twice. In 2021, the Cologne tax office decided that the plaintiff had to pay the taxes.
The Federal Ministry of Finance then participated. It ruled that cryptocurrencies would be considered “other economic goods”. Accordingly, by law, they are subject to income taxes. Citizens subject to this tax must declare their profits in their tax return.
The Federal Fiscal Court emphasizes the importance of economic goods. Technical details, such as how these arise or are linked to each other, have no effect on the profits in the end. Those responsible write:
“Contrary to the view of the plaintiffs, the technical details of virtual currencies – for example to the extent that they are described in a so-called “white paper” on the composition of the blockchain – are not relevant to the economic property. Since the plaintiff in the dispute bought the cryptocurrencies relevant BTC, ETH and XMR and that they sold them within the holding period, the profit made from this is to be recorded according to Section 23 (1) sentence 1 no. 2 EStG within the framework of taxation.
The timing of the sale is important: the 12 month rule applies
With this verdict, crypto trading is becoming much more expensive for German traders. However, if you pay attention to a few things, you could still protect yourself from cancellation in the future. The court decided that there should also be a period of speculation here.
The published judgment will determine the period during which this rule applies.
” In its statement, the BMF is of the opinion that virtual currencies (“currency or payment tokens”) should be considered as “other economic goods” within the meaning of Section 23(1) sentence 1 no. 2 EStG. It is income from private sales transactions within the meaning of the mentioned provision are profits from the sale of virtual currency units held as private assets — in the case of holding BTC, ETH and XMR — unless the period between acquisition and sale is more than one year. When applicable with the taxation of capital gains from the aforementioned virtual currencies, there is also no structural deficiency in enforcement.”
This means that if you just hold your coins for eleven months and then sell them again, you don’t have to pay tax on the profit. Since the regulation of speculation applies here. Given the short-term holding of the signals, the outcome was still uncertain at the time of purchase.
This is what German traders can expect soon: strong regulations and controls
This judgment underlines the opinion of some financial experts. Among other things, they criticized the weak regulations. Trading in cryptocurrencies in Germany is like the “wild west”.
That’s what the German financial expert Jan Pieter Krahnen said in an interview with the Tagesschau. He describes the crypto world as a kind of “shadow banking system” at the moment. At the moment, there are no regulations on the trade or the exchanges on which the coins can be bought.
Krahnen is in favor of regulations that will take place soon. He does not believe that these would restrict further trade and development. He believes that they would protect users. Fraudulent intent in the trade offer would no longer be possible through the laws.
He also describes that the regulations could lead to more confidence in cryptocurrencies.
“On the other hand, Government regulation would mean that investors could place much more confidence in the products and trading structures offered to them. From this it can be assumed that a regulated crypto financial market could become more important – it would be promoted.”
Germany has not yet made any major moves towards regulating or taxing crypto trading. Yesterday’s judgment may approve.
Bitcoin and Co – the current price developments
Bitcoin again rose ten strong percentage points in the last 24 hours after falling briefly yesterday. today its $24,437. The market capitalization has increased to 480 billion euros.
Ethereum can also look forward to a slight increase in price today. After falling almost to the EUR 1,500 mark yesterday, it rose to EUR 1,554 today. The current trade volume is 190 billion euros.
The Binance course has been very volatile for the past seven days. In the last 24 hours, however, the price has remained relatively stable at 286 euros. The trading volume of the fourth strongest coin is currently 345 million euros. The market capitalization is also stable at 45.1 billion euros.