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German law qualifies cryptoassets as financial instruments. Mining and the sale of tokens are in general not activities that require authorization from the German Federal Financial Supervisory Authority.

The German federal ministry of finance, in guidance issued in 2018, held that bitcoin mining is a nontaxable transaction under value-added tax law. With regard to the income tax treatment of mining, the federal minister of finance and the tax authorities of the German states are currently discussing that issue, and respective guidance will be published once an agreement has been reached. In December 2017, then-Parliamentary State Secretary in the Federal Ministry of Finance Michael Meister stated that occasionally performed mining could qualify as “other income” within the meaning of the Income Tax Act, which is only taxable if it exceeds 256 Euros (about US$310) in a calendar year. On the other hand, if cryptocurrencies are acquired or generated in the course of business with the aim of making a profit, proceeds from the disposal or exchange represent assessable income.

It appears that there is no official guidance with regard to the tax treatment of staked tokens, airdrops, or forks.

I. Introduction

The German Banking Act qualifies cryptoassets as financial instruments.[1] Cryptoassets are defined as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange or payment instrument or serves investment purposes due to an agreement or established practice, and which can be transferred, stored, and traded electronically.’’[2] Undertakings and persons who arrange the acquisition of tokens, sell or purchase tokens on a commercial basis, or carry out principal brokering services in tokens via online trading platforms, among others, are generally required to obtain authorization from the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) in advance.[3] Mining and the sale of mined or acquired tokens are generally not transactions that require authorization from BaFin.[4] However, additional factors might trigger the obligation to obtain prior authorization, for example, in a mining pool.[5]

In February 2018, the German federal ministry of finance published guidance on the value-added tax (VAT) treatment of bitcoin and other virtual currencies. It determined that transactions to exchange a traditional currency for bitcoin or other virtual currencies and vice versa constitute the taxable supply of other services for consideration, but fall under the exemption from VAT. It stated that bitcoin or other virtual currencies that are used simply as a means of payment are treated the same as traditional means of payment. Using bitcoin or other virtual currencies for no other purpose than as a means of payment is therefore not taxable.[6] Virtual gaming money, meaning in-game currencies, particularly in online games, is not exempt, because it does not constitute a means of payment within the meaning of VAT law.[7] This guidance is in line with the European Court of Justice Hedqvist decision from October 22, 2015.[8] The German VAT Application Decree was amended accordingly.[9]

The federal ministry of finance in its guidance also addressed several follow-up questions regarding the VAT treatment of mining, digital wallets, and online trading platforms.[10]

The governing coalition parties Christian Democratic Union/Christian Social Union (CDU/CSU) and Social Democratic Party (SPD) have stated that the taxation of blockchain technologies must be addressed and clarified.[11]

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II. Tax Treatment of Block Rewards

A. VAT

With regard to mining, the federal ministry of finance in its 2018 guidance held that bitcoin mining is a nontaxable transaction.[12] It noted that miners fulfill a service that is central to maintaining the bitcoin system. They make their processing power available to a mining pool, record transactions in a “block,” and subsequently add it to a “blockchain.” The ministry of finance stated that the transaction fee, which miners can receive from other users of the system, is paid on a voluntary basis and is not directly related to the services provided by the miners. It further added that receiving new bitcoin from the bitcoin system (block rewards) cannot be classified as payment for mining services because there is no exchange of services, as that requires an identifiable beneficiary.[13]

B. Income Tax

1. Relevant Law

The German Income Tax Act taxes income earned in a calendar year from agriculture and forestry, business operations, self-employment, dependent employment, capital assets, rentals and leases, and other income as stated in section 22 of the German Income Tax Act (Einkommenssteuergesetz, EStG).[14] A person operates a business if the activity is performed with the aim of making a profit, is sustainable, there is participation in economic transactions, and the work is performed independently.[15]

2. Official Statements

In response to a parliamentary inquiry submitted by the Free Democratic Party (FDP) concerning the income tax treatment of cryptocurrency-related activities in February 2020, the federal government stated that the federal minister of finance and the tax authorities of the German states were currently discussing the taxation of mining of cryptoassets and other issues.[16] Once an agreement has been reached, the federal ministry of finance will publish respective guidance.[17]

