Intraday trading is immoral

Is cryptocurrency trading taxable?

The year 2017 was the year of success for Bitcoin and other Altcoins due to the strong price increase. The number of new registrations at crypto exchanges such as Kraken, Poloniex & Co boomed, so that even one or the other exchange had to temporarily suspend the opening of trading accounts. Many got rich trading cryptocurrencies. Yes, they really do exist, those people who have built a substantial fortune by trading Bitcoins and Altcoins in 2017. But what about the taxation of these trading profits?

The thing about the exchange principle

If bitcoins or altcoins are held in private assets for more than a year, any price gains are tax-free under the current legal situation. Tax exemption only exists if the respective cryptocurrency is held for more than 1 year (calculated from day to day). The "HODLer" - as it is so beautifully called in the crypto language - is therefore fine from a tax point of view as long as he has not exchanged the respective cryptocurrency for other coins or has used the cryptocurrency as a medium of exchange for goods or services. In tax law, the exchange is generally a paid transaction, ie. If assets, such as cryptocurrencies, are exchanged, the given asset has been sold and the acquired asset has been purchased. If the given asset has increased in value since its acquisition, this increase in value is to be taxed according to the current legal situation with the income tax rate (attention: not at 27.5%!) As part of the income from speculative transactions, provided that the acquisition was not more than a year ago. The BMF also made it clear in the BMF Info dated July 25, 2017 (see that trading between crypto currencies is to be viewed as an exchange process. Every exchange of cryptocurrencies within the one-year period therefore leads to the realization of exchange rate gains or losses, which have to be converted into euros. At the time of the sale (or the exchange for other crypto currencies or goods or services), sales proceeds in euros must be calculated for the crypto currency given. As a rate for the conversion into euros, you will usually be able to use the rates of the crypto exchanges used. The acquisition costs can be deducted from these sales proceeds. If stocks of a cryptocurrency are acquired in several “tranches” one after the other, the question arises as to which acquisition costs may be deducted from the sales proceeds. According to BMF-Info, in the event of a sale or exchange of a cryptocurrency held in a “virtual wallet”, the decisive factor is which of this “tranche” is sold. According to the BMF, the taxpayer can make any assignment if the inventory of the respective purchased cryptocurrency is fully documented with regard to the time of purchase and purchase costs. If this is not the case, the oldest stocks of a cryptocurrency are to be regarded as sold first (so-called first-in-first-out method).

In the case of taxable exchange rate gains and if the exemption limit of EUR 440.00 per calendar year is exceeded, the gains must be declared in the income tax return.
provided that the total annual income exceeds a total of EUR 11,000. Losses from the sale (or exchange) of a cryptocurrency portfolio can be offset against profits from the sale (or exchange) of other cryptocurrency holdings in the same calendar year. If there is an overall loss, this cannot be offset against other income (e.g. from an employment relationship) within a calendar year, nor can it be carried over into the following years. The 2017 income tax return must be submitted electronically via FinanzOnline without a tax advisor by June 30, 2018 of the following year. If you are represented by a tax advisor, a longer period applies.

Evidence & documentation obligation

As proof of the holding period or to calculate the realized profits and losses, it is necessary to keep all transactions (trades, deposits and withdrawals) of the crypto exchanges and all transactions of the personal addresses on which crypto currency stocks are managed on record. With most exchanges it is possible to output all transactions in a csv file. In any case, these transactions should be exported regularly so that the entire "transaction history" can be documented. This is the only way to ensure that the transaction data is available, even if the crypto exchange ceases to operate. In order to prove the validity of the exported trades, it is advisable to also take screenshots of the exchange transactions. Missing evidence or failure to comply with the documentation requirement can entitle the tax authorities to an estimate of the income. Due to the complexity and the high documentation requirements, it is advisable to seek professional support, for example from specialized tax advisors.