How Germany taxes cryptocurrency and NFTs

Transactions involving the acquisition and disposal of cryptocurrencies are generally subject to income tax as “other income from private sales transactions” at progressive income tax rates, provided that the period between purchase and sale does not exceed one year and the exemption limit of €1,000. If the one year holding period is exceeded, the disposal proceeds do not come within the scope of income tax, i.e. any profits are not taxable at all. A further prerequisite is that the cryptocurrency was not generated itself, because the "acquisition" is then missing.

When determining the taxable profit, the acquisition costs must be deducted from the selling price. With regard to acquisition cost, the "FIFO method" (first in, first out) is applied if several acquisitions and disposals are made at different times in the same cryptocurrency. If the total of all taxable private sales (including the sale of real estate and similar rights) does not exceed the exemption limit of €1,000 in the respective calendar year, these are tax-free. As soon as this exemption limit has been exceeded, all profits from private sales are taxable.

Losses arising from the acquisitions and disposals of cryptocurrencies may be offset against profits from other private sales transactions in the same calendar year. If it is not possible to offset the losses in the same calendar year, the losses can be offset against profits from disposals of cryptocurrencies or from other private sales transactions in subsequent years. However, there is no possibility to carry back losses on the sale of cryptocurrencies to years preceding the year in which the crypto losses occurred.

If individual investors trade in cryptocurrencies on a commercial basis, any income is subject to income tax as “income from a trade or business”. Income arises from a trade or business if an independent, sustainable activity is carried out with the intention of making a profit, which also includes carrying out general economic transactions.

“Income from a trade or business” is taxable regardless of the holding period.

Cryptocurrencies are valued at their acquisition cost based on the fair market value of the exchanged currency (eg Euro). Any subsequent valuation of cryptocurrencies depends on whether the cryptocurrencies qualify as fixed assets or current assets. However, the upper valuation limit remains the acquisition cost. However, banks holding cryptocurrencies in their trading book must report the cryptocurrencies at fair value less a risk discount.

Acquisitions and disposals of cryptocurrencies as part of a corporate investor's business assets are subject to the general valuation and accounting principles of German commercial and tax law. Therefore, gains and losses must be taken into account as taxable income for corporation tax and trade tax purposes.

Profits from trading in cryptocurrencies are taxable as income for corporate income tax (15 per cent plus 5.5 per cent solidarity surcharge thereon) and trade tax purposes at the level of a corporate investor if the activity is carried out by a corporation (eg GmbH). The acquisition costs of the cryptocurrencies are deductible as business expenses.

Yes.

For individual investors it should be noted that mining can be a private or a commercial activity, depending on the circumstances of the individual case. The income includes both the block reward and any transaction fees received.

The mere mining of cryptocurrencies is not taxable, but the tax administration seems to assume that mining amounts to a taxable commercial business (due to the expected investment volume). Whether the proceeds of mining is classified as trading income depends on whether the requirements of a trade or business under the relevant German tax rules are met.

Mining is sustainable if it is intended to be repeated. It must be capable of generating a profit from this activity in the long term. The block creators already participate in general economic transactions by making their computer resources available to the network participants for the verification of the transaction data and its inclusion in a new block of the blockchain. The fact that the fee depends on the successful creation of the block does not prevent such transactions amounting to a participation in general economic transactions.

Block creation does not constitute private asset management, but a commercial activity. When mining, block creators receive the block reward and the transaction fees in exchange for the creation of new blocks and therefore this income, equal to the fair market value of the cryptocurrencies received, is subject to German income taxation. The activity thus corresponds to the one of a service provider.

Cryptocurrencies received by corporate investors from mining qualify as fully taxable income valued at fair market value of the cryptocurrencies received which forms also the initial acquisition costs. For corporates, profits and losses generated by mining or trading of cryptocurrencies is subject to corporation tax (15 per cent plus 5.5 per cent solidarity surcharge thereon) and trade tax at fair market value. The costs of mining the cryptocurrencies are deductible as business expenses.

For individual investors it should be noted that the receipt of additional units of cryptocurrency and other tokens as a reward for any kind of performance may be treated as other income from a service within the meaning of the relevant German tax rules or as business income depending on whether the taxpayer acts as a private investor or within its commercial activity.

If the aim of the airdrop is that, in addition to performance, "chance" also determines the receipt of units of a cryptocurrency or other tokens, then the attribution of performance and consideration is broken by the "element of chance".