In December 2017, then-Parliamentary State Secretary in the Federal Ministry of Finance Michael Meister stated in response to a written question from a member of the Green Party concerning the income tax treatment of mining and block rewards that occasionally performed mining could qualify as “other income” within the meaning of section 22, number 3 of the Income Tax Act.[18] Such income is only taxable if it exceeds 256 Euros (about US$310) in a calendar year.[19]

On the other hand, if cryptocurrencies are acquired or generated in the course of business with the aim of making a profit, proceeds from the disposal or exchange represent assessable income according to the parliamentary state secretary.[20] Expenses incurred in respect to the mining activity are deductible as business expenses.[21] Profits are calculated using the first-in, first-out inventory cost method.[22]

The tax authorities in the German state of North Rhine-Westphalia have published guidance and held that mining of cryptocurrencies should generally be regarded as a business activity, in particular due to the required high computing power and energy costs.[23] However, they point out that there are ongoing discussions between the federal ministry of finance and the state tax authorities as mentioned above.[24]

3. Court Decisions

The lower tax courts are also not in agreement with regard to the income tax treatment of cryptoassets, as the Federal Fiscal Court has not yet ruled on the issue. The fiscal court in Berlin-Brandenburg, for example, held that capital gains from cryptoassets are without a doubt taxable according to sections 22 and 23 of the Income Tax Act, because the term “commodity” must be interpreted widely.[25] The fiscal court in Nuremberg, on the other hand, stated that “a particular cryptocurrency might be a commodity and the acquisition and sale therefore taxable according to section 22, no. 2, section 23, paragraph 1, sentence 1, no. 2, sentence 1 of the Income Tax Act. Jurisprudence of tax courts as well as from the Federal Fiscal Court in this sense does not exist.”[26]

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III. Differences in the Tax Treatment of Mined Tokens and Staked Tokens

It appears that there is no official separate guidance with regard to the tax treatment of staked tokens. However, legal scholars have opined that income received from occasional staking should be regarded as other income, which is only taxable if it exceeds 256 Euros.[27] Furthermore, the 10-year speculation period applies, meaning that income tax must be paid on profits from a sale during that time frame.[28] On the other hand, it is pointed out that staking cannot generate income from business operations, because the agreement to use already existing digital currency units does not represent an active, independently performed activity.[29]

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IV. Tax Treatment of Tokens Received Through Airdrops and Forks

It appears that there is no official guidance with regard to the tax treatment of airdrops and forks. Airdrops are generally distributed without compensation to increase awareness of a new token. Legal scholars therefore qualify them as donations that have to be reported to the tax authorities.[30]

Forks create a new version of the blockchain alongside the old version. Participants receive a credit equivalent to the amount of their coins in the old version. There is no agreement among legal scholars about how to qualify forks. Some state that the new tokens were not “acquired,” and the old tokens were not “sold,” within the meaning of section 23 of the Income Tax Act, resulting in a tax-neutral event.[31] They treat the situation as analogous to the taxation of a stock split, meaning the tokens are not taxable at the time of the fork.[32] Once sold, the date of acquisition for all tokens is the date the old tokens were acquired. The costs of acquisition are split between the total portfolio of tokens according to the ratio of old and new tokens.[33] Others contend that these proceeds are also not taxable, because the old and new tokens are not identical (Nämlichkeit) and because the receipt of new tokens happens without the active participation of the participant.[34]

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Prepared by Jenny Gesley
Foreign Legal Specialist
January 2021


[1] Gesetz über das Kreditwesen [KWG], Sept. 9, 1998, Bundesgesetzblatt [BGBl.] I at 2776, § 1, para. 11, sentence 1, no. 10, https://perma.cc/2VEN-DEUU (original), https://perma.cc/8HGS-J4MZ (unofficial English translation, updated through July 15, 2014).

[2] KWG, § 1, para. 11, sentences 4, 5.

[3] KWG, § 32.

[4] Virtuelle Währungen/Virtual Currency (VC), BaFin, https://perma.cc/Z8ZL-BSWE (last updated Sept. 18, 2020).

[5] Id.

[6] Bundesministerium der Finanzen [BMF], BMF-Schreiben. Umsatzsteuerliche Behandlung von Bitcoin und anderen sog. virtuellen Währungen; EuGH-Urteil vom 22. Oktober 2015, C-264/14, Hedqvist (BMF letter), Feb. 27, 2018, at 1 & 2, https://perma.cc/NMB8-6WYV.

