How are profits and losses from Bitcoin treated for tax purposes?
Bitcoins are a digital, anonymous currency independent of central banks. However, many people do not really know what it is and how it works. What is widely noticed, however, are press reports about the extreme increases in value, especially recently. At the beginning of 2017, Bitcoin was still trading at around 1,000 dollars - and on 28.11.2017 it broke the 10,000 dollar mark.
On 06.12.2017, the price broke through 12,000 dollars, on 07.12.2017 it even broke the 14,000 dollar mark, and shortly before Christmas it was worth almost 20,000 dollars! After Christmas, however, the price was back at around 17,000 dollars. Anyone who is now the lucky owner of a Bitcoin is considering whether to turn the gigantic virtual gains into real money and what the tax implications might be.
The tax authorities have clarified that Bitcoins can be the subject of a private sale transaction in accordance with section 23 (1) no. 2 EStG (BT-Drucksache 17/14530 dated 09.08.2013, p. 40). This means:
- The exchange or re-exchange of Bitcoins into euros or another cryptocurrency within one year of acquisition constitutes a private sale transaction in accordance with section 23 (1) no. 2 EStG. If euros are exchanged for Bitcoins, the asset "Bitcoin" is acquired. You should definitely record the acquisition date, acquisition price and quantity purchased.
- If Bitcoins are sold within 12 months of acquisition, i.e. exchanged into euros, profits are fully taxable as "other income" in accordance with section 22 no. 2 EStG at the individual tax rate. However, capital gains tax does not apply. However, a profit remains tax-free if it is below the exemption limit of 600 euros. Losses may only be offset against profits from private sales transactions, through loss offset in the same year and through loss deduction in the previous year and/or in subsequent years. The transactions must be declared in "Anlage SO".
- If the sale of Bitcoins takes place after 12 months, profits are completely tax-free and losses are irrelevant for tax purposes.
- If Bitcoins are acquired successively and held in the same account, the "first in, first out" rule applies: for the calculation of the speculation period and the capital gain, the Bitcoins purchased first are deemed to be sold first (FinMin. Hamburg dated 11.12.2017, S 2256-2017/003-52).
- If interest income is generated from the Bitcoin investment as a source of income in at least one year, the speculation period is extended from 1 year to 10 years (section 23 (1) no. 2 sentence 3 EStG).
If cryptocurrencies are acquired or produced as part of a commercial activity with the intention of making a profit, profits from the sale or exchange of the cryptocurrency must be recorded under "income from business operations". The costs for mining cryptocurrencies are deductible as business expenses.
The Nuremberg Tax Court has currently expressed doubts about the tax authorities' view. Although there is only a decision in a so-called suspension procedure; the decision on the main issue is still pending. However, the judges point out that the Federal Fiscal Court has not yet ruled on the taxation of cryptocurrencies. Therefore, there are considerable doubts about the legality of the taxation of cryptocurrencies, which would justify a suspension of the enforcement of the contested tax assessment (FG Nuremberg, decision of 08.04.2020, 3 V 1239/19).
Tipp
File an objection against notices in which profits from cryptocurrencies are taxed and refer to the current proceedings. With a little luck, the tax office will suspend your proceedings until the Nuremberg Tax Court and possibly later the Federal Fiscal Court have ruled. Admittedly, the likelihood that the Federal Fiscal Court will actually leave profits from cryptocurrencies untaxed is not very high, especially as it recently considered profits from the sale of football tickets to be taxable (Federal Fiscal Court ruling of 29.10.2019, IX R 10/18).
Lohnsteuer kompakt
Current: There is currently a draft BMF letter entitled "Individual questions on the income tax treatment of virtual currencies and tokens" (BMF letter dated 17.06.2021). It remains to be seen what the final version will look like and to what extent the BMF will establish new principles.
(2021): How are profits and losses from Bitcoin treated for tax purposes?
How are profits and losses from gold sales treated for tax purposes?
Gold and silver have seen significant value changes in recent years. Many are considering selling their gold coins and bars to "cash in". But how are profits and losses from the sale of gold treated for tax purposes? The sale of coins and bars is considered a private sale transaction for tax purposes, and the 12-month holding period plays an important role (§ 23 para. 1 no. 2 EStG):
- For sales within 12 months of purchase, profits up to 600 Euro per year are tax-free. This is an exemption limit, not an allowance. Profits of 600 Euro or more are fully taxable as "other income" in accordance with § 22 no. 2 EStG at the individual tax rate. However, capital gains tax does not apply. Losses may only be offset against profits from private sales transactions, through loss offset in the same year and through loss deduction in the previous and/or following years.
- For sales after 12 months, profits are completely tax-free and losses are irrelevant for tax purposes.
The exemption limit means: A total profit of 599 Euro is completely tax-free, whereas a profit of 600 Euro or more is taxable from the first Euro. Profits from private sales transactions must be declared in the income tax return in "Anlage SO" on the reverse side. However, you are only obliged to submit this "Anlage SO" if your total profit or the total profit of your spouse from private sales transactions is at least 600 Euro.
Lohnsteuer kompakt
The exemption limit of 600 Euro applies per person, provided each person makes the corresponding profits. It is not doubled for married couples. If purchases and sales are made through a joint marital account, the profits are attributed to both spouses equally (in "Anlage SO" in line 47). This way, the exemption limit is taken into account for each spouse.
There are bonds that entitle the holder to delivery of gold or another commodity and are backed by gold or another commodity in physical form. In Germany, this is particularly the XETRA-Gold bond from Deutsche Börse Commodities GmbH. The exciting question is how this bond is treated for tax purposes and whether it is subject to capital gains tax.
In 2015, the Federal Fiscal Court ruled that the profit from the sale or redemption of Xetra-Gold bearer bonds, which grant the holder a right to delivery of gold, is tax-free after the one-year holding period between the purchase and sale of the securities. As a result, the BFH equates the purchase and redemption or sale of the bond with the direct purchase or sale of physical gold (BFH rulings of 12.5.2015, VIII R 4/15, VIII R 35/14, VIII R 19/14).
Recently, the Federal Fiscal Court (in its ruling of 16.06.2020 (VIII R 7/17) continued its case law, according to which the sale of exchange-traded bearer bonds that entitle the holder to delivery of physical gold and reflect the current gold price does not constitute the taxable sale of a capital claim. According to the BFH, the profit made by the claimant from the sale of "Gold Bullion Securities" bearer bonds did not result in taxable income from capital assets within the meaning of § 20 para. 2 sentence 1 no. 7 EStG, as the bonds are not to be classified as other capital claims within the meaning of § 20 para. 1 no. 7 EStG.
(2021): How are profits and losses from gold sales treated for tax purposes?
