Take Bitcoin profits tax-free? That works, says Taxfix tax expert Juliane Kutzke. But many a crypto tax privilege could soon be a thing of the past.
We talked to Juliane about the upcoming deadline for the tax return, exemption limits, taxes on lending and no longer privileges in the crypto sector.
City Telegraph Editorial Team: When is the deadline for the tax return?
Juliane Kutzke, DE Tax Lead at Taxfix : This year it’s October 31st. It would normally be July 31st. However, it was extended due to Corona. In addition, if a deadline falls on a weekend, as is the case now in this case, i.e. Saturday, Sunday or public holiday, then the deadline is postponed to the next working day. Therefore this year the deadline is Monday, November 1st. This in turn is a public holiday in some federal states, for example in Bavaria and North Rhine-Westphalia. This is why taxpayers who are resident in these federal states can still submit their tax return on time until November 2nd.
BTC-ECHO: Where should I enter Bitcoin profits in the tax return? Is there a distinction between Bitcoin and other crypto values?
Juliane Kutzke : It doesn’t make any difference. Everything is more or less the same with cryptocurrency. According to tax law, cryptocurrencies are all “other economic goods”. The sale of these “other assets” represents a so-called “private sale transaction”. If these are taxable, then they are “other income” and therefore they are included in Annex SO (other income). In this they are entered under the “private sales transactions”.
City Telegraph Editorial Team : That sounds complicated.
Juliane Kutzke : That’s why the Taxfix has solved it differently: We ask the questions about profits in the “Income” category, where one would intuitively expect such items and then automatically enter them for our users in the correct form. In the Taxfix app there are questions like: When did you buy the coins? When is it sold? How much paid How much did you get This is then automatically calculated and entered.
City Telegraph Editorial Team : What tax burden can you expect if you have made a profit with Bitcoin? Can that be said across the board or is it different?
Juliane Kutzke : Unfortunately, that cannot be said in general terms . This is always the case with taxes because the tax rate in Germany is linearly progressive. Graphically speaking, the tax rate rises at an angle. That means: the higher the income, the steeper the slope. As a result, it comes down to total income, not just income from Bitcoin deals. Because the tax rate is always based on the taxable income (zvE). This in turn is calculated from all income minus all expenses.
For the sake of clarity, I’ve come up with an example: In this, the taxable income is 25,000 euros and there is a profit of 2,000 euros from Bitcoin transactions. The tax only on the 25,000 euros income would be around 3,714 euros in 2020. If you add the 2,000 euros from the Bitcoin transactions, the result is a tax of 4,290.00 euros. Thus, the difference between income with and without Bitcoin profits is 576.00 euros. Now you might think that this is the tax on Bitcoin. However, due to the fact that the basis is the zvE, one cannot say that. If the zvE were lower, the difference between the two taxes would be smaller. The same applies if the zvE were higher, the difference would also be higher. Therefore, it is absolutely impossible to make a general statement about the tax burden. It always depends on the personal situation: on all income and all expenses that you have.
This can also be calculated free of charge with Taxfix.
“If all profits from all private sales transactions amount to a maximum of 599.99 euros, they are tax-free”
City Telegraph Editorial Team : Is there a way to sell Bitcoin and make a profit without paying any taxes?
Juliane Kutzke : Yes, there are. There is a so-called speculation period in private sales transactions. For other assets this is one year. For land, for example, it is ten years. For cryptocurrencies, this means that the profit is tax-free, provided that the digital coins are held for at least one year and only then sold. If you sell them in between or before that, the business is taxable.
In addition, there is an exemption limit: If all profits from all private sales transactions are less than 600.00 euros, i.e. a maximum of 599.99 euros, then they are tax-free.
City Telegraph Editorial Team : Lending is a current topic. This means that I can lend Bitcoin or other cryptocurrencies to a platform and receive interest for it. How are these taxed? We are particularly interested in the theoretical case, in which I simply “leave it behind”, generate interest in Bitcoin and never pay out in a fiat currency. Do I have to pay tax on them?
Juliane Kutzke: Yes, you have to pay taxes on that too. Because this is also very likely income. I have to say in advance that, in my opinion, crypto currencies and Co. are new territory for the German tax authorities. In June the Federal Ministry of Finance presented a draft of possible legal regulations. In this the ministry expresses itself on a great many things. For example, they declare lending to be a benefit in the report. As a result, the interest income from this would be allocated to “other income from services” in the future. The reason is that you let others use it and get something back in return. In the draft, the Federal Ministry of Finance speaks of a possible tax-free amount in this case as well. The limit to tax liability would be 255.99 euros.
Bitcoin holding period could be extended to ten years
City Telegraph Editorial Team: Are there any other important findings from the report?
Juliane Kutzke : In the draft, the ministry also writes an important change for everyone : n those interested in lending: n exciting change: in the case of the use of lending, the owner would: in the above-mentioned one-year speculation period on Bitcoin and Co . extend. Since the coins are then used to generate “other income”, the period is then extended from one year to ten years until tax exemption.
According to the draft, lending would be a source of income.Juliane Kutzke
City Telegraph Editorial Team: I still have to chop it up again: Does the extension apply according to the draft, only for lending activities or generally for the Bitcoin holding period?
Juliane Kutzke : The Bitcoin holding period could therefore generally be extended if Bitcoin or other virtual currencies are used as a source of income. And according to the draft, lending would be a source of income. So if you use the cryptocurrencies to generate income in whatever way, then it extends. In the event that the digital coins are really only lying around on the wallet, the deadline is not extended.
City Telegraph Editorial Team: And is that so easy to enter at Taxfix? True to the motto: I invested this bitcoin at the time and received so much bitcoin as interest and you then calculate the tax for lending for me?
Juliane Kutzke : It’s not quite that intuitive yet. In our system, lending is not yet explicitly mentioned or queried as a category. However, it can be recorded under other income as other services. We are also looking at how we can make this more understandable for users in the future