France Crypto Tax Guide 2023

France is one of Europe's highest-ranked countries for crypto adoption, with approximately 3.4 million residents reported to be invested in the digital asset space. The French Government is seeking to transform France to become a blockchain hub within Europe and has taken a positive stance on the ownership of digital assets, which may further boost the number of crypto investors in the country.

The French Tax authority, Direction Générale des Finances Publiques (DGFiP), is well aware of this high rate of crypto ownership and has outlined specific tax rules to clarify the taxation of digital assets in France.

This comprehensive guide will explain everything about the DGFiP’s classification of cryptocurrency, the tax treatment of cryptocurrencies and related activities in France, as well as how French cryptocurrency traders and investors can report their taxes with Crypto Tax Calculator.

Is Crypto Taxed in France?

Yes, crypto is taxed in France.

The DGFiP treats cryptocurrency as a moveable asset; thus, the capital gains obtained from the disposal of cryptocurrency are treated as ordinary income. This same treatment applies to other moveable assets, such as securities. However, it is important to be clear on what situations the DFGiP deems to be a disposal and the implications for other activities such as mining, staking and trading.

When is the deadline to report my Crypto Taxes in France?

The tax year runs from 1st January to 31st December, and Online reporting is generally opened in the first week of April in the year after the tax year. The deadline for submitting reports depends on your department.

Does the DGFiP know about my crypto holdings?

Despite popular belief, cryptocurrency is extremely easy to track and is not as anonymous as many believe. Due to much stricter regulation around cryptocurrency exchanges and digital asset investment, almost all exchanges require users to complete a ‘Know-Your-Customer’ (KYC) identification application before the account can be used to purchase crypto. If you have signed up to any exchange which required this check, it is highly likely that the DGFiP has your user record from that exchange. Withdrawals to external wallets are also tracked, and it is a simple process to follow the money trail from an exchange account to external wallets due to the availability of data on public blockchains.

The European Union’s sixth Anti-Money Laundering Directive means that any company that provides financial services to customers or other businesses must adhere to stricter regulations regarding customer identification. This directive also means that data is made available between EU member states, so signing up to an exchange in another EU country does not mean the IDFiP will be unable to gain access to your data.

The European Commission’s proposed Directive on Administration cooperation (DAC8) is a step towards stricter regulation regarding cryptocurrency ownership and trading. The proposed update will likely take effect in the next 12 months, increasing the availability of data on cryptocurrency owners to financial authorities across EU member states to address tax evasion or fraud. Once this takes effect, DAC8 may allow the DGFiP to specifically search if a person owns cryptocurrency, as well as other information such as holdings, transaction history and withdrawal addresses.

What happens if I don’t report my Crypto Taxes?

In France, failure to report your crypto tax obligations can lead to hefty fines of up to €1,500 per unreported account and €250 for each omission or inaccuracy, depending on the value of the account. As outlined above, it is highly likely the DGFiP has access to data on individuals who have opened an account on a centralised exchange, so it is highly recommended that crypto investors and traders stay up to date with tax reporting.

It is highly advisable to keep records of all trading activity, even from past tax years, as the DGFiP can go back through records up to 5 years prior. Crypto Tax Calculator makes it easy to store and maintain records of transactions from past years by importing wallets and exchange history.

How does the DGFiP tax crypto?

Just like securities and bonds, the DGFiP treats cryptocurrencies as moveable assets. Disposing a movable asset, which requires selling the asset to euros or other fiat currency, triggers a capital gains event. The tax rate for the capital gains made on cryptocurrencies depends on the frequency of your trading activities.

As outlined by the DGFiP, cryptocurrency investors and traders fall into two categories:

1. Occasional Traders - Flat tax rate of 30%

   This type of income tax is known as a Single Fixed Levy (PFU) or ‘flat tax’. The 30% rate consists of 12.8% income tax and 17.2% social security contributions. High earners may be required to pay an additional 4%.

2. Professional traders - Industrial and Commercial Benefits tax (BIC) 0-45%

   This tax rate applies to regular traders of cryptocurrency and means that any capital gains associated with crypto will be subject to a progressive rate of tax.

The French Tax Law does not specifically state how to decide whether the activity is carried out occasionally or on a regular basis, indicating it is judged on a case-by-case basis. Some factors that the DGFiP uses to differentiate occasional and regular traders include:

• The total amount invested
• The total trading volume
• The frequency of transactions

Occasional traders can opt for the progressive tax rate in certain circumstances; however, this option is best discussed with a tax professional who can provide individual guidance.

