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What tax do I owe on a Bitcoin profit?

The following events are tax events:

Everything written on this page not only applies to Bitcoin, but also to other types of (crypto) currency.

You will have to supply proof to the Finanzamt, so always take screen shots of every transaction! 
Greenshot is a nice open source software for taking screen shots.

Disclaimer: what is described below is the legal situation as of 2019, the law may change in the future.

You sold Bitcoin that you had previously purchased

... and they were a "private asset"

If you had bought the Bitcoin with your own money, they are considered a private asset and since German tax law sees Bitcoin as a currency like any other currency, any profit/loss you made by selling them at a higher/lower price than the price you bought them for is a private profit/loss stemming from the sale of a private asset and is part of your “private asset management” (= private Vermögensverwaltung), see §23 EStG.

If you took out a loan to finance your purchase of Bitcoin, they are still considered a private asset.

For the sale of “private asset” Bitcoin, the Finanzamt assumes a FIFO order (first in, first out), i.e. that when you sell Bitcoin, they were the oldest ones you had, the ones you had bought first, see §23 (1) Nr. 2 Satz 3 EStG.

… within 1 year of buying them:

If you made a profit, that profit will be added to your other income that year, and the tax rate on that total yearly income will be applied to it, this is your personal variable income tax rate. 

You will have to submit an income tax return and declare that profit.
For details on how high that income tax rate will be, please see the section “How much income tax will I pay” on the FAQ page.
In the unlikely event that your profit was less than 600€, it will not be taxed and you do not have to submit a tax return because of this profit.

If you made a loss, that loss can only be used to offset another profit from the sale of another private asset (another currency speculation profit, the profit from selling a let flat after less than 10 years, …), either in the year before, or in one of the following years.
But for the Finanzamt to get to know about this loss, you will first have to submit an income tax return in which you declare that loss.

I can do the income tax return for you, to see how much it will cost please see the section “employee or retired or have other non-business income” on the Cost page.

after 1 year of  buying them:

In this case, the profit you made by selling them is tax-free.

But you will have to be able to prove to the Finanzamt that you had held the Bitcoin for more than 1 year, so gather all possible proof along the way, and always make screen shots.

If you made a loss after a holding period of more than a year, tough luck, that’s not of interest to the Finanzamt either, so you will not be able to “use” it.

Some Finanzämter will try to reclassify private profits as business profits, if this happened to you, an objection (Einspruch) has to be lodged before the end of the 1 month objection period, or you will have to pay the income tax that the Finanzamt erroneously set down in the Bescheid!

I can do this objection for you, my fee for the objection and for all the further dispute with the Finanzamt (= Rechtsbehelfsverfahren) will depend on how much unjustified tax the Finanzamt asked for, in accordance with §40 StBVV.

Example: If they asked for 10,000€ in unjustified tax on the profit from selling your “private asset” Bitcoin, and I wasn’t the one who did your income tax return, I will charge you for the objection and all the further dispute with the Finanzamt (= Rechtsbehelfsverfahren) a fee in accordance with §40 (1) StBVV and Tabelle E StBVV, depending on how “difficult” your case is, a fee between 303.45€ and 910.35€:

  • average difficulty: 15/10 x 510€ x 1.19 = 910.35€
  • very simple case: 5/10 x 510€ x 1.19 = 303.45€

If the Finanzamt gives up after my first letter, your fee will only be:

  • 3/10 x 510€ x 1.19 = 182.07€

... and they were a "business asset"

If you had bought the Bitcoin by collecting and using other people’s money, i.e. by appearing on the market to offer your services to the public, you are a Gewerbetreibender and the Bitcoin were a “business asset”.
Which means that any profit/loss you make selling them is a business profit/loss, no matter how long you held the Bitcoin.

For “business asset” Bitcoin, the Finanzamt assumes a LIFO order (last in, first out), i.e. that when you sell Bitcoin, they were the newest ones you had, the ones you had bought last, see §6 (1) Nr. 2a EStGR6.9 (1) Satz 1 EStR.

