BHF: Capital gains taxable in the case of cryptocurrencies

In a ruling dated February 14, 2023, the BFH (IX R 3/22) confirmed the taxability of swaps and sales of cryptocoins in the case of Bitcoin, Ethereum and Monero, provided that a swap and/or sale takes place within one year of the coin's acquisition (Section 23 (1) sentence 1 no. 2 EStG).

This is because virtual currencies (currency tokens, payment tokens) represent a "different asset" within the meaning of Section 23 (1) Sentence 1 No. 2 EStG in the opinion of the BFH. Regardless of the technical peculiarities of the blockchain, the BFH attributes the income to the taxpayer who holds the de facto right to dispose of tokens.

Risk of discovery of previously untaxed income from crypto assets

In parallel, the tax authorities have already initiated and sent so-called collective information and submission requests pursuant to Sections 93 (1), 97 and 208 (1) No. 3 AO to known crypto trading exchanges (e.g. Bitcoin.de) in the past months. Based on the information provided to the tax authorities, criminal tax investigations have been opened against taxpayers in the meantime.

In other cases, taxpayers have been requested to provide information and make subsequent declarations by separate letter on the basis of the information provided by the respective crypto exchange (Section 208 (1) No. 3 AO).

Consequently, there is a considerable risk of discovering previously untaxed income from crypto assets. Taxpayers who have generated income from cryptocurrencies or trading in NFTs in the past without disclosing this to the tax authorities should seek advice in the short term regarding the subsequent declaration. The currently existing time window should be used for the post-declaration (so-called voluntary disclosure).

Advice on the post-declaration of income from cryptocurrencies

The ruling of the Federal Fiscal Court represents a significant decision regarding the taxation of Bitcoin and other cryptocurrencies. 

We provide comprehensive advice on the tax recording and evaluation of cryptotrades, airdrops, lending, staking and accompany subsequent declarations and voluntary disclosures with regard to any taxable income or capital gains. You will always have a competent contact person for questions and will be informed about the current status of your proceedings at any time without being asked. 

The further practice of the tax offices and the developments in tax case law regarding the taxation of cryptocurrencies will be monitored by our lawyers, tax advisors and crypto experts.

BFH, Judgment of February 14, 2023 - IX R 3/22