Cryptocurrency and other tokens must be recognised at the market value at the time of acquisition. If the market value cannot be determined at the time of acquisition, it may be possible to value the cryptocurrency or other tokens received in an airdrop at €0.

If the allocation of units of a virtual currency or other tokens does not take place in a commercial context (eg by chance), gift tax may become relevant (see Question "How are gifts of cryptocurrency taxed, including in-game rewards?").

For corporates, income in the form of the transfer of units of a cryptocurrency and other tokens constitute fully taxable income. Units of a cryptocurrency and other tokens received are valued at their market value at the time of receipt.

Income from staking (participation in a staking pool, platform staking) generated by individual investors is generally subject to taxation under the relevant German tax rules as private asset management. The taxpayers receive consideration in the form of additional units of cryptocurrency which should be recognised at the market value at the time of acquisition.

For corporates, the consideration for the provision of stakes constitutes operating income and is fully taxable. Cryptocurrency units received for staking are to be recognised in the balance sheet at the time of the acquisition at market value.

Income from lending is taxable at the level of individual investors. Units of cryptocurrencies and other tokens received for lending are valued at the market value at the time of the acquisition.

For corporates, income from lending of cryptocurrencies and other tokens constitute operating income and is fully taxable. Units of a cryptocurrency and other tokens received for the lending are valued at the market value at the time of receipt.

A hard fork does not give rise to income for German tax purposes. The acquisition costs of the units of the cryptocurrency that existed prior to the hard fork are allocated to the new cryptocurrency units. The allocation is based on the ratio of the market values of the units of the different cryptocurrencies at the time of the hard fork. If, after a hard fork, no value is attributed to the units of the newly created cryptocurrency, the acquisition costs remain with the units of the cryptocurrency existing prior to the hard fork.

For individual investors, the acquisition date of the units of the new cryptocurrency is treated as the same as the acquisition date of the units of the existing cryptocurrency for purposes of calculating the one year holding period (see the first question above).

If tokens are provided to an employee the tax treatment depends on whether a cash benefit or a benefit in kind is given. The valuation of a benefit in kind shall be carried out at market value at time of receipt. A benefit in kind is not taxable if it does not exceed a total of €50 per month.

Tokens that are classified as non-cash benefits accrue to the employee at the time they are transferred into the wallet. The receipt of tokens takes place at the earliest when the tokens can be traded, as the employee only then has the possibility to dispose of the tokens economically. Cryptocurrency is not received by an employee therefore at the time the employer merely promises a transfer of tokens.

Should the receipt of cryptocurrencies result from a voluntary donation by the person who rewards the cryptocurrency and not as consideration for a service, there may be a charge to gift tax. No specific tax regulations apply to a gift of cryptocurrencies. Therefore, a gift of cryptocurrencies (including as a reward in a game) should be subject to the general principles of the German Gift Tax Act. The gift tax base should be the fair value of the cryptocurrencies. Applicable exemptions from gift tax and tax rates depend on the relationship of the donor to the recipient and the value of the gift.

No.

No.

No.

The EU Council has adopted a directive amending EU rules on administrative cooperation dealing with the reporting and automatic exchange of information in relation to transactions in crypto-assets (DAC8). DAC8 imposes new tax transparency rules for all service providers facilitating transactions in crypto-assets for customers resident in the EU. The rules, which will come into effect in 2026, will require all service providers, of whatever size and wherever located, to report on crypto-asset transactions carried out by clients residing in the EU.

Germany plans to implement the EU Directive through amendments to its national tax laws, specifically via the "Act to Implement the EU Directive on Administrative Cooperation in the Field of Taxation of Crypto-Assets." The draft legislation specifies concrete penalties for non-compliance with reporting obligations, including minimum fines of €50,000 for smaller entities, €150,000 for larger entities, and with a penalty of €20,000 for individuals. These penalties are designed to ensure strict adherence to the reporting obligations.

The draft also includes a clear enforcement mechanism, which involves issuing two warnings before penalties are applied. This detailed approach reflects Germany's commitment to establishing a rigorous compliance framework that meets the EU's requirements.

Currently, the draft is in the legislative process, having been circulated for consultation among relevant stakeholders, including industry representatives and legal experts. Discussions are ongoing in the German Parliament, with the aim of finalising and enacting the legislation by the deadline set by the EU (i.e. by 31 December 2025).

The Federal Ministry of Finance equates cryptocurrencies with legal tender insofar as these currencies have been accepted by the parties to the transaction as an alternative contractual and direct means of payment and do not serve any purpose other than use as a means of payment. The use of cryptocurrencies for the mere payment of goods/services is therefore not subject to VAT.

