Taxation of Cryptocurrencies
The taxation of profits from cryptocurrency trading has become increasingly important both for taxpayers and the tax authorities in Germany. For a long time, it was a legally controversial issue. In a landmark judgment of 14 February 2023 (Case IX R 3/22), the Federal Fiscal Court (BFH) clarified that profits from the sale of so-called currency tokens – such as Bitcoin (BTC), Ethereum (ETH) and Monero (XMR) – are subject to income tax.
If you are under investigation in Germany for white-collar or corporate crime – for example in connection with the conduct described on this page – you should involve our English-speaking criminal defence solicitors in Frankfurt at an early stage, with particular experience in white-collar and corporate crime defence and, where relevant, also in tax evasion and criminal tax law.
For a confidential initial assessment of your situation and the development of a tailored defence strategy, you can reach us on +49 69 710 33 330 or by email at kanzlei@dr-buchert.de.
Facts of the Case
The claimant acquired Bitcoin via a trading platform between 2014 and 2016 and transferred them into a private wallet. At the beginning of 2017, he exchanged his Bitcoin for Ethereum, later swapped Ethereum for Monero, and finally sold the Monero in several transactions for euros. He declared the resulting profits in his 2017 tax return. The tax office assessed the relevant tax, against which the claimant unsuccessfully filed an appeal and later a lawsuit. The Federal Fiscal Court ultimately rejected his revision as well.
Classification of Cryptocurrencies as Assets
The BFH held that cryptocurrencies such as BTC, ETH and XMR are to be classified as “assets” within the meaning of § 23 (1) no. 2 of the German Income Tax Act (EStG). Their sale thus constitutes a taxable private disposal if it occurs within the one-year speculation period. The concept of “assets” extends not only to tangible property and rights but also to concrete opportunities, economically exploitable advantages, and legal positions.
Control and Tax Attribution
The BFH further explained that tax attribution of currency tokens is based on § 39 (1) of the Fiscal Code (AO). Possession of the “private key” is sufficient for recognition as the economic owner under this provision. Each act of the claimant – whether purchase, exchange, or sale – qualifies as a disposal transaction within the meaning of § 23 (1) no. 2 EStG. This includes exchanges between different cryptocurrencies as well as with euros or foreign currencies.
No “Normative Enforcement Deficit”
The BFH rejected the argument that there was a “normative enforcement deficit” for the relevant period. Such a deficit could only be assumed if the equality of taxation were significantly undermined by the structure of the collection procedure. Already in 2017, the taxation of cryptocurrency profits was both legally applicable and practically enforceable, with the tax authorities able to record and tax such profits.
Consequences of the Ruling
The judgment provides legal certainty on the tax liability of cryptocurrency profits and eliminates previous uncertainties. There is no “grace period” for undeclared crypto gains. The likelihood of discovery has increased due to intensified controls by the tax authorities and automated reporting systems (e.g. CARF, DAC8 Directive).
Recommendations for Investors
Investors in cryptocurrencies must ensure complete documentation of all transactions and meet their tax obligations on time. Otherwise, they risk serious consequences under criminal tax law, including criminal investigations, fines or imprisonment. Our specialist criminal lawyers in Frankfurt advise and defend clients nationwide in matters of cryptocurrency taxation and tax evasion allegations.
FAQ: Taxation of Cryptocurrencies in Germany
Are cryptocurrency profits taxable in Germany?
Yes. According to the Federal Fiscal Court, profits from the sale of cryptocurrencies such as Bitcoin, Ethereum or Monero are taxable under income tax law if sold within one year.
Do exchanges between cryptocurrencies trigger taxation?
Yes. The BFH confirmed that exchanging one cryptocurrency for another constitutes a taxable disposal transaction.
What is the importance of the private key?
Possession of the private key determines tax ownership. Whoever holds it is considered the economic owner of the cryptocurrency.
Can I rely on a “grace period” for undeclared crypto gains?
No. There is no exemption period. Tax authorities can track undeclared profits, and automated reporting obligations are increasing.
What are the risks of non-compliance?
Failure to declare crypto profits may result in additional tax assessments, penalties, and potentially criminal tax proceedings.
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