German Ministry Of Finance Provides Guidance On Bitcoin Taxation

March 3, 2018

German authorities have shed some light on cryptocurrency tax implications.

  • On February 27, 2018, the German Federal Ministry of Finance, Bundesministerium der Finanzen, released a message to the public clarifying that it would not tax cryptocurrencies such as bitcoin when they are used in payments.

    According to the document, when used for purchases, cryptocurrencies will receive the same tax treatment as legal tender. The ministry cited a 2015 European Union Court of Justice judgment pertaining to value-added taxes (VAT) as the basis for the decision.

    A translated excerpt from the ministry’s recently issued document affirms the legality of cryptocurrencies as a payment method:

    “Virtual currencies (cryptocurrencies, e.g., Bitcoin) become the equivalent to legal means of payment, insofar as these so-called virtual currencies of those involved in the transaction as an alternative contractual and immediate means of payment have been accepted and no other purpose serve as a means of payment.”

    For purchases, taxes will be calculated (in accordance with the EU’s VAT Directive) based on the converted value of the cryptocurrency’s fiat pair value at the point of sale, which is reported by the vendor. In addition, taxes may also be applied to fees collected by providers of digital wallets and other types of services relating to cryptocurrencies.

    Taxes will not be applied to block rewards sent to miners. Likewise, intermediaries who facilitate cryptocurrency conversions to or from fiat currency would not be considered liable for taxes. The EU ruling considers such conversions a “supply of services” that are tax exempt.

    Intermediary operators of exchanges that purchase or sell cryptocurrencies will also be exempt, but that won’t be the case for exchanges that facilitate a marketplace.

    Various nations have been taking different approaches to the new digital assets. Israel, for example, recently confirmed that cryptocurrency will continue to be regarded as a property, while Australia passed a bill last year to remove double taxation of cryptocurrency.

    Translations by Google.

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