First nationwide guidance on the income tax treatment of cryptocurrencies issued by Germany's federal finance ministry (BMF)
According to a
release, on Wednesday, Germany's federal finance ministry (BMF) issued the
first nationwide guidance on the income tax treatment of cryptocurrencies which
also includes other blockchain-based tokens.
It is a 24-page document that covers and explained technically various aspects of crypto-related issues in terms of Germany’s income tax law. In a statement, parliamentary state secretary Katja Hessel said that after one year of owning the assets individuals can sell acquired cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH). According to the finance ministry, the main point of guidance covers crypto-related topics such as mining, staking, lending, hard forks, and airdrops, as well as tax implications of buying and selling bitcoin and ether. Further, Staking and lending protocols may also use digital assets under the new guidance. Section 23 of the German Income Tax Act specifies that those gains are tax-free if more than one year passes between the acquisition and sale of an asset.
This issue has become one of the most intensely discussed topics in recent months. To qualify for a tax exemption, cryptocurrencies held for stake or profit generation may have to behold for up to ten years."The deadline is not extended to ten years if, for example, bitcoin was previously used for lending or the taxpayer provided ether as a stake for someone else to create their block," Hessel added. In the release percentage rate of the crypto, income tax was not disclosed.
In mid-February, the Bahamas let residents pay taxes with cryptos. Bahamas residents began paying taxes with cryptos in mid-February. According to Hesse, the publication of the guidance is not the end of their engagement with the topic but an interim result. "Of course, the publication of the guidance is not the end of our engagement with the topic, but an interim result,” said Hessel.
According to Hessel, the German government is already working on a supplementary document that will focus on the cooperation between the federal states and their commitments to the issue. The new German government included cryptocurrencies and blockchain technology in its coalition agreement which are referred to as key elements that will support the country’s development over the next four years. After six months of which publication of the guidance on the income tax treatment of virtual assets came.
CBW - External Analyst