Reporting taxes on cryptocurrency is difficult — in Germany and in the rest of the world.
Whether you’re new to cryptocurrency or you’re a seasoned investor, tax season can feel stressful. Our team of tax experts put together this guide to help you navigate the process.
In this guide, we’ll break down everything you need to know about how cryptocurrency is taxed in Germany. We’ll share the fundamentals of cryptocurrency tax, how different types of transactions are taxed, and a few tricks that can help you reduce your tax liability.
Note: This guide is updated regularly based on the latest announcements from the German government.
Germany has some of the friendliest crypto tax laws in the world. In Germany, disposing of cryptocurrency after a year is completely tax-free. In addition, you won’t be taxed if you have less than €600 of short-term capital gains.
You’ll only be required to pay taxes if you earn more than €600 in short-term capital gains in a year or earn cryptocurrency income.
Your short-term cryptocurrency gains and cryptocurrency income are taxed according to your individual Income Tax rate. In Germany, workers get a tax-free allowance of €9,744.
In addition, individuals who’ve earned more than €9,744 will need to pay an additional 5.5% for the solidarity subcharge.
If you sell your cryptocurrency after less than 12 months of holding, you can determine your capital gains by subtracting your proceeds from your original cost for acquiring your crypto.
You can calculate your crypto income by looking at the fair market value of your coins at the time of receipt. This is considered income subject to income tax (even if the value of your coins rose/fell since then).
The BZSt can track cryptocurrency transactions.
The European Union’s Sixth Anti-Money Laundering Directive came into effect in December 2020 and applies to all cryptocurrency exchanges. As a result, all crypto exchanges with customers in EU member states need to register with the EU and collect customer information.
In Germany, the tax year runs from January 1st to December 31st. Typically, the deadline for submitting your tax return is July 31st of the following year.
It’s important that you don’t wait until the last minute to submit your tax return. Collecting the information you’ll need to report your taxes takes time, so it’s important to get started as soon as you can.
Remember, tax evasion is a serious crime with serious consequences.
In Germany, tax evasion is punishable by a fine and anywhere from 6 months - 10 years in prison.
Remember, late tax payments are subject to penalty as well. The penalty is 0.25% of your unpaid tax liability per month — which can be as high as €25,000 for high-income investors.
Looking for strategies to reduce your crypto taxes while staying compliant with German tax law? Here are three simple tactics that can help you save money.
By simply holding your cryptocurrency for longer than a year, you can ensure that you’ll pay no taxes upon disposal.
If you sell your cryptocurrency as a loss after fewer than 12 months of holding, you can offset capital gains (more on this later).
You can gift crypto to your spouse completely tax-free up to €500,000. If your spouse is in a lower tax bracket than you, they can potentially save money on a short-term disposal.
As noted above, disposals after 12 months are tax-free in Germany. Here are a few more examples of tax-free transactions.
In Germany, the preferred method for calculating your cryptocurrency taxes is FIFO (first-in-first-out). That means the first coins you acquired chronologically will also be the first that you dispose of.
Buying cryptocurrency with a fiat currency like EUR is not considered taxable.
Selling cryptocurrency you've held for less than a year is taxable. You’ll incur capital gains or losses depending on how the price of the crypto you’re selling has changed since you originally received it.
Spending cryptocurrency within a year of receiving it is considered a taxable disposal, just like selling cryptocurrency. You’ll incur capital gains or losses depending on how the value of your crypto has changed since you originally received it.
Trading a cryptocurrency you’ve held for less than a year for another cryptocurrency is taxable. You’ll incur capital gains or losses depending on how the price of the crypto you’ve traded away has changed since you originally received it.
If you’ve disposed of cryptocurrency for a loss after less than a year of holding, you can use this to offset any taxable gains and reduce your crypto tax liability for the year.
Just as gains on crypto that have been held for more than a year aren’t considered taxable, losses on crypto that have been held for more than a year cannot be used to offset gains.
Relevant exchange/blockchain fees can potentially reduce your tax liability. Fees can be deducted from the proceeds of your sale and reduce capital gains.
Cryptocurrency received as compensation for labour is considered income subject to income tax.
Coins earned from mining cryptocurrency are considered income. Businesses can deduct the costs of relevant expenses such as electricity and equipment. However, hobby miners cannot deduct relevant expenses.
If you dispose of your mining rewards after fewer than 12 months, they will be subject to short-term capital gains tax tax depending on how the price of your coins has changed since you originally received them.
Cryptocurrency earned from staking rewards is considered income. If you dispose of your staking rewards after fewer than 12 months, they will be subject to short-term capital gains tax depending on how the price of your coins has changed since you originally received them.
Airdrops may be taxable depending on the specific circumstances.
Airdrop proceeds are considered taxable income if you took specific actions to receive it such as paying gas fees to claim your tokens or sharing a social media post about the airdrop.
However, if you took no action to receive the airdrop, it will be considered non-taxable.
New units of cryptocurrency that are received due to a hard fork are not considered taxable. However, you will be taxed if you dispose of your coins within 12 months of receiving them.
At this time, the German government has not provided any guidance on NFTs. It’s likely that they’ll be taxed similarly to other crypto-assets.
As a result, it’s likely that disposing of NFTs after less than 12 months will be subject to income tax while disposing of NFTs after more than 12 months will be tax-free.
In addition, it’s important to remember that buying NFTs with cryptocurrency will be considered a taxable disposal if you’ve held your crypto for less than 12 months.
At this time, the German government has not provided any guidance on DeFi. It’s likely that DeFi transactions will be taxed according to the following rules.
Stablecoins are taxed similarly to other crypto-assets. Selling stablecoins or trading them for other cryptocurrencies after less than a year is considered taxable (though it’s likely that your taxable gain will be close to 0).
Cryptocurrency gifts are tax-free up to a certain point — €20,000 for friends and €500,000 for spouses. Larger gifts are subject to gift tax, which can range from 7-50%.
It’s important to keep detailed records of your cryptocurrency transactions. You should keep track of the following information for at least 5 years.
If you have taxable cryptocurrency income, you will need to fill out at least two tax forms.
Any German taxpayer who has earned income or received capital gains from any asset class needs to fill out this form. Here, you’ll enter general tax information — such as salary from your job and your German bank account.
This form is designed to help taxpayers report income from property tax. It can also be used to report income and short-term capital gains from cryptocurrency.
Tracking your cryptocurrency income and capital gains can be difficult, especially if you’re using multiple wallets and exchanges.
Crypto tax software can save you hours of time and effort. Instead of manually tracking your trading, you can automatically import dozens, hundreds, or even thousands of transactions from your blockchains and exchanges of choice.
With CoinLedger, it’s never been easier to file your cryptocurrency taxes. You can file your taxes in three simple steps.
Step 1: Import your wallets and exchanges to CoinLedger.
Step 2: Let the platform pull your transactions automatically and calculate your tax bill!
Step 3: Download your tax report.
Whether you’re using exchanges like Kraken or blockchains like Ethereum, CoinLedger can help take the stress out of your tax season. The platform is trusted by more than 300,000 crypto investors all across the globe!
Get started with CoinLedger today.
Step 1: Connect your CoinLedger account to your exchanges and wallets.
Step 2: CoinLedger will automatically alert you to any missing/incomplete information on your tax report.
Step 3: Click the View Report button to download your gains, losses, and income tax reports in AUD.
Step 4: Once your report is generated, send them to your accountant OR upload them directly via MyTax.