In the case of payment in cryptocurrencies (e.g. Bitcoin), valuation of the payment to the supplier is generally determined by the equivalent value in the currency of the EU Member State in which the service is provided. Conversion takes place at the last published selling rate (e.g. on corresponding conversion portals on the internet) and must be documented by the supplier. The exchange of conventional currencies into cryptocurrencies and vice versa is a service for VAT purposes which is, however, VAT exempt.

Lending transactions in relation to cryptocurrencies should be VAT exempt. Services provided by miners should not be VATable. Currently, there is no further guidance in relation to the VAT treatment of cryptocurrencies by the German tax authorities (eg in relation to airdrop, hard fork, staking).

In an Initial Coin Offering (ICO), tokens are issued by the issuer which may - depending on the structure - represent equity or debt.

If the issued tokens qualify as equity, their issue should not have any tax impact for the issuer.

If the issued tokens qualify as debt, the amount should be reflected as a liability in the (tax) balance sheet and interest payments should generally be deductible as business expenses.

Tokens are assets produced by the issuer itself which are recognised in the balance sheet at cost.

Depending on their specific design, utility tokens may come within the scope of the European Voucher Directive (EU 2016/1065).

Their VAT treatment will depend on whether they amount to single-purpose or multi-purpose vouchers. If the voucher specifies the service so that the use of the voucher is clear at the time of issue, it is a single-purpose voucher. In the case of such vouchers, the issue itself is subject to VAT.

However, if, the use of the voucher is not specified, but it can be used as a means of payment for various products, services or applications, it is a multi-purpose voucher. If it is a multi-purpose voucher, it is only subject to VAT when it is used as consideration.

Thus, if a utility token is issued that amounts to consideration for a specific transaction and is also consumed in the course of that transaction, it would be classified as a single-purpose voucher and be subject to VAT when issued. However, this would require that the right of the acquirer to the specific transaction is established and specified upon issue. This should rarely be the case in practice. In other cases, where the use of the token is not specified but can be used as a means of payment for various transactions, it will be treated as a multi-purpose voucher.

No.

According to the tax administration, the creation of NFTs (“minten”) can take place in two different ways, each of which entails different tax consequences.

In the case of the production of items such as digital works of art, the creation of the NFT will give rise to income from an artistic activity taxed as self-employment income. The prerequisite for this is that the taxpayer performs a creative activity.

In addition, however, the creation of an NFT may give rise to commercial income. The tax administration will assume a commercial activity exists in the case of self-distribution of art in online trade, for example. However, such a classification is associated with several tax disadvantages for the taxpayer compared to income from self-employment; for example, trade tax must also be paid.

The correct classification will be a question of the fact based on the specific individual case. Since neither the courts have yet ruled on this issue, nor has there been a clarifying guidance from the Federal Ministry of Finance, there is currently uncertainty for creators of NFTs in many cases.

There is no official guidance available so far on the tax treatment of the creation of NFTs. However, according to general tax principles, the costs associated with obtaining the NFTs should be capitalised as a separate asset in the tax balance sheet.

No, the tax treatment of the gains/losses on the sale of NFTs is not different from that in respect of the gains/losses on the sale of cryptocurrencies. The tax treatment should not depend on the nature of the underlying assets.

No.

No specific tax regulations apply to a gift of cryptocurrencies. Therefore, a gift of cryptocurrencies (including as a reward in a game) should be subject to the general principles of the German Gift Tax Act. The gift tax base should be the fair market value of the NFTs. Applicable exemptions from gift tax and tax rates depend on the relationship of the donor to the recipient and the value of the gift.

Insofar as NFTs can be classified as a work of art, the tax exemption for cultural assets may apply, in principle.

No.

No.

No.

At present, there are no reliable statements from the courts or the tax authorities as to whether the sale of an NFT is a supply of a good or a supply of service. The opinion in commentaries currently leans towards a supply of services. In the case of a supply to a business (and equivalent purchasers), the place of supply will be the place of such customer. In the case of a supply of service to a non-business customer, on the other hand, the place of supply will be the place of the supplier.

It is likely that the standard VAT rate of 19 per cent is applicable to such supplies, since the transfer of the token is a one-off transaction and it is therefore not relevant that possibly non-exclusive rights of use are transferred. Where the supply involves a supply of copyright or tangible works of art, the reduced VAT rate of 7 per cent would apply.