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Germany Simplifies Laws on Taxation of Crypto Income

Crypto holders in the country will no longer be held to the previous traditional “10-year” rule.

 

Germany’s federal ministry of finance has published a release outlining its plans for taxing crypto and blockchain-related income.  

Among other things, Germans who sell their crypto holdings after 1 year of possession do not have to pay taxes

Tax-Free After a Year

According to Parliamentary State Secretary Katja Hessel, this applies specifically to digital currencies Bitcoin and Ethereum. This is only one of the various aspects the financial watchdog the 24-page document explains. 

Hessel shared in his statement that the clause above also applies to assets invested in lending and staking projects. Interestingly, monetary regulators have clashed on this subject over the past few months. Many have questioned whether lending and staking operations call for an extension on the taxation period. 

Fortunately, the BMF ironed out laws regarding DeFi features and mechanisms such as staking, lending, hard forks, and airdrops. In the past, investors had to retain their holdings for up to ten years for gains on the tokens to go tax-free. However, the ministry has decided the typical ten-year taxation deadline will have no bearing on digital assets.

More Regulatory Clarity for Germany’s Crypto Space

In addition to these, the BMF’s document addressed utility, security tokens, and digital assets as employee income. This is Germany’s first time providing consistent, countrywide material on these matters. Hessel noted that this publication will not be the last as the crypto space’s continued evolution makes future discussion unavoidable.  

Of course, the publication of the guidance is not the end of our engagement with the topic, but an interim result,” said Hessel. “The rapid development of the ‘crypto world’ ensures that we do not run out of topics.”

Other Crypto Laws to Come

In addition, the parliament secretary revealed that the BMF is working on another letter. This document will cover other crypto-related tax issues and the obligation to abide by the ministry’s latest stipulations. The regulator will work alongside the leading tax authorities of the federal states, they will also bring the associations on board.

In a release, the ministry noted 2021’s summer hearing which helped pave the way for the letter to arrive. Participants included several associations and practitioners and even regular citizens. Jointly these individuals approached the ministry with extensive data.

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The ministry is yet to unveil any details on the income tax rates.

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