Introduction: Airdrops and German Tax Obligations
Cryptocurrency airdrops – free distributions of tokens to wallet holders – have become popular in the crypto space. But in Germany, these “free” coins come with tax responsibilities. The Federal Central Tax Office (Bundeszentralamt für Steuern) treats most airdrops as taxable income at the moment you gain control of them. Failing to report can lead to penalties, interest charges, or audits. This guide explains exactly how to declare airdrop income correctly under German tax laws, helping you stay compliant while navigating the crypto landscape.
Understanding Airdrop Taxation in Germany
Under German income tax law (§ 22 Nr. 3 EStG), airdrops are typically classified as “other income” (sonstige Einkünfte). This applies when:
- You receive tokens without providing services (e.g., not for marketing or development work)
- The airdrop is unexpected and requires no active participation beyond holding a wallet
- Tokens are distributed to existing cryptocurrency holders
Tax Trigger: Income is recognized at the fair market value of the tokens on the day you receive them. For example, if you get 100 tokens worth €1 each during the airdrop, you report €100 as income. This value determines your initial cost basis for future capital gains calculations if you sell later.
Exception: Airdrops received as payment for services (e.g., promotional activities) qualify as business income and must be reported under § 15 EStG.
Step-by-Step Guide to Reporting Airdrop Income
Follow this process to accurately declare airdrops in your German tax return:
- Record Receipt Details: Note the date, token name, quantity received, and fair market value in EUR at the exact time of receipt. Use reputable exchanges like CoinMarketCap for valuation.
- Calculate Total Income: Sum the EUR value of all airdrops received during the tax year. Include even small amounts – there’s no minimum threshold for reporting.
- Complete Annex SO: Report the total under “Sonstige Einkünfte” in the supplementary form Anlage SO (line 35). Specify the source as “Kryptowährung-Airdrop”.
- Document Transactions: Maintain screenshots of wallet transactions, airdrop announcements, and valuation sources for 10 years as proof.
- File Electronically: Submit via ELSTER, Germany’s official tax portal, by July 31st of the following year (or with a tax advisor’s extension).
Important: If you later sell airdropped tokens, gains are tax-free if held over 12 months. Sales within 12 months incur capital gains tax on profits calculated from the initial airdrop value.
Common Mistakes to Avoid
- Ignoring Small Airdrops: Even tokens worth €0.50 must be reported. Cumulative small amounts can trigger audits.
- Incorrect Valuation: Using exchange rates from the wrong date or platform. Always use the rate at receipt time.
- Mixing with Capital Gains: Reporting airdrop income under “Anlage KAP” instead of “Anlage SO”.
- Omitting Documentation: Failing to keep evidence of transactions and valuations.
- Assuming Non-Taxability: Believing “free” means tax-exempt – German tax authorities disagree.
Frequently Asked Questions (FAQ)
Q: Are all airdrops taxable in Germany?
A: Yes, unless explicitly exempted. Most qualify as income upon receipt. Exceptions are extremely rare.
Q: What if I receive tokens worth less than €1?
A: You must still report them. Germany has no minimum threshold for crypto income reporting.
Q: How do I value tokens from obscure projects?
A: Use the highest reputable exchange listing at receipt time. If unavailable, document your valuation method consistently.
Q: Can I offset airdrop income with crypto losses?
A: No. Airdrop income is separate from capital gains/losses. Losses from token sales can only offset capital gains.
Q: Do I need to report if I didn’t sell the tokens?
A: Yes! Taxation occurs at receipt, not sale. The income is based on the token’s value when you received it.
Final Tip: When in doubt, consult a Steuerberater (tax advisor) specializing in cryptocurrency. Regulations evolve, and professional guidance ensures compliance with Germany’s complex tax code.
