Is Bitcoin legal in New Zealand
Bitcoins & cryptocurrencies: moving abroad enables tax-free sales
It is known that the sale of crypto currencies such as Bitcoins in Germany is tax-free after one year. However, if the bitcoins have been lent in the meantime, this extends the speculation period to ten years. A design developed by us offers the possibility of tax-free sales. However, the prerequisite for the tax-free sale of Bitcoins is that the holder moves abroad. In the following article you will find out exactly how the move works so that you can sell the Bitcoins abroad tax-free.
Cryptocurrencies & Bitcoins
In this video we explain the taxation of bitcoins and cryptocurrencies.
[email protected] 0221 999 832-10
1. Taxation of bitcoins & cryptocurrencies by moving away?
A move describes the comprehensive task of domestic domicile (§ 8 AO), as well as domestic, habitual residence (§ 9 AO). As a result, there is a move if a natural person (§ 1 ff. BGB) moves abroad with all of his or her property. Furthermore, the question of taxation arises if the natural person was the owner of Bitcoins or other cryptocurrencies at the time of moving away. Provided that the bitcoins & cryptocurrencies are in the private assets of the natural person, the following options for exit taxation must be checked:
1.1 Exit taxation through sale in accordance with Section 22 Paragraph 1 Clause 1 No. 2 in conjunction with Section 23 EStG
Insofar as assets have arisen through the acquisition, holding, trading or sale of Bitcoins, these are classified in the other income according to Section 22 No. 2 in conjunction with Section 23 Paragraph 1 No. 2 EStG of the natural person. Even if cryptocurrencies are viewed from a tax point of view as an intangible, non-depreciable asset, the cryptocurrency assets are subject to the same tax assessment as foreign currencies. For other income, a one-year period (Section 23, Paragraph 1, Clause 1, Number 2, Clause 4 of the Income Tax Act) is usually assumed between acquisition and sale. Therefore, if the period is exceeded, the asset is not subject to taxation and can be sold tax-free. However, in the present case of the cryptocurrency, the period increases to a full ten years. Because the cryptocurrency serves as a source of income and to generate income. Thus, in order to achieve the tax-free sale, there must now be ten years between purchase and sale.
Does this mean that when you move out of Germany, a sale is fictitious in accordance with Section 22 (1) Sentence 1 No. 2 in conjunction with Section 23 of the Income Tax Act?
No, a move does not classify the asset growth from Bitcoins & Co. as a sale. Only an actual sale process, or processes equivalent to it, lead to the fulfillment of the private sale transaction.
1.2 Exit taxation of capital growth in accordance with Section 6 AStG in conjunction with Section 17 EStG
With regard to Section 6 of the Foreign Tax Act, a move triggers the taxation of Section 17 EStG - sale of shares in corporations. The Foreign Tax Act requires that the person moving away has been subject to unlimited income tax for at least ten years (Section 1 (1) EStG) and that unlimited tax liability is ended by giving up residence or giving up habitual residence. With approval of the factual requirement, the sale of shares in corporations at the time of the move is then faked.
As a result, is the asset growth from bitcoins & crypto currencies equated with shares in corporations according to § 17 EStG?
No, it can be ruled out that Bitcoin assets are shares in a domestic or foreign corporation. Accordingly, § 6 AStG does not trigger any taxation of asset growth through crypto currencies when moving away.
Do you have any questions about the
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2. Taxation in Germany through subsequent sale
It has already been determined that the move itself does not trigger any taxation of a Bitcoin asset. However, the question arises as to how the tax-free sale of the crypto currency is possible. For this purpose, § 2 AStG must be carefully considered. Accordingly, the following four facts are decisive in order to meet the requirements of the extended limited tax liability:
- a natural person § 1 ff. BGB
- at least 5 years of unlimited tax liability within the last ten years
- Moving to a low-taxed foreign territory or no continued residence
- essential economic interests within the scope of the foreign tax law
As a result, the extended limited tax liability applies for the following ten years, based on the unlimited tax liability. This includes the German taxation of all income that is not foreign income within the meaning of Section 34d EStG. As a result, the preceding elements will be discussed again in detail.
2.1 natural person
From a legal perspective, a natural person is a legal subject. In addition, this legal subject is the bearer of rights and obligations. All in all, this is how people are described.
2.2 Unrestricted tax liability
According to the law, whoever is a natural person and has his or her place of residence or habitual abode in Germany is subject to unlimited income tax within the meaning of Section 1 (1) EStG.
2.3 A low tax country / foreign territory with low taxation
The low taxation of a foreign area is determined on the basis of a fictitious income of EUR 77,000 in accordance with Section 2 (2) AStG. If the applicable German tax is under the same conditions by 66.67%, this means the determination of an area subject to low taxation within the meaning of the Foreign Tax Act.
2.4 Material economic interests
The central requirement is divided into different variants:
- Section 2 (3) No. 1 AStG: status as an entrepreneur, co-entrepreneur or partner in domestic companies.
- Section 2 (3) No. 2 AStG: minimum income for those who do not count as foreign income in accordance with Section 34d EStG.
- Section 2 (3) No. 3 AStG: composition limit of domestic assets
It should be added to 2. and 3. that the generation of actual, foreign income is irrelevant. The elements of the offense consider each other under the assumption of unlimited tax liability. Thus, in accordance with Section 2 (3) No. 2 AStG, there are significant economic interests if domestic income exceeds the limit of more than 30% of all income or more than EUR 62,000. Furthermore, assets whose income is not foreign income and which is more than 30% of the total assets or exceeds EUR 154,000 also represent significant economic interests. The total assets described here are determined in accordance with the provisions of the Valuation Act. Objects with which no current income is generated are left out.
3. Possibility of tax-free sales of bitcoins & crypto currencies by moving away
In summary, it can be said that the sale of Bitcoins & Co. as a result of moving away is tax-free. The prerequisite for this is that the elements of the extended restricted tax liability (§ 2 AStG) are not met. If there is no extended restricted tax liability, no taxation is due in Germany. Both the avoidance of unlimited tax liability over a period of five years within the last ten years and the identity of a natural person are difficult to avoid. Thus, the focus should be placed on the choice of the country of departure or the existence of essential economic interests. Because by choosing a non-low-tax country, or by avoiding significant economic interests in Germany, the cumulative validity of § 2 AStG is invalidated. As a result, the natural person would be able to move away tax-free with a cryptocurrency asset and also sell the asset as a result of the move.
Tax advisor for cryptocurrencies & road taxation
Our law firm specializes in advising companies on tax law matters. When it comes to advising on cryptocurrencies and exit taxation, clients value our expertise, for example, in the following areas:
- Advice on international tax law
- Preparation of applications for deferral and reimbursement of exit tax
- Advice on exit tax, in particular on strategic reduction
- The valuation of the GmbH shares
- Preparation of the associated tax returns
- Support of english speaking clients
- Clarification of individual tax issues for cryptocurrencies (trading, mining, lending, funding, etc.)
- Development of strategies for tax reduction
Our tax advisors and lawyers in Cologne and Bonn will be happy to provide you with personal advice. We also provide advice across Germany by telephone and video conference:
Specialist at the Association of Tax Advisors forthe taxation of bitcoins
Since 2014, the partners of our law firm have been regular experts at the Cologne Tax Advisors' Association. Around 1500 tax consultants attend our seminars every year. Due to the high demand, we are happy to provide you with our presentation on cryptocurrencies for download free of charge:
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