German federal court: Crypto gains are taxable

Crypto gains are subject to income tax.

Crypto gains fall under the Income Tax Act. That is the conclusion of Germany's Federal Fiscal Court. According to the federal tax judge, cryptocurrencies like Bitcoin are economic goods and must therefore be taxed that way. Many German investors have finally got clarity after a long time.

The judges of Germany's top tax court are crystal clear: cryptocurrencies are economic goods with a market value. They also function as a means of payment on trading platforms where you can buy and sell them. This means profits from Bitcoin, Ethereum and other cryptocurrencies are considered "private sale transactions" and must be part of the tax return.

Experts had anticipated the ruling in advance.

The ruling was preceded by a years-long legal case. An anonymous investor realized a profit of 3.4 million euros from private crypto transactions in 2017, which he reported to the tax office but later resisted taxation. His argument: Cryptocurrencies are merely algorithms and not economic goods.

The Federal Fiscal Court did not accept this argument. For tax purposes, Bitcoin and its peers should be considered as "other economic goods", comparable to vintage cars or event tickets. According to the judges, the technical details do not affect their status as an economic good.

In Germany, the rule generally goes like this: crypto gains of 600 euros or more realized in less than a year must be taxed. If cryptocurrencies are held for longer than a year, the tax does not apply.