The purchase price you paid for the Bitcoin is a business expense, but depending on whether you have to keep books or not, the point in time when they lower your business income differs:

  • if you do not have to keep books (§241a HGB§141 AO), i.e. if you’re a single trader and your yearly profit is up to 60,000€ and your yearly turnover up to 600,000€, the purchase price will lower your business profit immediately, i.e. as soon as you pay those expenses, since your profit calculation will be done by the simpler Einnahmenüberschussrechnung.
  • if you have to keep books, i.e. if you’re a single trader and your yearly profit is over 60,000€ or your yearly turnover over 600,000€, or if you’re a partnership (PersG = Personengesellschaft) or capital company (KapG = Kapitalgesellschaft) with no matter how low a profit or turnover, the purchase price will lower your business profit only once you sell those bought Bitcoin, since here your profit is calculated with the more complicated Betriebsvermögensvergleich. 

Your business profit/loss is the difference between your business income and business expenses that year and it always has to be declared in an income tax return (or in a corporate tax return if you’re a capital company).

If your business profit exceeds 24,500€ a year if you’re a single trader or a partnership, or if you made a profit and are a capital company, you will also have to pay an additional local tax called Gewerbesteuer. 
You will get a part of that paid Gewerbesteuer back as an income tax credit, but only if you’re a single trader or a partnership.

You sold Bitcoin that you had mined

If you had mined Bitcoin, you are a Gewerbetreibender and the mined Bitcoin were a “business asset”.
Which means that any profit/loss you make selling them is a taxable business profit/loss, no matter how long you held the Bitcoin.

For “business asset” Bitcoin, the Finanzamt assumes a LIFO order (last in, first out), i.e. that when you sell Bitcoin, they were the newest ones you had, the ones you had mined last, see §6 (1) Nr. 2a EStGR6.9 (1) Satz 1 EStR.

The expenses that you had mining them (electricity and so on) are business expenses, but depending on whether you have to keep books or not, the point in time when they lower your business income differs:

  • if you do not have to keep books (§241a HGB§141 AO), i.e. if you’re a single trader and your yearly profit is up to 60,000€ and your yearly turnover up to 600,000€, the business expenses will lower your business profit immediately, i.e. as soon as you pay those expenses, since your profit calculation will be done by the simpler Einnahmenüberschussrechnung.
  • if you have to keep books, i.e. if you’re a single trader and your yearly profit is over 60,000€ or your yearly turnover over 600,000€, or if you’re a partnership (PersG = Personengesellschaft) or capital company (KapG = Kapitalgesellschaft) with no matter how low a profit or turnover, these business expenses will lower your business income only once you sell those mined Bitcoin, since here your profit is calculated with the more complicated Betriebsvermögensvergleich.

Your business profit is the difference between your business income and business expenses that year and it always has to be declared in an income tax return (or in a corporate tax return if you’re a capital company) and taxed.

If your business profit exceeds 24,500€ a year if you’re a single trader or a partnership, or if you made a profit and are a capital company, you will also have to pay an additional local tax called Gewerbesteuer.
You will get a part of that paid Gewerbesteuer back as an income tax credit, but only if you’re a single trader or a partnership.

You exchanged Bitcoin into another crypto currency/asset

Exchanging Bitcoin into another crypto currency (or into another asset) is considered two transactions:

  1. a “sale” of the Bitcoin, see §480 BGB, in which the Bitcoin “selling” price is their market price in €  
    → profit from “selling “Bitcoin = [Bitcoin market price in €] – [Bitcoin purchase price in €])
  2. a purchase of the other crypto currency, e.g. Ethereum (or of the other asset), see §6 (6) EStG
    → you now have a purchase price of [Bitcoin market price in €] for those Ethereum

... and the Bitcoin were a "private asset"

If you had bought the Bitcoin with your own money, they are considered a private asset and since German tax law sees Bitcoin as a currency like any other currency, any profit/loss you made by “selling” them at a higher/lower price than the price you bought them for is a private profit/loss stemming from the sale of a private asset and is part of your “private asset management” (= private Vermögensverwaltung), see §23 EStG.

If you took out a loan to finance your purchase of Bitcoin, they are still considered a private asset.

For the sale of “private asset” Bitcoin, the Finanzamt assumes a FIFO order (first in, first out), i.e. that when you sell Bitcoin, they were the oldest ones you had, the ones you had bought first, see §23 (1) Nr. 2 Satz 3 EStG

… within 1 year of buying them:

If you made a profit on the “sale” of the Bitcoin, that profit will be added to your other income that year, and the tax rate on that total yearly income will be applied to it, this is your personal variable income tax rate. 

