Where can I trade crypto without verification
Bitcoin, Ethereum & Co: This is how you tax cryptocurrencies
Do you buy and sell cryptocurrencies such as bitcoins? Then the subject of Bitcoin tax is relevant for you. Because the tax authorities are also interested in your trade with the virtual currency. One important piece of information in advance: Crypto currencies such as Bitcoins are virtual currencies. Onecoin is not a classic crypto currency, but a financial system marketed as a crypto currency. The Federal Financial Supervisory Authority, or BaFin for short, has classified Bitcoins & Co. as units of account. Cryptocurrencies are therefore not legal tender. In terms of income tax law, bitcoins and so-called crypto assets are classified as economic goods.
By the way
In April 2020, the Nuremberg Tax Court (FG) questioned whether profits from trading in cryptocurrency should be taxed at all. In tax German it reads like this: "Whether income from transactions with crypto currencies qualify as taxable private capital gains within the meaning of Section 22 No. 2 in conjunction with Section 23 (1) EStG is questionable. It is also uncertain whether a taxation of such income in relation to any crypto currencies can even be assumed without careful examination. " Therefore you have to wait for the highest judge's assessment, because this judgment contradicts the decision of the FG Berlin-Brandenburg from 2019 (File number 13 V 13100/19).
Our video gives you a quick overview of the topic of cryptocurrency and tax:
Trading bitcoins is a private sales transaction
As a result of this classification, trading in virtual currencies such as Bitcoin, Etherum or Onecoin, but also with Ripple or Litecoin, is one of the private sales transactions - also known as speculative transactions - for tax purposes. For example, anyone who exchanges bitcoins for euros via a trading platform and thus achieves a so-called capital gain may have to pay taxes. The date on which the digital currency was purchased is decisive for taxation. There are two scenarios:
The basic idea behind crypto currencies: Crypto currencies are structured decentrally. So control is not with a financial institution, but with the global community. The price of crypto depends on supply and demand, which also explains the strong price fluctuations. The so-called Bitcoin was the first publicly traded crypto money in 2009. Almost ten years later, there are over 3,000 other cryptocurrencies worldwide.
Holding period of more than one year: tax-free
If you bought Bitcoin & Co. more than a year ago, things are simple - your capital gains remain tax-free. However, there is one limitation: If you earn interest with your crypto currency, not only is the withholding tax due for the interest, but the so-called speculation period also increases from one to ten years.
Holding period of less than one year: taxable
Anyone who only holds the bitcoins for a few months and then sells or exchanges them for a profit must tax the profit at the personal tax rate. However, there is an exemption limit that helps you save. Because private sales transactions remain tax-free up to an exemption limit of 600 euros per year. But be careful: The exemption limit should not be confused with the exemption. Anyone who is even one euro above the exemption limit must pay tax on all of their capital gains.
By the way:
The exemption limit applies to all private sales transactions within a year. That means: If, in addition to capital gains from Bitcoin trading, you also sold a work of art, for example, you have to add up all the profits for a year. Your private sales are only tax-free if your profit remains below 600 euros. You can read more about this in our article on the speculation period.
Determine profits using the Fifo method
The capital gain is the difference between the sales price achieved and the purchase price of the cryptocurrency. There is only one problem: Like stocks, cryptocurrencies are subject to price fluctuations. So which order of purchases and sales must be adhered to? Basically, the Fifo method comes into play with Bitcoin & Co. Fifo stands for “First in, first out” and means that, for example, the bitcoins bought first are offset against the bitcoins sold first. The VLH therefore recommends that you document all Bitcoin transactions that you do very precisely. In this way, in case of doubt, you can provide the tax office with precise evidence.
Losses can be offset
After all: Losses from Bitcoin trading can also be offset - either with profits from the previous year or, thanks to losses carried forward, with future profits. However, losses from private sales transactions can only be offset against such profits, not against profits from stock transactions, for example.
How to enter the digital money on your tax return
You enter your capital gains from Bitcoin trading, for example, in Annex SO (other income). Even if your winnings are below the exemption limit of 600 euros. Because the tax office must first officially determine the tax exemption.
Taxation not yet finally clarified for ICOs and other investments
In addition to classic trading in Bitcoin & Co., many other investment opportunities are currently emerging around crypto currencies. One of these options is the so-called Initial Coin Offering, or ICO for short. Companies whose business model is based on a crypto currency use the ICO as a kind of crowdfunding. Ultimately, with an initial coin offering, part of a newly issued cryptocurrency is sold to investors either for a state currency or, for example, Bitcoins. This is how cryptocurrency companies can raise new capital.
If you have participated as an investor in an ICO or, for example, lent bitcoins, it becomes more complicated with the tax return. The tax authorities have not yet issued an official statement on the taxation of these investments. The tax office will accordingly currently examine each case individually.
By the way:
In addition to the classic purchase of crypto money on corresponding online marketplaces, the virtual currencies can also be earned through so-called mining. In mining, the user's computer has to solve difficult mathematical equations. This process creates new virtual money. But be careful: Anyone who makes a profit by generating Bitcoins, for example, has income from commercial operations.
With cloud mining - you don't dig yourself, you have it digged - the taxation depends on the precise contractual arrangement with the service provider. The tax office is currently still examining each individual case individually.
This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to § 4 No. 11 StBerG.
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