How does Germany taxes crypto? Are cryptocurrencies really tax free?

How does Germany taxes crypto? Are cryptocurrencies really tax free?

Germany has hit the headlines as an attractive country for individuals to invest in cryptocurrencies, let's understand why.

First of all, please note that the German Federal Central Tax Office considers cryptocurrencies as private money for tax purposes. In this sense, cryptocurrencies are not considered as a legal tender, foreign currency nor as property.

At a personal level, profits regarding cryptocurrencies are tax-free if the total profit generated from private sales transactions in the calendar year was less than 600 Euros and sales of cryptocurrencies held over a year are tax exempt in Germany.

This makes it a very attractive regime for individuals (0% tax rate), specially for long term hodlers.

However, note that if at least one of these conditions is not met (holding over a year or sale under 600 Euros), the income arising from the sale of cryptocurrencies are subject to income tax over the net amount gained or lost at the time of the sale.

This income is subject to Personal Income Tax, which has progressive tax rates ranging as follows (2021 tax year):

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Additionally, crypto to crypto and crypto to fiat sales are taxable under German tax law, and fees paid are deductible for tax purposes.

In what regards income arising from mining bitcoin, this is taxed as other income under German tax law and the taxable amounts are the net profit on the cryptocurrency (i.e. the revenue from mining deducted from the costs associated such as energy).

Help calculating German crypto taxes

A useful resource to calculate and report your German crypto taxes is using a crypto tax calculator. There are some options available on the market, so we created a Crypto Tax Software Comparison tool, to help you find the right tool for your situation (taking into account the exchanges you use, how many crypto transactions you do per year and other variables).

Since crypto tax reporting is still in its early days, a crypto tax software may also be a useful tool to provide reports to your accountant to help in the report process (since at this stage most accountants are not familiar with the crypto world).

In conclusion

Germany has a very attractive tax regime for long term (held over a year) individual investments in cryptocurrencies or for small yearly profits (below 600Euro), since these are tax exempt.

Nevertheless, this doesn't mean that Germany is a tax haven for crypto, since other types of income may be subject to tax.

This post is brought to you by CoinTaxList, which focuses on crypto tax research and knowledge.

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Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto taxes, we recommend contacting a specialist in the specific country.

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