Federal Fiscal Court rules: Cryptocurrency trading subject to tax

April 05, 2023 /

According to a ruling by the Federal Fiscal Court, profits made from the sale of cryptocurrencies are subject to income tax. The decision was preceded by a discussion between the plaintiff and the tax office.

Tax office demanded income tax

In this case, the plaintiff traded privately in various cryptocurrencies in the 2017 financial year, generating a profit of around 3.4 million euros. The responsible tax office was of the opinion that, according to § Section 23 (1) sentence 1 no. 2 EstG income tax would have to be paid. The plaintiff did not agree and filed a complaint with the tax court, which was unsuccessful.

Cryptocurrencies are economic means of payment

According to the Federal Fiscal Court, these requirements are met in the case of virtual currencies such as Bitcoin or Ethereum. Cryptocurrencies are “economically to be regarded as a means of payment”. They are traded on trading platforms and exchanges, have a market value and can be used for payment transactions directly between the parties involved. The technical details of the virtual currencies are not relevant to their status as an asset. If the acquisition and sale or exchange of the tokens took place within one year, the resulting gains or losses were subject to taxation.

Cryptocurrencies in general

Interest in cryptocurrencies has skyrocketed in recent years, most likely also due to the triumph of Bitcoin, which has rapidly increased in value in phases. In general, cryptocurrencies can be described as a type of virtual money. Unlike paper money, which is usually managed centrally, cryptocurrencies are purely digital. With the special feature of decentralized administration. Anyone who uses cryptocurrencies can see who has traded with whom and at what time via the blockchain.

You can find more general information on the topic in the blog article on the legal classification of Bitcoin.

Sources:
Tax treatment of gains from the sale of cryptocurrencies (haufe.de; last accessed on 30.03.2023)
Capital gains on cryptocurrencies are taxable (rsw.beck.de; last accessed on 30.03.2023)

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