You will have to submit an income tax return and declare that profit.
For details on how high that income tax rate will be, please see the section “How much income tax will I pay” on the FAQ page.
In the unlikely event that your profit was less than 600€, it will not be taxed and you do not have to submit a tax return because of this profit.

If you made a loss, that loss can only be used to offset another profit from the sale of another private asset (another currency speculation profit, the profit from selling a let flat after less than 10 years, …), either in the year before, or in one of the following years.
But for the Finanzamt to get to know about this loss, you will first have to submit an income tax return in which you declare that loss.

I can do the income tax return for you, to see how much it will cost please see the section “employee or retired or have other non-business income” on the Cost page.

… after 1 year of  buying them:

In this case, the profit you made by “selling” them is tax-free.

But you will have to be able to prove to the Finanzamt that you had held the Bitcoin for more than 1 year, so gather all possible proof along the way, and always make screen shots.

If you made a loss after a holding period of more than a year, tough luck, that’s not of interest to the Finanzamt either, so you will not be able to “use” it.

Some Finanzämter will try to reclassify private profits as business profits, if this happened to you, an objection (Einspruch) has to be lodged before the end of the 1 month objection period, or you will have to pay the income tax that the Finanzamt erroneously set down in the Bescheid!

I can do this objection for you, my fee for the objection and for all the further dispute with the Finanzamt (= Rechtsbehelfsverfahren) will depend on how much unjustified tax the Finanzamt asked for, in accordance with §40 StBVV.

Example: If they asked for 10,000€ in unjustified tax on the profit from “selling” your “private asset” Bitcoin, and I wasn’t the one who did your income tax return, I will charge you for the objection and all the further dispute with the Finanzamt (= Rechtsbehelfsverfahren) a fee in accordance with §40 (1) StBVV and Tabelle E StBVV, depending on how “difficult” your case is, a fee between 303.45€ and 910.35€:

  • average difficulty: 15/10 x 510€ x 1.19 = 910.35€
  • very simple case: 5/10 x 510€ x 1.19 = 303.45€

If the Finanzamt gives up after my first letter, your fee will only be:

  • 3/10 x 510€ x 1.19 = 182.07€

... and the Bitcoin were a "business asset"

If you had bought the Bitcoin by collecting and using other people’s money, i.e. by appearing on the market to offer your services to the public, you are a Gewerbetreibender and the Bitcoin were a “business asset”.
Which means that any profit/loss you make “selling” them is a taxable business profit/loss, no matter how long you held the Bitcoin.

For “business asset” Bitcoin, the Finanzamt assumes a LIFO order (last in, first out), i.e. that when you sell Bitcoin, they were the newest ones you had, the ones you had bought last, see §6 (1) Nr. 2a EStGR6.9 (1) Satz 1 EStR.

The purchase price you paid for the Bitcoin is a business expense, but depending on whether you have to keep books or not, the point in time when they lower your business income differs:

  • if you do not have to keep books (§241a HGB§141 AO), i.e. if you’re a single trader and your yearly profit is up to 60,000€ and your yearly turnover up to 600,000€, the purchase price will lower your business profit immediately, i.e. as soon as you pay those expenses, since your profit calculation will be done by the simpler Einnahmenüberschussrechnung.
  • if you have to keep books, i.e. if you’re a single trader and your yearly profit is over 60,000€ or your yearly turnover over 600,000€, or if you’re a partnership (PersG = Personengesellschaft) or capital company (KapG = Kapitalgesellschaft) with no matter how low a profit or turnover, the purchase price will lower your business profit only once you sell those bought Bitcoin, since here your profit is calculated with the more complicated Betriebsvermögensvergleich. 

Your business profit/loss is the difference between your business income and business expenses that year and it always has to be declared in an income tax return (or in a corporate tax return if you’re a capital company).

If your business profit exceeds 24,500€ a year if you are a single trader or a partnership, or if you made a profit and are a capital company, you will also have to pay an additional local tax called Gewerbesteuer.
You will get a part of that paid Gewerbesteuer back as an income tax credit, but only if you’re a single trader or a partnership.