Taxable Situations

The DGFiP treats crypto as a movable asset; thus, gains are only triggered once a disposal has occurred. Disposal happens when a cryptocurrency is sold for euros or another fiat currency. In France, capital gains of up to €305 per year are tax-free. This means that French crypto investors who have not exchanged crypto for fiat currency, or have realised less than €305 in capital gains for the year, will not need to pay any taxes on their crypto-related trading activity.

The good news for crypto investors and traders in France is that crypto-to-crypto transactions are not deemed taxable events. This means trading one crypto for another, such as minting NFTs or swapping BTC for ETH, is a non-taxable event.

Decentralized finance is not specifically mentioned in current tax legislation for crypto. If the activity does not involve disposing of crypto for fiat, it will likely not be triggering a capital gain. The DGFiP may treat rewards from staking or other forms of interest the same way they treat mining; however, there is yet to be specific guidance.

Example scenario 1:

An investor buys 1 Bitcoin on the 1st of January for €1000. The same investor then purchases another Bitcoin on the 5th of February, €2000. The price of Bitcoin rises to €5000, and the investor decides to sell both for €10,000. This realises a capital gain of €7000, which is calculated from the total proceeds ($10,000) minus the cost basis of both Bitcoin (€1000 + €2000 = €3000)

Example Scenario 2:

An investor buys 1 Bitcoin on the 1st of January for €1000. The same investor then traded the Bitcoin for 5 Ethereum on 5th February, a non-taxable event. The price of Ethereum rises to €1000, and the investor decides to sell all 5 for €5000. This realizes a capital gain of €4000, calculated from the total proceeds of $5000 minus the cost basis of the original fiat purchase of $1000.

Non-Taxable Crypto Transactions in France

The good news for crypto investors and traders in France is that crypto-to-crypto transactions are not deemed taxable events. This means that activities such as trading one crypto for another. This means that any DeFi transactions, such as staking crypto, lending/borrowing, liquidity pools etc., do not trigger capital gains events. This means trading NFTs is also non-taxable unless you are selling the NFT directly into Euros, in which case it will be treated as a disposal of a moveable asset.

The sale of cryptocurrencies to Euros or other legal currencies triggers a capital gains event, and capital gains of up to €305 per year are tax-free. This means that French crypto investors who have not exchanged crypto for fiat currency, or have realised less than €305 in capital gains for the year, will not need to pay any taxes on their crypto-related trading activity.

Crypto Mining in France

Crypto mining is taxed separately from occasional or professional crypto trading and is subject to Non-commercial profits (BNC) tax. The profits from crypto mining are taxed at 45%. For smaller scale, crypto mining operations that have a turnover of less than €70,000 may be eligible for Micro BNC tax treatment.

How to report crypto taxes in France

Once you have calculated your crypto taxes manually, with an accountant or using the Crypto Tax Calculator app, you must file your taxes online via your FranceConnect account. Persons unable to complete an online form may continue to submit a paper form; however, they will need to apply for permission.

In France, you will need to report individual crypto taxes using three forms as part of your annual tax return; impôt sur le revenu(IR).

Fill in Form 2042: Income Tax Return. Married persons file a joint tax return, with no option to file separately after marriage or before the year of divorce.

Attach to Form 2042:

1. Declare capital gains using Form 2086
   • This appendix must be attached to Form 2042 to declare capital gains
   • This form only has enough lines to include 20 disposals, so if you have a higher trading volume than this during the year, you may need to discuss your options with an accountant
2. Declare mining income using Form 2042 C

   • Complete line 3AN to report an overall gain

     Or

   • Complete line 3BN to report an overall loss

   • This form also requires you to enter your total income totals from crypto-related activities

3. Cryptocurrency accounts opened outside of France must be declared using Form 3916-bis
   • This form is required for individuals, companies or associations who have opened overseas crypto-related accounts. One form is required per declaration of a foreign exchange account.

How Crypto Tax Calculator can help

Manually maintaining records of all of the above doesn’t sound like much fun, does it? Spoiler: it’s not. That’s where we come in! Our crypto tax calculator software can help you aggregate your crypto transaction data to help calculate any gains, losses, income and/or expenses. As an added bonus, we’ve worked with tax professionals from France to ensure our platform follows your region’s guidelines.

Once you’ve imported all your data to form a complete overview of your trading history, you’ll be prompted to reconcile any outstanding lines. After those are reconciled, you’ll have the option to download reports showing these values clearly. These reports and the information included will give you the amounts needed to complete your yearly tax return for the IDFiP.