As tax returns are open since April 7, BFM Crypto explains how to declare your capital gains on cryptocurrencies.
• I own cryptocurrencies, what do I have to declare with taxes?
A taxpayer who has opened an account on a foreign cryptocurrency exchange platform, such as Coinbase or Binance, must declare this account to the tax authorities on Form 3916-BIS even if their account is closed during the fiscal year, subject to prior declaration. It doesn’t matter how much money he holds on the platform. A user will have to fill in as many forms as there are platforms on which he is located. He incurs a fine of 750 euros for an undeclared account.
If, on the other hand, a user is a customer of a French platform, such as Coinhouse, he will not need to declare it to the taxman. Likewise, there is an exception for decentralized platforms, which can be wallets (physical or virtual wallets for storing cryptocurrencies), such as Ledger or MetaMask.
“But this could potentially change with European Mica regulations. Decentralized platforms could also have a KYC (for” Know Your Customer “or” know your customer “, a system for verifying the identity of a customer, ed) and some standards. additional, including account reporting, ”said Adrian Felden, business manager of Waltio, a fintech specializing in cryptocurrency taxation.
• In case of capital gains in cryptocurrencies, what must be declared?
If an investor makes a taxable sale, he will have to declare it to tax. Among the taxable transfers we distinguish the transfers of cryptocurrencies against fiat currency (fiat currencies such as the euro or the dollar for example) or the purchase of a good or service with a cryptocurrency.
There is a tax exemption if all taxable sales in the entire year are less than 305 euros of capital gain. This also applies to losses: if a user has lost money by selling bitcoins, this must also be declared.
• How to declare the capital gains?
Cryptocurrencies fall within the scope of the flat tax of 30% (the single flat-rate levy or ELT, with 17.2% of social security contributions plus 12.8% of Irpef) of the Pacte law, with a regime dedicated to digital assets . To know how to report their capital gains, a user needs to keep track of all cryptocurrency transactions made during the reporting year and be able to calculate the valuation of their portfolios at the time of taxable divestment.
Here is the calculation formula to be applied for each taxable sale:
selling price – [prix total d’acquisition × (prix de cession / valeur globale du portefeuille)]
Example proposed by Adrian Felden: on January 1 a taxpayer buys 1000 euros of bitcoin and 600 euros of ether (i.e. 1600 euros in all). After a price hike in February, his bitcoin wallet is worth € 2100 and that for ether is € 900. The overall valuation of the taxpayer’s portfolio is therefore equal to 3000 euros (2100 + 900 euros).
Following this increase, the taxpayer decides to sell 600 euros of ether (this amount therefore constitutes the selling price).
To calculate the taxable capital gain, it is necessary to subtract from this sum the ratio between the total purchase price of the client’s digital asset portfolio at the date of the transfer as well as the ratio between the transfer price of these digital assets on the total value of the taxpayer’s portfolio at date of the transfer.
The amount sold represents 20% of the portfolio (600/3000 x 100 = 20%). It will then be necessary to subtract from the sale price the sum of 20% of the initial value of the taxpayer’s portfolio, therefore 20% of 1600 euros (the amount invested at the beginning), which represents 320 euros (1600 x 20% = 320). The sale price is 600 euros, the taxable capital gain of the taxpayer will be 280 euros (600 – 320). With an ELT of 30% he will therefore have to pay 96 euros to the tax authorities (320 euros x 30% = 96 euros).
• What if I have stablecoins?
Stablecoins – these cryptocurrencies backed by classic fiat currencies like the euro or the dollar – allow you to stay on the market for a long time without being subject to capital gains. If a user has made capital gains because he has sold bitcoin for stablecoin, it will not be taxable. If, on the other hand, you sell stablecoins against the euro, you will need to know the valuation of your portfolio at the time of the transaction, the value of which will have increased in the previous months.
“This neutralization of the taxation of crypto-crypto transfers could explain the fact that it is not allowed to carry over its losses from year to year, unlike other tax regimes in the financial world,” explains Adrian Felden.
• What if I have NFT?
There is legal uncertainty regarding capital gains realized on NFT (non-fungible token). To date, NFTs are not considered digital assets. They fall outside this definition, which would mean that NFTs could soon have dedicated taxation. A customer can buy an NFT at an initial price that can rapidly increase tenfold after his purchase: when he sells his NFT, he can calculate the flat tax according to current legislation for digital assets in the absence of a specific regime. It is possible that there will be a dedicated NFT regime in the coming months.
• Is the system in place adapted to the cryptocurrency ecosystem?
“The calculation method that consists of following the valuation of the portfolios during each taxable transfer is complex. Especially since prices can differ from one platform to another and the uses and different applications of the crypto ecosystem are changing very rapidly”, says Adrian Feld.
We got it right: for an individual who wants to keep his accounts in an Excel file, this remains nearly impossible. The latter will have to seek the help of experts, be they lawyers, tax specialists or even companies specializing in the taxation of cryptocurrencies.