On Tuesday, the Federal Ministry of Finance (BaFin), published a 24-page document outlining clear income tax rules regarding cryptocurrency and virtual assets. The tax requirements for buying, trading, and selling cryptocurrency are now clearly laid out for taxpayers, as well as tax professionals and businesses.
It is important to note that individuals who sell BTC/ETH within 12 months of acquisition are not subject to taxes if they make a profit. Katja Hessel, Parliamentary State Secretary, addressed questions about the long-term stake of cryptocurrencies.
Private individuals can sell purchased Bitcoin or Ether after one year. If, for instance, Bitcoin was used previously for lending or ETH is provided by the taxpayer to someone else in order to create their block, the deadline does not extend to ten years.
Germany asked individuals, companies and institutions to provide input on tax considerations regarding the use of cryptocurrency. One of the most important points was a clause in Germany’s Income Tax Act. Section 23 provides that any asset that is sold within a year of its acquisition is exempt from tax.
Similar: Germany’s Blockchain Initiative: How adoption became a reality by 2020
Many wondered if lending or taking virtual assets would result in an extension of time for a private sale of virtual currency. The German Finance Ministry said that the 10-year rule does not apply to cryptocurrency.
After a year, Bitcoin miners who have newly minted BTC will be exempt from tax payments. Hessel indicated that further guidance would be issued by the Federal Ministry of Finance on the use of and trading of cryptocurrencies.
Germany took a proactive approach in cryptocurrency regulation and oversight. In 2019, Germany adopted a national strategy for blockchain. BaFin required that cryptocurrency service providers, including exchanges and custody platforms, obtain licenses starting January 2020. This ensures that the sector operates according to the same standards of traditional financial service providers.
Germany has issued favorable tax guidelines to cryptocurrency holders in the country. The profits of long-term Bitcoin or Ether holders are exempt from tax.
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