Germany Publishes First Nationwide Crypto Tax Guide

UTC by Daria Rud · 3 min read
Germany Publishes First Nationwide Crypto Tax Guide
Photo: Unsplash

Along with crypto tax guidance, Germany is now also working on a supplementary document that will address the cooperation between the federal states and their commitments to the subject.

Germany has brought more clearance on crypto regulation, with its federal finance ministry releasing the final version of the crypto tax guide. In the 24-page document, the regulators covered various aspects of crypto-related issues, explaining them technically and in compliance with Germany’s general income tax law.

Firstly, the document states that staked or lent cryptocurrencies remain tax-free if held for more than one year. Besides, according to Parliamentary State Secretary Katja Hessel, individuals are allowed to sell Bitcoin (BTC) or Ethereum (ETH) free of tax after one year.

Secondly, the period of one year also applies to cryptocurrency that has been lent out or used by someone else as a stake to create new Ethereum blocks. Notably, previously, the alternative period of a 10-year holding was mandatory for avoiding taxation.

In addition, the income tax does not apply when redeeming utility tokens, which are the crypto assets that entitle to a certain right, such as getting access to a network or receiving a specific product.

Further, the document provides guidance on crypto mining, staking, lending, hard forks, and token airdrops. It defines the terms as well as gives a clear understanding of how to handle the processes.

Six months earlier, the new German government included blockchain and digital currencies and blockchain technology in its coalition agreement, describing them as the key elements that will support Germany’s development over the next four years.

Katja Hessel stated:

“Of course, the publication of the guidance is not the end of our engagement with the topic, but an interim result. The rapid development of the ‘crypto world’ ensures that we do not run out of topics.”

Along with crypto tax guidance, Germany is now also working on a supplementary document that will address the cooperation between the federal states and their commitments to the subject.

Germany’s Crypto-Friendly Regulation

The German tax code has always been crypto-friendly. Even before the latest update to its crypto tax regulation, its tax rules on crypto have been far more flexible than in other countries. Despite taxing some of the transactions and certain crypto events, such as short-term trades, mining and staking rewards, the country has been offering attractive tax treatment of individual long-term cryptocurrency holdings.

The reason behind this attitude is treating cryptos not as property but as private assets. Under the German Tax Acts, cryptocurrencies are classified as ‘other assets’, and selling them is considered as a ‘private disposal.’

As a result, Germany has become the home for an increasing number of crypto exchange-traded products. Besides, it has even surpassed Singapore as the most crypto-friendly country in Q1 2022. Its number of Bitcoin and Ethereum nodes is second only to the United States.

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Daria Rud
Author Daria Rud

Daria is an economic student interested in the development of modern technologies. She is eager to know as much as possible about cryptos as she believes they can change our view on finance and the world in general.

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