The Central tax federal of german simplified the cryptocurrency tax system more than other nations because many nations do not declare the proper tax system on Bitcoin.
Bitcoin Cryptocurrency Taxation In Germany
So in this five-minute reading article, you will introduce the German tax system on Bitcoin or other cryptocurrencies simply and easily.
For more information about cryptocurrency, you can visit https://cryptotrader.software/
Income tax will apply
Since thousands of centralized bitcoin wallets are available on the internet, many people go trading to make money with bitcoin or other cryptocurrencies.
Bitcoin or other cryptocurrency trading is becoming very popular in this era. Many professional traders make 100 euro to 1000 euros per day, which is a massive profit for an ordinary person.
When you make a profit by bitcoin trading, it will become your income through your trading skills, and you will be liable to report the tax to the German government.
Bitcoin trading means purchasing these digital coins at a regular price, and after one hour, seven days, or a few months when the cost of this crypto will pump, you will sell that crypto to make money.
The person who buys and sells crypto and earns money is quickly known as a bitcoin or crypto trader because he has trading skills such as reading charts, marketing analysis, and being aware of the latest crypto news. Here is the following example to understand it in a straightforward way given below:-
Suppose you bought one bitcoin at 100 euro and after seven years the price of Bitcoin pumped worth 200 euro, and you sold bitcoin at 200 euros which means hundred euro is your trading income.
When you withdraw your funds from your bitcoin wallet into euros, you have to report to the government your payment. And if you are using the centralized bitcoin wallet, it will automatically report to the government about your activity or income.
Three aspects for calculating the tax on cryptocurrencies
The central tax federal of Germany’s three elements for calculating the tax on bitcoin or other cryptocurrencies are given below:
- High-income bracket: If your income is already high and you are also making by investing or trading in bitcoin or other cryptocurrencies, then your income tax or tax on capital gain will also be increased. If your income is low, you are liable to pay less tax on cryptocurrencies.
- Time for holding cryptocurrencies: If you are daily trading bitcoin or any other crypto just for making money, it will count as your ordinary income, and tax deducted from your income. If you keep the bitcoin in your wallet for more than one year and if any payment you earn after one year, you are not liable to pay tax to the government because income or gain is tax-free, according to the German government.
One-year tax amount:- If you are generating up to six hundred euros under a year through bitcoin trading, then tax will be levied, and income above six hundred euros are non-taxable income. Of course, you already know that holding bitcoin for more than one year is also a non-taxable income.
Tax on receiving bitcoins
Suppose you are receiving bitcoin from your friend as a gift or someone sent you bitcoin or another crypto coin for pleasure, then it will become your income, and you have to pay for it.
You cannot consider it a gift because it’s now your income and you can use it for any purpose like earning euros from it or buying some goods and services.
You know that when you receive euros from your friend and any person, it becomes your income, and you will pay tax on it similarly, bitcoin tax applies.
Tax on shopping with bitcoin gain
Fiat currency will not give you the feature to earn money with deflation, but bitcoin and other cryptocurrencies have deflation features.
Suppose you have 1000 euros in your bank account, and when you withdraw it from the bank, it will also have 1000 euros with little banking interest. But if you purchase Bitcoin worth 1000 euros and after some years when you withdraw, you will get shocked by seeing that the 1000 euros become 1,500 or 2,000 or at whatever value increased.
Some people invest money in bitcoin, and after some months, when the price of bitcoin gets high, they buy goods and services through the bitcoin gain, but they have to pay the tax on the capital gain.
You can also avoid the tax because you will hold bitcoin for more than one and use the revenue for buying goods and services. After all, it will become tax-free, but shopping within the year will require you to pay tax.