Updated circular on the income tax treatment of crypto assets in Germany

The Federal Ministry of Finance in Germany has now provided assistance to taxpayers declaring crypto assets such as Bitcoin in their tax return to help them document and declare their income. This guidance is also available to taxpayers and tax offices outside Germany. The Ecovis experts are familiar with the details. 

In response to the ongoing developments in the crypto sector, the German Federal Ministry of Finance (BMF) has clarified the tax treatment of crypto assets. These requirements replace the previous circular dated 10 May 2022, which is published under the title “Individual questions on the income tax treatment of certain crypto assets”.

What now applies to taxpayers?

Taxpayers holding or trading in crypto assets should familiarise themselves with the new cooperation and record-keeping requirements and ensure that their documentation is tax compliant, given the cross-border nature of these assets. Key changes include:

1. Terminology: The term “crypto assets” is now used instead of “virtual currencies and other tokens” to reflect the evolution of regulatory terminology. A detailed description of the various crypto assets can be found here.

2. Transactional gains: These are taxable within one year, while long-term holding periods may offer tax advantages. Please find detailed information here.

3. Stricter documentation and tax reporting requirements:

• Investors who make large profits (more than €500,000) must keep all relevant documents archived for six years.
• Investors must keep detailed records of all transactions – such as purchases, sales, stakes, loans or airdrops. Incomplete records can lead to blanket assessments by the Inland Revenue and unexpectedly high tax bills.
  • Details of purchases and sales: Date, amount, type (purchase, exchange, mining, staking, airdrop), platform used, cost (including transaction fees and account setup) and market price source if not in EUR.
  • Use in transactions: Records of purchases/exchanges of goods & services, including credit card statements where applicable.
  • Valuation and accounting: Method chosen (FIFO, average cost, or specific identification), records of purse transactions and documentation of reallocation.
  • Other revenue sources: Mining, staking, lending, forging, airdrops, and similar activities.
  • Additional data is available upon request: Source of funds, wallet balances at key dates, wallet addresses, transaction hashes (for decentralised trades), and platform account details.

More information on stricter documentation and tax reporting requirements can be found here.

4. Staking, lending – income from capital assets: In the future, activities such as staking and lending will be classified as income from capital assets and will be subject to personal income tax.

For further information please contact:

Steffen Baierlein, Tax consultant, ECOVIS Wirtschaftstreuhand GmbH, Munich, Germany
Email: Steffen.Baierlein@ecovis.com