(2023) How are profits and losses from Bitcoin treated for tax purposes?

Cryptocurrencies such as Bitcoin, Ethereum, or Litecoin are becoming established as a means of payment, although they are often seen as speculative objects. The Federal Ministry of Finance has issued guidelines on the taxation of cryptocurrencies (BMF letter dated 10.5.2022, IV C 1 - S 2256/19/10003 :001).

Key points:

• Capital gains from exchanges within one year are taxable; gains up to 600 Euro remain tax-free.
• The sale of acquired cryptocurrencies is tax-free after one year.
• Repeated trading in cryptocurrencies may constitute a commercial activity.
• Block creation is considered commercial and subject to income tax.
• Income from block creation may be taxable if it exceeds 256 Euro per year.

The Federal Fiscal Court has ruled that capital gains from the sale or exchange of cryptocurrencies such as Bitcoin, Ethereum, and Monero within one year are subject to income tax (BFH ruling of 14.2.2023, IX R 3/22).

A claimant made a profit of 3.4 million Euro in 2017 from trading cryptocurrencies. The BFH confirmed the tax liability of the capital gains. Cryptocurrencies are considered assets subject to private sales transactions under § 23 EStG. The taxation is not constitutionally objectionable.