We may be in a deep slump, but regulation development continues. The German Federal Ministry of Finance has published a so-called “BMF letter” outlining how income tax on cryptocurrencies should be handled. This is the first time such guidance on cryptocurrency taxation has been released.
What does the letter say?
The Ministry of Finance described the letter as “a legally secure and easily applicable guideline for the treatment of virtual currencies and other tokens in income tax,” according to the ministry’s website.
“This letter explains and classifies crypto matters under the Income Tax Act. It covers not only trading in crypto, but also income tax treatment for mining, staking, lending, hard forks, airdrops, utility and security tokens, and employee remuneration.” In short, the ministry has addressed a wide range of topics.
Sales of BTC and ETH tax-free after one year
A notable conclusion in the letter is that the two largest coins can be sold tax-free after one year. “For private individuals, the sale of acquired Bitcoin and Ether is tax-free after one year,” says State Secretary Katja Hessel. However, the letter is not definitive for the future—rules may still change.
“Naturally, the forthcoming official publication of the BMF letter is not the end of our discussion on this topic, but rather an interim result. The rapid development of the ‘crypto world’ means we will continue to face new issues. An additional letter on cooperation and registration obligations is already in preparation.”
For those interested in reading the letter, it is available from the ministry. You will need a good command of German or a reliable translation tool to review the original text.
Germany ranks #1 for crypto
According to Coincub, Germany ranks first as the best crypto country in the world. The country scores even higher than El Salvador, which made headlines for adopting Bitcoin as legal tender. Germany outranks the South American nation because crypto investments are already integrated into the domestic savings sector.
Additionally, Germany leads in the number of Bitcoin nodes and already has progressive tax policies. With the new BMF letter, the Ministry of Finance is taking further steps to clarify and expand the tax treatment of cryptocurrencies.