A draft bill by the German Ministry of Finance has led to an outcry of the German crypto community. If put into law, activities such as mining, staking, or lending would become subject to heavy taxation. This could cost Germany its international competitiveness in an upcoming technology.
Germany is eyeing crypto taxes. The German Federal Ministry of Finance wants a uniform framework for the taxation of cryptocurrencies and has presented a draft that will tighten the thumbscrews for investors.
The draft bill calls for higher tax burdens on mining in particular. It does not distinguish between private and commercial mining activities. Specifically, this means that the tax authorities assume that mining is generally income from a commercial enterprise, regardless of whether one is connected to a mining pool. That means tax officers could generally presume income from a trade or business. With the draft bill, crypto-mining would become a commercial activity, meaning business taxes could then also apply to income such as Block Rewards.
The bill would also make staking and lending unattractive. It proposes an increase of the holding period (currently one year) to 10 years if cryptocurrencies are used as a source of income. That is the case with staking and lending, where investors earn interest income.
The draft is still subject to change and is initially to be understood as a recommendation for tax officers. However, a final version, which will initially be binding for tax officers, could then appear in a few months.
The crypto community in Germany is protesting as the law would make activities such as staking, lending, and mining economically unattractive. Miners would likely move elsewhere, giving Germany a disadvantage. The tax authorities are obviously pursuing the intention of fully taxing almost all transactions related to cryptocurrencies. That’s certainly not what the crypto community was waiting for.
The German Blockchain Association Bundesblock is now preparing a statement in cooperation with its members to make alternative suggestions to the draft bill and explain why in their eyes, these proposals would be harmful to Germany. Lawyers specialized in crypto taxation have also criticized the law, saying it merely applies regulations from other areas to crypto assets. Instead, the government should create new laws that meet the unique requirements of the new asset class, like, for example, in Liechtenstein.
The international community has also taken note. As Germany still plays a leading role within Europe, crypto enthusiasts in other countries fear knock-off effects, particularly in Austria. That’s why Crypto-Europe is watching what happens in Germany. It wouldn’t affect Liechtenstein; maybe it would even be a positive. Those seeking a new place to settle might consider Liechtenstein, which has some of the most progressive crypto and blockchain regulations within Europe.
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