Cryptocurrency Taxation in the EU

With the EU introducing cryptocurrency legislation with MiCAR, the Markets in Crypto-Assets Regulation, which will be implemented from 2025, taxation of cryptocurrency is an important topic. Investors, individuals and companies who use crypto as a means of payment, and miners whose income is crypto – they all need to comply with the tax laws in their country of residence.  

The EU is aiming to prevent tax fraud and tax evasion when it comes to income from crypto assets. As there are 28 member states in the EU, it is not possible to cover every country’s specific tax legislation.

We will look at some of the countries‘ taxation of crypto assets as part of private assets, and what activities related to crypto are considered as commercial activities. We will concentrate on Austria, where the Bitkern Group was founded, Switzerland, where Bitkern now has its head office, and Germany, where many of Bitkern’s customers come from.

Austria
The tax regulation for cryptocurrencies, which applies to crypto acquired after 28 February, 2021, stipulates that crypto assets are part of capital assets and are subject to income tax at a rate of 27.5%, regardless how long the asset will have been held.

Cryptocurrencies acquired before 1 March, 2021 are considered old assets and 
can therefore (still) be sold tax-neutrally after the expiry of the one-year speculation period. The mining, operation of online exchanges and crypto asset ATMs, as well as commercial income generated with crypto assets are commercial activites and are taxed accordingly.

Switzerland
The Swiss Federal Tax Administration and the Association of Swiss Tax Administrations updated their guidelines on the taxation of crypto at the end of 2021. In Switzerland, crypto is considered a private wealth asset, and private investors do not pay capital gains tax. Capital gains tax does apply to self-employed traders and businesses.

Not taxable are crypto that are held by private investors for at least 6 months, and meet certain conditions that are specified in the guidelines. Income in crypto is taxed through income tax. In Switzerland, if the total value of assets (including crypto) is over ones personal Wealth Tax allowance (of approx CHF 100 000), 0.3 – 1% tax of the value is payable. Further, there are slightly different rules depending on the Canton one lives in.

Germany
In Germany, crypto is regarded as private money and not as capital asset. This means that crypto is subject to income tax. Crypto privately held for over one year is not taxable. Any profit from crypto that is held for less than a year is taxable over the amount of € 600.

Short-term trades, mining and staking are taxable at the applicable income tax rates, depending on the annual income at rates of up to 45%. Additionally, in Germany there is a solidarity tax to be paid, which is capped at 5.5% of income tax. Staked crypto (locked funds) also need to be held for a minimum of one year to be tax-free.

References:

• https://wts.com/global/publishing-article/20220404-taxation-crypto-currencies-austria~publishing-article?language=en
• https://koinly.io/guides/crypto-tax-germany/
• https://koinly.io/guides/switzerland-crypto-tax-guide/