Resources/guides/Germany Crypto Tax Guide 2023

Germany Crypto Tax Guide 2023

Germany Crypto Tax Guide 2023
This tax guide is regularly updated: Last Update February 07 2023

Germany is a country becoming known for its positive tax treatment of individuals’ cryptocurrency investments. This German crypto tax guide will focus on the specific guidelines given by the Bundeszentralamt für Steuern (BZSt) so that you, as a German taxpayer, will knowexactly what type of crypto activity is or is not taxable in your country.

Crypto Taxes in Germany

In Germany, cryptocurrencies are classed as ‘private assets’. Germany’s tax law states that private assets incur Income Tax, instead of Capital Gains Tax when participating in what they define as a ‘private disposal’. Private disposals in Germany are also non-taxable after a holding period of one year. Germany also has an allowance bracket of up to 600 EUR profits within 12 months of obtaining the private asset, meaning that even if you sell your cryptocurrency in less than a year, if the profit doesn’t exceed 600 EUR, you won’t be taxed on it.There are slightly different rules for crypto activities like staking, mining, and lending, which we will explore further in this guide.


German Income Tax brackets

As cryptocurrencies in Germany incur Income Tax, let’s go over the current income tax brackets according to German regulation in 2022. The bracket you fall into will depend on your total income for the financial year, as well as your relationship status (single vs married).

Taxe Rate Single Person Married Person
0% Up to 9,744€ Up to 19,488€
14-42% Up to 57,918€ Up to 115,836€
42% Up to 274,612€ Up to 549,224€
45% More than 274,612€ More than 549,224€

As an example, if as a single German taxpayer you earn 55,000 EUR per year from your ordinary job, but you also gain a profit of 10,000 EUR from your cryptocurrency trading, you would fall into the 42% tax bracket as your total yearly income would be valued at 65,000 EUR.

Earnings under 600 EUR

In Germany, crypto is considered “Privatvermögen”, or a private asset. According to Section 23 of the German Income Tax Act, Privatvermögen cumulative profits are tax-free when under a total of 600 EUR.

This means that if you sell crypto assets within a year of obtaining them, you might be liable for Income Tax. However, if your total profits from these crypto disposals are less than 600 EUR per year, it will remain tax-free.

Short-term trades and long-term trades

Time is of the utmost importance when it comes to German tax regulation. The treatment of private assets held for less than one year versus private assets held for more than a year are vastly different.

In regards to short-term trades; if as a German taxpayer your total profit from cryptocurrency sales is over 600 EUR and you held the assets which made these specific profits for less than the period of one year, your profits will be taxed as income (as per the Income Tax Bracket table in the previous section). This includes selling crypto for fiat currency AND swapping crypto for crypto.

Example: Lea purchases 0.5 ETH in January 2020 for a value of 1000 EUR. She then sells it in July 2020 at a profit for a value of 1200 EUR. Even though she sold it within one year of obtaining it, the 200 EUR profit falls into the tax-free threshold of 600 EUR, so Lea will not pay tax on this profit.In regards to long-term trades; any private assets, including crypto, held for over a year as an individual in Germany do not incur any tax liabilities. Simply put, hold your crypto for over a year before you make any gains, and in Germany, those gains will be tax-free!

Example: Lea decides to buy more ETH in January 2021, and purchases 5 ETH for a value of 12,000 EUR. She holds it until March 2022 and then sells it for a value of 14,000 EUR. She has made a profit of 2,000 EUR but because she held the private asset (ETH) for longer than a year, any profits made are tax-free.

What crypto activity is taxable in Germany?

  • Crypto sold in the same 12-month period from when you obtained it that takes your total profits for the period to more than 600 EUR.
  • Staking rewards
  • Mining rewards
  • Earning interest or similar from using a DeFi protocol, such as a lending platform

What crypto activity is not taxable in Germany?

  • Profits made from selling crypto after owning it for longer than one year
  • Profits made from selling crypto in the same 12-month period from when you obtained it with a profit of less than 600 EUR

DeFi: Lending and interest

Recently, the German tax authorities clarified their positioning that DeFi lending protocols and any generated interest will be taxable in accordance with Section 22 Number 3 EStG. To quote their guidelines directly, “the generation of income from the temporary use is based on a service provided by the taxpayer. Units of a virtual currency and other tokens received for the transfer of use are purchased and are to be valued at the market rate at the time of purchase.”

Exchanging crypto for fiat

As mentioned earlier in this guide, the sale of private assets such as cryptocurrencies in Germany is treated as a private sale. This means that if you sell your crypto for fiat currency within a year of obtaining it if the profit is over 600 EUR, your profits will be subject to Income Tax. If you sell your crypto for fiat currency after more than a year of obtaining it, your profits will be exempt from tax.

Example: Gunther purchases 1 BTC at the value of 25,000 EUR in January 2021. He goes on to sell his 1 BTC in April 2022 for the value of 29,500 EUR. In this situation, Gunther has made a profit of 4,500 EUR, but won’t be taxed as the sale occurred after more than a year after he first bought the 1 BTC.

Crypto to crypto swaps

In Germany, crypto to crypto swaps are seen as private sales; one private asset is being exchanged for another. This means that the transaction will be taxable if: there is any profit made as a result of the swap, the profit exceeds 600 EUR, and the swap was made within a year of obtaining the first crypto asset.

