The following guidelines summarize certain material German income tax aspects that may become relevant for you with respect to your cryptocurrencies. These guidelines are limited to individuals being tax resident in Germany holding cryptocurrencies as private assets (Privatvermögen). They are not meant to be a comprehensive or complete description of all German income tax aspects that may be relevant for you. Thus, we strongly recommend discussing your individual tax situation and the possible tax implications with regard to the sale and exchange of your cryptocurrencies or the participation in staking rewards with your tax advisor.
Sale or Exchange of Cryptocurrencies
If you are an individual being tax resident in Germany holding your cryptocurrencies as private assets (Privatvermögen), the sale or exchange of cryptocurrencies, which have not been generated by yourself through validation of transactions, within a one-year holding period should generally be qualified as a private sale transaction (privates Veräußerungsgeschäft) within the meaning of Section 23 para. 1 sentence 1 no. 2 German Income Tax Act (EStG). However, in case you use your cryptocurrencies as a source of income by providing them to Coinbase Germany GmbH, for example, for staking purposes, the one-year holding period could be extended to ten years, cf. Section 23 para. 1 sentence 1 no 2 sentence 4 German Income Tax Act (EStG).
If you therefore sell cryptocurrencies, please note that any gain from such a sale could be subject to German income tax. However, the income should only be subject to German income tax if the annual allowance (Freigrenze) in the amount of EUR 600 has been exceeded.
“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”-method (“First In, First Out”) should apply (cf. Section 23 para. 1 no. 2 sentence 3 German Income Tax Act, EStG), according to which it is assumed that the cryptocurrency-coins acquired first by you are also the first cryptocurrency-coins sold. Therefore, in order to calculate the profits in the event of a sale of cryptocurrency-coins, the determination of the acquisition costs is based on the acquisition costs of the cryptocurrency-coins 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 thereon and, as the case may be, church taxes.
If you are an individual being tax resident in Germany holding your 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 German Income Tax Act (EStG).
Staking rewards may not be subject to German income tax only if the legal threshold amount (Freigrenze) of EUR 256 per calendar year is not exceeded by you, cf. Section 22 no. 3 sentence 2 German Income Tax Act (EStG). However, in case, your gains reach or exceed the legal threshold amount of EUR 256, staking rewards should be fully taxable. Please note that for the calculation of whether or not the legal threshold amount is exceeded, other gains, beside your staking rewards, might also be relevant.
Staking rewards will be taxed based on your individual tax rate, i.e. up to 45% plus 5.5% solidarity surcharge thereon and, as the case may be, church taxes.
The above statements are merely a general presentation of the current tax situation. 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 cryptocurrencies 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 cryptocurrencies trading.
These guidelines do not constitute a legal opinion or tax advice. We strongly recommend consulting your tax advisor for an assessment of your individual tax situation, in particular with respect to staking rewards 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 Germany Ministry of Finance (Bundesfinanzministerium) has not published a decree with regard to the German income tax implications of cryptocurrencies trading or staking rewards so far.