Tax & Legal

Recent developments in Germany have highlighted that income from crypto lending is taxed at the personal income tax rate as Bitcoin is not considered a legal tender for the purpose of capital gains taxation. The Cologne Tax Court confirmed this development and held that income from the transfer of the cryptocurrency Bitcoin in return for payment (known as crypto lending) is not subject to the 25% flat rate tax but taxable at the regular progressive scale rate.

The European Parliament endorsed the first EU rules to trace crypto-asset transfers, prevent money laundering, as well as common rules on supervision and customer protection.

Gains realized by taxpayers within one year from the sale or exchange of cryptocurrencies such as Bitcoin, Ethereum and Monero are subject to taxation as a private capital gain. At least as far as the year 2017 was concerned the Supreme Tax Court held that there was no normative enforcement deficit in the recognition and taxation of transactions with currency tokens which could be viewed as unconstitutional.

In a current circular, the tax authorities generally comment on the VAT treatment of services provided by exchanges and other trading platforms for financial products and, in this respect, partially amends an earlier decree issued in 2018 with regard to trading platforms for the acquisition or trading of Bitcoin and other so-called crypto currencies.

The ECJ has held that dealing in “bitcoin” and other virtual currencies is equivalent to a traditional currency exchange and is, as such, exempt from VAT.