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BFH and the taxation of gains from the sale of cryptocurrencies?

What has been decided so far?

Gains realized from the sale of cryptocurrencies are subject to income tax as part of a private sale transaction. This was decided by the 14th Senate of the Cologne Fiscal Court in a ruling dated November 25, 2021 (14 K 1178/20).

The plaintiff had previously acquired Bitcoins at the beginning of 2017. He initially exchanged these for Ethereum units in January 2017 and the Ethereum units for Monero units in June 2017. At the end of 2017, he partially exchanged his Monero units back into Bitcoins and sold them later that year. For the settlement of the transactions, the plaintiff had entered into either purchase contracts with providers of certain crypto assets at current prices or exchange contracts, in which he used his own crypto assets as consideration, via digital trading platforms.

In his 2017 income tax return, the plaintiff declared the gain of around €3.4 million generated from the sale as income from private sales transactions pursuant to Sec. 22 No. 2, Sec. 23 (1) Sentence 1 No. 2 of the German Income Tax Act (EStG). The tax office assessed the income tax in accordance with the declaration. The plaintiff then filed an objection. In justification, he essentially stated that there was a structural enforcement deficit in the taxation of capital gains from cryptocurrencies and that there was a violation of the principle of certainty. Therefore, these profits should not be taxed. Moreover, cryptocurrencies lack the necessary disposal of an “economic good”.

The Cologne Fiscal Court did not follow suit and dismissed the action. There is no structural enforcement deficit. In particular, this is not justified by the anonymous sale. In addition, the conditions for a private sale transaction were met. The cryptocurrencies are “other assets” within the meaning of Section 23 (1) No. 2 EStG. The qualification as an asset does not violate the principle of certainty, as there is no ambiguity as to the subject matter of the asset. The crypto assets traded by the plaintiff (Bitcoin, Ethereum, and Monero) were marketable and independently assessable. In addition, there is a structural comparability with foreign currencies.

The decision is not yet final. The appeal proceedings are pending before the Federal Fiscal Court under the case number IX R 3/22.

Exciting legal question at the Federal Fiscal Court

Thus, if a cryptocurrency conceptually falls under the constituent element of another asset within the meaning of § 23 para. 1 Sentence 1 No. 2 Sentence 1 EStG and thus within the scope of income from private sales transactions? Is there an enforcement deficit regarding the detection of cryptocurrency transactions?

All those concerned should probably pay close attention to the publications from 14.02.2023. This is because the oral hearing in the BFH – IX R 3/22 proceedings will take place there.


Marian Härtel

Marian Härtel

Marian Härtel is a lawyer and entrepreneur specializing in copyright law, competition law and IT/IP law, with a focus on games, esports, media and blockchain.

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