Self-disclosure and preventive advice on cryptoassets

The tax authorities are increasingly taking action against taxpayers who have not paid tax on income from cryptoassets in the past or have paid incomplete tax.
The first requests for information to crypto exchanges were successful.
The data obtained in this way is currently being evaluated by the tax authorities.
A number of taxpayers have already received mail from their tax office.
This development is likely to continue.

The ruling by the Federal Fiscal Court (BFH) on February 14, 2023 (case no. IX R 3/22) has made it clear that gains from the sale and exchange of cryptocurrencies can lead to taxable income.
According to the BFH, blockchain-based assets held as private assets are so-called “other assets”.
The decision was issued for Bitcoin (BTC), Ethereum (ETH) and Monero (XMR), but can be applied to other tradable virtual currencies.

With its ruling, the BFH has confirmed the opinion of the Federal Ministry of Finance (BMF).
In its letter dated May 10, 2022, the BMF had already issued a fundamental statement on the “income tax treatment of virtual currencies and other tokens”.

This means that such profits must also be declared in tax returns.
Anyone who fails to do so is guilty of tax evasion if they do so intentionally.
There may also be a tax correction obligation for tax returns that have already been submitted.

Whether and to what extent taxable income was actually generated depends on numerous factors.
The BFH has assumed other income from so-called private sales transactions.
Such speculative gains from trading in (or exchanging) cryptocurrencies are (only) subject to income tax if there is no more than one year between acquisition and sale (so-called speculation period).
However, this only applies if no commercial activity can be assumed.
In such a case, all profits, including those from sales outside the speculation period, are taxable.
In addition, trade tax is generally due.
Trade tax is also due.
When exactly the threshold for commercial activity is exceeded is still unclear, as are numerous other detailed questions.

Anyone who has had income from the sale or exchange of cryptoassets in the past and has not declared this in their tax returns should consider filing a voluntary disclosure to avoid prosecution.
Caution is also advised when submitting tax returns.
Unresolved legal issues or poor documentation often make it very difficult to prepare a correct and complete tax return.
Sufficient disclosure as part of the declaration as a preventive measure can minimize the risk of criminal prosecution.
In view of the large number of unresolved legal issues, it may be worthwhile to lodge an objection to a tax assessment and, if necessary, to take legal action in the tax court.
This also applies if a tax office estimates profits from cryptoassets and assesses a higher tax than declared in the tax return.