Pay Taxes on Bitcoin Gains in Germany: Your 2024 Compliance Guide

Understanding Bitcoin Taxation in Germany

Navigating cryptocurrency taxes is crucial for German investors. In Germany, Bitcoin and other cryptocurrencies are classified as private assets (Privatvermögen) under §23 EStG. This means profits from crypto sales are subject to capital gains tax, but with unique exemptions. The Federal Central Tax Office (BZSt) treats crypto similarly to traditional investments, requiring accurate reporting to avoid penalties. Whether you’re a casual holder or active trader, understanding these rules ensures compliance and optimizes your tax strategy.

How Germany Taxes Bitcoin Gains

German tax law distinguishes between short-term and long-term holdings:

• Short-term gains (under 1 year): Fully taxable as income at your personal tax rate (14-45% + solidarity surcharge)
• Long-term gains (over 1 year): 100% tax-exempt regardless of profit amount
• Business traders: Frequent, high-volume trading may classify you as a business, subjecting all profits to trade tax (Gewerbesteuer)

Losses can offset gains within the same tax year, but unused losses expire.

The 1-Year Holding Period Rule

Germany’s tax exemption hinges on the 365-day holding period. The clock starts at acquisition and resets if:

• You sell/redeem any portion of your holdings
• You exchange Bitcoin for other crypto (e.g., ETH or stablecoins)
• You use Bitcoin for purchases exceeding €600 annually

Example: Buying 1 BTC on January 1, 2024? Sell after January 2, 2025 for zero tax. Sell earlier, and gains face income tax.

Calculating Your Tax Liability

Use the FIFO (First-In-First-Out) method to determine cost basis:

1. Identify acquisition dates/prices of sold coins
2. Subtract purchase costs + transaction fees from sale price
3. Apply holding period rules to calculate taxable amount

Tools like CoinTracking or Blockpit simplify this. Note: Gifts inherit the original acquisition date, while inherited crypto resets the holding period.

Reporting Crypto on German Tax Returns

Declare gains in Anlage SO (Supplement for Other Income) with your annual tax return (Steuererklärung). Required details include:

• Transaction dates and types (buy/sell/trade)
• Amounts in EUR (use exchange rate at transaction time)
• Wallet addresses (if requested by tax office)

Deadline: May 31 (or extended via tax advisor). Penalties for non-compliance reach 10% of evaded tax.

Special Cases: Mining, Staking, and Airdrops

• Mining: Rewards are taxable income at market value upon receipt. Subsequent sales follow standard capital gains rules.
• Staking: Similar to mining – rewards taxed as income when received.
• Airdrops/Hard Forks: Taxable as “other income” at fair market value when you gain control.
• Crypto-to-Crypto Trades: Treated as disposals – even swapping BTC for ETH triggers taxable events.

Frequently Asked Questions (FAQ)

Is Bitcoin legal in Germany?

Yes. Bitcoin is recognized as private money, regulated under BaFin guidelines. Exchanges must obtain licenses.

Do I pay taxes if I hold Bitcoin long-term?

No. After 365 days, all gains are tax-free per §23 EStG.

Are small crypto gains exempt?

Only if under €600 and held long-term. Short-term gains lack a minimum threshold.

How are DeFi earnings taxed?

Lending rewards or yield farming income is taxed upon receipt, similar to staking.

Can I deduct crypto losses?

Yes, but only against capital gains in the same year. Unused losses expire.

What records must I keep?

Retain all transaction logs, wallet statements, and exchange reports for 10 years.