Across Germany, crypto is becoming an increasingly popular option for wages and day-to-day payments. While 5.8% of Germans are invested in crypto, of that group, 35% use it to pay for purchases on a regular basis.
In Germany, while crypto is not classified as legal tender, it can still be legally bought, sold, traded and used to pay for goods or services. As an increasing number of German businesses adopt payment options for accepting crypto, the German tax authorities are intensifying their efforts to regulate crypto transactions.
How is Crypto Taxed in Germany
The German tax authority, the Bundeszentralamt für Steuern or the BZStIn, classifies crypto as a private asset. This categorization has specific tax implications that differentiate it from a Capital Gain.
Earnings on crypto fall under Income Tax if the crypto has been bought and sold within the year. As such, they are liable to the same tax rates as regular Income Tax, which can be as low as 0% and as high as 45%, with the addition of the universal 5.5% Solidarity Surcharge.
For crypto that is held for more than a year, once disposed of, no taxes are owed. As for crypto that has been received in compensation for goods or services, Income Tax is owed the same as any income earned.
Tax-Free Crypto Transactions
- Crypto that is sold or traded after being held for more than 365 days.
- Income earned in crypto that amounts to less than €256.
- Total profits on crypto investments in a less than one-year period that amount to less than €600.
Taxable Crypto Transactions
- Total short-term earnings (crypto bought and sold or traded within one year) on crypto that exceed €600.
- Crypto that is earned as income, such as in the case of mining or staking.
- Crypto that is paid as income to an individual by an employer.
Income Taxes on Crypto in Germany
Any earnings made on crypto that has been bought and sold within a year or less are subject to Income Tax.
For crypto that has been paid as wages to a contractor by an employer, Income Tax rates will also apply. These can be calculated by determining the fair market value of the crypto at the time that payment was received.
For goods or services paid for in crypto, if they are purchased with a crypto investment made in that same year which has risen in value, Income Tax will be owed on the capital gains of the investment.
For capital gains that exceed a total of €600 or wages of more than €256, one of the following tax rates will apply, plus an additional Solidarity Tax of 5.5%.
- 0 - €10,347 0% Tax Rate
- €10,632 - €61,971 14-42% Tax Rate
- €61,971 - €277,825 42% Tax Rate
- €277,825 and above 45% Tax Rate
It is important to note that crypto losses can be used to offset capital gains. If losses are incurred in the course of a year, when reported in that year’s tax return, they can be carried over to offset gains in future years.
Corporate Taxes on Crypto
The taxation applied to German companies that hold cryptocurrencies will depend on the particular legal entity they are registered as, resulting in varying tax obligations.
If a company is legally considered to be a partnership, crypto holdings are taxed under the same tax brackets as Personal Income Tax with the addition of a Trade Tax. The Trade Tax differs depending on the municipality in which the company is based and can range from 8.75%-20.3%.
In case of LLCs, public companies and corporate entities, a Corporation Tax and a Trade Tax will be levied on crypto holdings. The Corporation tax is applied to corporate profits at a uniform rate of 15% with an added 5.5% Solidarity Surcharge, plus the Trade Tax of 8.75-20.3%.
It is of utmost importance to note that unlike in the case of individuals, corporate entities that hold crypto for a year plus do not have tax exemptions, and instead will be expected to pay the same Corporate Taxes and Trade Taxes as are levied on crypto earnings made within a year or less.
Paying Contractors in Crypto with Rise
The BZStIn has increased its surveillance of German companies with crypto holdings in recent years. As a result, ensuring compliance has become more important than ever before. For German companies that hold crypto and issue crypto payments to contractors, Rise provides a comprehensive payroll and compliance solution.
Rise is built to support the infrastructure of both traditional companies and web3-native organizations. It provides a streamlined process for hiring, managing, and paying both local and international contractors. From KYC onboarding to fiat and crypto payroll, Rise guarantees total compliance.
Ensure that your crypto payments to contractors in Germany and abroad meet Germany’s constantly-evolving tax landscape. Schedule a demo today to learn how Rise can scale your global teams and streamline your crypto payroll.