Crypto: When a private investor has to pay tax on profits from Bitcoin and Co

Does a private person who sells or exchanges cryptocurrencies have to pay tax on profits? Yes, says the Federal Fiscal Court in a landmark judgment. An overview.

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AI Midjourney Editing: c't

AI Midjourney Editing: c't

(Image: KI Midjourney | Editing: c’t)

In the case of private transactions with cryptocurrencies, the question arises as to whether and, if so, how income from this should be taxed. The law dictates what should be taxed as which type of income. Income from capital assets such as dividends and interest from savings contracts are taxed at a so-called withholding tax rate of 25 percent according to Section 2 Paragraph 1 Sentence 1 No. 5 in conjunction with Section 20 of the Income Tax Act (EStG).

However, the profits from the private sale of foreign or cryptocurrencies are so-called speculative profits. This is subject to taxes at the personal tax rate.

In the case of private individuals, such gains or losses are only taken into account if the sale or exchange of the cryptocurrency takes place within one year of purchase (so-called holding period). For example, if someone only sells Bitcoin for a profit a year after their purchase, the tax office will get nothing.

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