This page summarizes certain material aspects of German income tax law that may be relevant to you with respect to your cryptocurrency holdings. These guidelines are limited to individuals German residents holding cryptocurrency as private assets (Privatvermögen). These guidelines are not a comprehensive or complete guide to all aspects of German income tax law that may be relevant to your individual tax situation. Therefore, we strongly recommend that you and your tax advisor discuss your individual tax situation and the possible tax implications of selling, exchanging, or staking cryptocurrency.
Sale or Exchange of Cryptocurrencies
If you are an individual who resides in Germany and holds cryptocurrencies as private assets (Privatvermögen), the sale or exchange within a one-year holding period of cryptocurrencies that you did not generate by validating transactions should generally be qualified as a private sale transaction (privates Veräußerungsgeschäft) within the meaning of Section 23 para. 1 sentence 1 no. 2 of the German Income Tax Act (EStG).
However, if you use your cryptocurrencies for staking purposes as a source of income (for example, by providing them to Coinbase Germany GmbH), the one-year holding period could be extended to ten years, cf. Section 23 para. 1 sentence 1 no. 2 sentence 4 of the German Income Tax Act (EStG).
Therefore, please note that any gain from the sale of cryptocurrencies could be subject to German income tax if you exceed the annual allowance (Freigrenze) of EUR 600.
“First In, First Out” and Taxation
The profits from the sale of cryptocurrencies are based on the difference between the acquisition costs and the sale prices of the cryptocurrencies. The “FIFO” (“First In, First Out”) method should apply (cf. Section 23 para. 1 no. 2 sentence 3 German Income Tax Act, EStG). The FIFO method assumes that the first cryptocurrency coins you acquired are also the cryptocurrency coins that you first sold. Therefore, in order to calculate the profit from a cryptocurrency sale pursuant to the FIFO method, the acquisition cost of the cryptocurrency sold is the acquisition cost of the cryptocurrency you have held the longest.
Profits will be taxed based on your individual tax rate, i.e. up to 45% plus 5.5% solidarity surcharge and, if applicable, church taxes.
If you are an individual who resides in Germany and holds cryptocurrencies as private assets (Privatvermögen), staking rewards received from Coinbase Germany GmbH should generally be subject to German income tax under Section 22 no. 3 of the German Income Tax Act (EStG).
Staking rewards are subject to German income tax unless they do not exceed the legal threshold amount (Freigrenze) of EUR 256 per calendar year, cf. Section 22 no. 3 sentence 2 German Income Tax Act (EStG).
Please note that the calculation of the legal threshold amount (Freigrenze) may include other gains in addition to your staking rewards.
Staking rewards will be taxed based on your individual tax rate, i.e. up to 45% plus 5.5% solidarity surcharge and, if applicable, church taxes.
The statements above are intended for informational purposes only and do not constitute legal or tax advice. Coinbase Germany GmbH does not make any representations or warranties regarding the existence or non-existence of any individual liability to pay taxes. You are responsible (i) for obtaining legal and tax advice and (ii) for assessing the tax implications of cryptocurrency trading or staking rewards for yourself. In particular, you acknowledge that you have not been advised by Coinbase Germany GmbH with regard to the tax treatment of staking rewards you may receive, or gains or losses from cryptocurrency trading.
We strongly recommend that you consult your tax advisor regarding your individual tax situation, particularly regarding staking rewards you may have received from Coinbase Germany GmbH.
You should be aware that the legal regulations, which are the basis of these guidelines, may change following the issuance of these guidelines and that such changes may have retroactive effect for you. Furthermore, please note that the German Ministry of Finance (Bundesfinanzministerium) has not yet published a decree with regard to the German income tax implications of cryptocurrency trading or staking rewards.