Example: Lea decides to swap 1 BTC she owns for 10 ETH, for a precisely equal value of 30,000 EUR. There was no profit made as a result of the swap, and this means that this particular swap transaction is not taxable.

Crypto as payment for goods and services

In Germany, crypto being used as payment for goods and services is treated the same as crypto-to-crypto transactions, as explained in the previous paragraph.

Example: Gunther purchases 0.5 BTC in February 2021 for the value of 15,000 EUR, and then proceeds to use that 0.5 BTC to purchase a new car in October 2021. In October 2021, the value of his 0.5 BTC had risen to 20,000 EUR, so he will be taxed on the 5,000 EUR gain. If Gunther had waited until after February 2022 to purchase a new car with his 0.5 BTC, however, he would not be taxed as the one-year taxable period would be complete.

Staking rewards

If you are a German taxpayer who receives staking rewards, these rewards should generally be subject to German Income Tax under Section 22 number 3 of the German Income Tax Act. Currently, you will need to record the staking rewards as income based on their value at the point of receipt. In this case, the 12-month since obtaining the assets and consequent tax-free period would once again become relevant. We recommend that you talk to your local accountant to find out what is best for your personal circumstances.

Mining rewards

Similar to staking rewards, mining rewards are generally subject to Income Tax in Germany. At present, this includes the block rewards and any fees received. Currently, you will need to record the mining rewards as income based on their value at the point of receipt. In this case, the 12-month since obtaining the assets and consequent tax-free period would once again become relevant. We recommend that you talk to your local accountant to find out what is best for your personal circumstances.

Airdrops

In the crypto world, you can receive airdrops - a certain amount of tokens given to a user without the need for a service or purchase. German tax authorities see airdrops where participants are given these assets at random, without having to action anything, as resembling a lottery win, in that there is an absence of a purchase transaction. If there is no purchase transaction, then there can be no subsequent sale transaction. This means that random airdrops are tax-free in Germany. According to the latest guidelines from the BMF, airdrops where participants actively take part in providing information or services in return for receiving the airdrop will be treated as other income.

Example 1: Lea registered the ENS domain leaiscool.eth in early 2021. When the ENS airdrop occurred, she received 1000 ENS without having to do anything specific. By following the guidelines put out by German tax authorities, if Lea decides to sell her 1000 ENS, any profits made will be tax-free.

Example 2: Lea found out her favourite token project is releasing an airdrop, and that users can get part of this drop by participating in 3 simple tasks on the protocol. Lea completes the 3 tasks and goes on to receive 10,000 FUN tokens. As she provided a service, these tokens may be treated as other income by the BMF. Lea should ask her local tax professional for advice on this matter.

NFTs

While there are no specific guidelines on NFT tokens from German tax authorities, NFTs as cryptocurrency assets could safely be assumed to incur the same type of Income Tax as other cryptocurrency assets in the region. This means that as a German taxpayer if you buy an NFT and do on to dispose of it for a profit, you will pay tax depending on the length of time you held the NFT and/or the amount of profit you made.

Example: Gunther purchases a Cryptopunk in February 2020 for 1 ETH at the value of 200 EUR. He goes on to sell his Cryptopunk in April 2022 for 100 ETH at the value of 300,000 EUR. Gunther held his Cryptopunk for longer than one year, which means the 299,800 EUR profit he made will be tax-free.

Crypto as a salary

If you are receiving crypto as part of a salary from your job, it will be taxed as income at the time you receive it. You would declare it as part of ordinary income on your annual tax return.

When is the deadline to file my crypto taxes as a German citizen?

In Germany, the financial year is from January 1 to December 31, with individual tax returns being due on the 31st of July unless that date falls on a weekend in which case the due date shifts to the next weekday. For the 2021 financial year, you will need to file your individual annual tax return by August 1st, 2022.

Accounting methods

German tax authorities recommend that you apply the First-in First-out (FIFO) method to determine your crypto taxes. FIFO means that your eventual profits are calculated based on what cryptocurrency assets you bought first - these will be taken to be the first sold.

How CryptoTaxCalculator can help

At CryptoTaxCalculator, we recognize that a native experience is the best type of experience. That’s why we’ve translated our entire platform into German so that you as a German user have the option of switching between English or German versions of the CryptoTaxCalculator app.

On top of that, we have worked to make it simple to import all of your crypto activity into one place. By using our integrations, you can either use your public wallet address, an API key and/or a CSV to import your crypto transaction history into the platform. Once you’ve done this for all of your relevant data sources, our algorithm will automatically categorize the majority of your transactions in accordance with BZSt guidelines. If there are any outstanding transactions that need reconciliation, you have the ability to choose from our range of transaction categories.Once all of your transactions are reconciled, you will be able to produce a tax report for any financial year, in line with the BZSt guidelines.

And we’re not finished! We automatically apply the FIFO inventory method to your transactions when you register as a German user so that you can be assured that your final report will be compatible with BZSt guidelines. The platform will also automatically apply EUR currency conversions to each of your crypto transactions so that you always have a fiat-based understanding of your portfolio positioning.

The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Cryptotaxcalculator disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.

Shane Brunette

CEO

Shane Brunette founded CTC back in 2018 after dealing with his own crypto tax nightmare. He has worked closely with accountants and tax lawyers to make it easy for fellow cryptocurrency users to be tax compliant.

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