Byline: Hannah Parker
Germany topped the list due to its more favourable tax policies for residents. Residents are exempt from paying capital gains tax on assets held for more than a year. As a result, more residents prefer to save their money in traditional savings accounts rather than spend it.
Gemini’s tax policy has helped the country stay on the cutting edge of cryptocurrency adoption. According to a recent Gemini study, 43% of high-income Germans own crypto assets, while 17% of all Germans own at least one crypto asset.
Germany finished seventh overall with a score of 3.6 in all scoring categories. Italy, Switzerland, Singapore, and Slovenia are among the other countries that offer tax breaks to their citizens.
Let’s look at why Germany has made headlines as an appealing crypto-friendly country for individuals to invest in cryptocurrencies.
To begin with, the German Federal Central Tax Office regards cryptocurrencies as private money for tax purposes. Cryptocurrencies are not considered legal tender, foreign currency, or property in this sense.
When Do You Pay Crypto Tax in Germany?
Unlike in many other countries, cryptocurrency in Germany is regarded as a private asset rather than property, which has tax implications. It means that crypto is subject to individual income tax rather than capital gains tax, but only in limited circumstances.
When you sell a private asset, such as cryptocurrency, the tax rules change depending on how long you’ve held the asset. If you’ve had your cryptocurrency for less than a year, you’ll have to pay Income Tax on any profits from a sale. Selling your cryptocurrency for EUR (or any other fiat currency), exchanging your cryptocurrency for another cryptocurrency, or spending your cryptocurrency on goods and services are all examples of disposals. Each taxpayer is allowed up to €600 in tax-free short-term gains per calendar year.
Meanwhile, if you’ve held your cryptocurrency for more than a year, you can sell it completely tax-free, so it pays to hold!
In addition to those mentioned above, some crypto transactions are considered income, such as mining or staking rewards, for which you must pay Income Tax. You will only have to pay tax if you earn more than the €256 threshold each year.
So, you will only pay tax on crypto gains as ‘other income’:
- If you sell, swap, or spend cryptocurrency in the same year, you bought it and made a profit of more than €600.
- If you sell crypto used in staking/lending protocols within a year of purchasing it.
- When you’re mining, staking, or otherwise earning money with cryptocurrency.
What About Crypto Losses in Germany?
If you traded, exchanged, or consumed cryptocurrency within a year and made a loss rather than a profit, you won’t have to pay taxes on it. However, you should keep track of these losses because you can offset them against your profits to lower your overall tax bill. If there are no profits to offset losses against, the German Tax Act allows taxpayers to carry losses to future fiscal years to offset future gains.
With Germany’s Federal Central Tax Office (BZSt), you may claim lost or stolen crypto as a loss. You must be able to provide specific evidence to claim this loss. This includes the following:
- The wallet address associated with the key
- When you obtained the key and when you misplaced it
- The cost of recovering a stolen or lost cryptocurrency
- The fact that you were in charge of the wallet
- The amount of cryptocurrency you had when you lost the key.
- That you own the hardware on which the wallet is stored
- Transactions to your wallet from an exchange linked to your identity
Germany Stays Leading the Crypto Tax Pack
Germany, the European Union’s largest economy, has recently been in the spotlight of the cryptocurrency scene. The country’s Finance Ministry stated a few months ago that the sale of Bitcoin and Ether would not be taxed if individuals held the assets for more than a year.
Bitcoineer estimated that the policy and several other factors have propelled Germany to the top of the list of countries with friendly cryptocurrency tax legislation for residents.
In a statement, the entity remarked, “Germany has a surprisingly progressive outlook on crypto tax. It has embraced and formalised the crypto tax situation more than most leading countries. Having a very generous no tax on gains if your crypto is kept for over a year seems to be perfectly in keeping with a country whose population has a long tradition of saving as opposed to spending,”
Germany has a very appealing tax regime for long-term (over a year) individual investments in cryptocurrencies or small yearly profits (under €600), as these are tax-free. Crypto to crypto and crypto-to-fiat sales are taxable under German tax law, but crypto fees paid are tax deductible. However, this does not imply that Germany is a tax haven for cryptocurrency, as other types of income may be taxed.