The German Federal Ministry of Finance has published a document aimed at defining and regulating the various types of cryptocurrency gains. In particular, we learn that German citizens will be exempt from tax on their cryptocurrency gains if they have held them for more than a year.
Germany takes another step towards cryptocurrencies
On Tuesday, Germany’s Federal Ministry of Finance released its first guidelines for framing the taxation of cryptocurrencies, and they confirm the country’s interest in developing digital assets.
In particular, the 24-page document explores how cryptocurrencies are taxed. The most important point mentions the tax exemption for gains in cryptocurrencies that are held for more than one year by an individual, and this includes staking as well as lending.
Until now, if a German citizen wanted to take advantage of the tax exemption on their crypto-currencies, they had to wait ten years. This is now reduced to just one year, in line with Section 23 of the German Income Tax Act, which states that if the period between the acquisition and sale of an asset is longer than one year, then the amount of the gain is tax-free.
The document, which also mentions mining, hard forks and airdrops, is still subject to change, according to the ministry:
The federal Department of Finance will continue to address income tax issues related to virtual currencies and other tokens in close coordination with the highest federal state financial authorities and with input from the associations. “
It’s my understanding that crypto gains are tax free in Germany if you hold for a year. However,.if you stack or earn any yield, it loses the 1 year tax free benefit
– Turtley (@Turtley66224485) May 21, 2022
Germany is the number one crypto-friendly country
According to a ranking by Coincub, Germany now sits at the top of the podium in terms of crypto-friendly countries, taking over from Singapore.
The reason for this is the country’s institutional position in positioning crypto-currencies as a long-term investment vehicle for savers, especially with a tax system that was already much more welcoming than most other countries in the world.
In addition, it is worth noting that Germany has 1,430 Bitcoin nodes, which represents 9.08% of the total global nodes. This puts it in second place in terms of nodes held just behind the US and ahead of France, which has only 3.35%.
Last month, Commerzbank, Germany’s second largest bank, applied for a licence to offer cryptocurrencies to its customers. If this comes to fruition, more than 11 million of its retail customers would benefit from cryptocurrency custody and trading services.
At the end of 2021, Paycer (PCR), a German cross-chain decentralised finance (DeFi) protocol, announced that it wanted to combine DeFi with traditional banking services (TradFi) in order to offer high interest rates to a wider audience.
Finally, according to a KuCoin report in March this year, 44% of German citizens would be “motivated to invest in cryptocurrencies to be part of the future of finance”.
Europe’s richest country thus also looks set to dominate the cryptocurrency market in this area, given both retail and institutional interest in it.
