As I recently reported, the German Federal Fiscal Court had to rule on a very relevant circumstance for the crypto industry, namely whether the sale of cryptocurrencies (at a profit) triggers a tax liability.

Key Facts

The Federal Fiscal Court has ruled that the sale of cryptocurrencies is taxable.
Cryptocurrencies are considered economic goods and not just virtual products.
The IX Senate considers digital currencies to be a means of payment under the Income Tax Act.
A structural enforcement deficit in the tax administration was not recognized by the BFH.
Investments in cryptocurrencies are taxable if sold within one year.
The exemption limit for profits is EUR 600, irrespective of other assets.
Losses from crypto trading must also be taken into account like other losses.

The BFH has now affirmed this and thus rejected the plaintiff’s argument that cryptocurrencies are not an economic good because they only exist virtually. The IX Senate of the BFH considers virtual currencies to be a “different asset” under the Income Tax Act and, from an economic point of view, a means of payment. The term is to be understood in a broad sense, because it does not only refer to objects and rights, but also to actual conditions as well as concrete possibilities and advantages, the attainment of which costs the taxpayer something. Cryptocurrencies would be traded on trading platforms and exchanges, they would have a market value and would be used for payment transactions. Technical details, on the other hand, are not decisive for the property as an economic good.

The highest tax court also did not want to accept a structural enforcement deficit at the tax administration, that there would be no evidence that tax offices would not record or determine gains and losses from cryptocurrencies.

Anyone who invests in virtual currencies and sells them within the speculation period of one year is therefore liable to tax insofar as the exemption limit of 600 euros is exceeded. Incidentally, this also applies if the exemption limit for other assets has already been exhausted. However, losses may of course also be incurred and would have to be taken into account in the same way as losses in other areas.

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.

Tags: Cryptocurrency Federal Fiscal Court