[7] Id. at 3.

[8] Case C-264/14, Skatteverket v. David Hedqvist, ECLI:EU:C:2015:718, http://perma.cc/7Q6Q-MM9V.

[9] Umsatzsteuer-Anwendungserlass [UStAE], Oct. 1, 2010, Bundessteuerblatt [BStBl] I at 846, as amended, 4.8.3, para. 3a, https://perma.cc/5MFR-PS7N.

[10] BMF letter, supra note 6, at 2 & 3.

[11] CDU/CSU, Zukunftstechnologie Blockchain – Chancen für Deutschland nutzen. Eckpunktepapier der CDU/CSU-Fraktion im Deutschen Bundestag 3(June 25, 2019), https://perma.cc/5KR4-ZV5D; Press Release, SPD Fraktion im Bundestag, Blockchain und FinTechs: Innovationen fördern und Verbraucherschutz stärken, Nov. 30, 2018, https://perma.cc/S4ZP-SH35.

[12] BMF letter, supra note 6, at 2.

[13] Id.

[14] Einkommensteuergesetz [EStG], Oct. 8, 2009, BGBl. I at 3366, 3862, as amended, § 2, para. 1, §§ 13-22, https://perma.cc/JSV5-LD4E.

[15] Id. § 15, para. 2.

[16] Bundestags-Drucksache [BT-Drs.] 19/17024, at 3, questions no. 6b & 6c, https://perma.cc/7JJW-ZT6E.

[17] Id.

[18] BT-Drs. 19/370, at 21, question no. 25, https://perma.cc/NS69-8JS3; EStG, § 22, no. 3.

[19] BT-Drs. 19/370, supra note 18, at 21, question no. 25.

[20] BT-Drs. 19/370, supra note 18, at 22, question no. 25; EStG, § 15.

[21] BT-Drs. 19/370, supra note 18, at 22, question no. 25.

[22] EStG, § 23, para. 1, sentence 1, no. 2, sentence 3.

[23] Oberfinanzdirektion [OFD] Nordrhein-Westfalen, Ertragsteuerliche Behandlung von virtuellen Währungen (Kryptowährungen) (Apr. 20, 2018), https://perma.cc/4J7A-KEDA.

[24] Id.

[25] Finanzgericht Berlin-Brandenburg, June 20, 2019, docket no. 13 V 13100/19, ECLI:DE:FGBEBB:2019:0620.13V13100.19.00, para. 21, https://perma.cc/DEU8-X9LM.

[26] Finanzgericht Nürnberg, Apr. 8, 2020, docket no. 3 V 1239/19, para. 36, citing further conflicting court decisions, https://perma.cc/4ECE-B3WF.

[27] Walther Pielke, Besteuerung von Kryptowährungen. Ein Überblick über die verschiedenen Steuerarten 17 (2018), point 3.2.4; EStG, 22, no. 3.

[28] Pielke, supra note 27, at 17, point 3.2.4; EStG, § 23, para. 1, no. 2, sentence 4.

[29] Pielke, supra note 27, at 17, point 3.2.4.

[30] Id. at 19, point 3.2.7.; Christian Reiter & Dirk Nolte, Bitcoin und Krypto-Assets – ein Überblick zur steuerlichen Behandlung beim Privatanleger und im Unternehmen, 2018 Betriebsberater [BB] 1179, 1181-82, citing further references; EStG, § 30, paras. 1, 2.

[31] Pielke, supra note 27, at 18, point 3.2.6; Reiter & Nolte, supra note 30, at 1181.

[32] Pielke, supra note 27, at 18, point 3.2.6; Reiter & Nolte, supra note 30, at 1181; BMF, Einzelfragen zur Abgeltungsteuer; Neuveröffentlichung des BMF-Schreibens (Jan. 18, 2016), BStBl. I at 85, 100, para. 89, https://perma.cc/Z8JG-M6DS.

[33] Pielke, supra note 27, at 18, point 3.2.6; Reiter & Nolte, supra note 30, at 1181; BMF, supra note 32.

[34] Lutz Richter & Christian Augel, Die Spaltung des Bitcoins: Entstehung steuerfreier Veräußerungsgewinne, 99 FinanzRundschau 1131, 1132 (2017).

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Last Updated: 02/05/2021