Germany - Crypto penetration

intro

According to some experts, Germany is a real competitor to the United States as the top blockchain economy in the world. The criteria and the complete list of countries can be found in Country Rating (Beta Version).

Security level

According to our rating, Germany has a minor level of danger. The country has 62 points (from 100) for safety and 62 in Numbeo crime rating(1). The homicide level(2) is 0,8 per 100,000 a year, and the firearm-related death level (3) is 1,04 per 100,000 a year.

Crypto Payments

Yes, you can accept (4) crypto payments while residing in Germany. Amendments to the German Banking Act (KWG) specifically permit the custody of virtual currencies. The German Federal Central Tax Office, or Bundeszentralamt für Steuern (BZSt), recognizes Bitcoin and other digital currencies as private money.

According to Bitcoin.com (5), converting Bitcoin to goods or services is treated no differently than selling Bitcoin on an exchange for tax purposes by The German Federal Central Tax Office.

Crypto Salaries

According to Cointelegraph.de (5¹) and the Transparent Beraten guide (6), it’s legal for foreign companies to pay the whole amount only in EURO/another currency.

At the same time, it’s possible to convert EUR in crypto or pay a part (up to 25%) of salary/additional rewards in crypto.

Legal

A detailed guide about crypto regulations in Germany can be found here (7) on the site of the local Finance Ministry.

In Germany, cryptocurrency regulation falls under the jurisdiction of the German Federal Financial Supervisory Authority (BaFin). You may check details on the regulator’s site (8). BaFin supervises and regulates the financial markets, including cryptocurrencies, to ensure their stability and protect consumers.

BaFIN license allows the registered companies the following activities:

-Exchange (Crypto to crypto AND/OR crypto to fiat)

-Custody

-Wallet

-Crypto lending

-Crypto funds

-ICOs/Securities/Security tokens

According to this guide (9), “BaFin has incorporated the crypto custody business as a new type of financial service into the German Banking Act (Kreditwesengesetz – KWG)” - Section 1 para. 1a no. 6. Crypto operations in the country are also regulated by AMLD5 (EU’s Fifth Anti-Money Laundering Directive). You may find more details about BaFin licenses in the Vega Consult guide (10).

According to consulting company RUE guide (11), Crypto securities and security tokens are referred to as financial services and are regulated by The German Electronic Securities Act. Moreover, electronic deposits are also held as an object of the German Civil Code. Based on the previous guide, local lawmakers have ''adopted an option to facilitate the introduction of crypto funds by this regulation''; the Federal Ministry of Justice and Consumer Protection and the Federal Ministry of Finance will issue it. BaFin should create a register of crypto securities.

Also, according to Law Review (12), The German Securities Prospectus Act (WpPG) regulates crypto securities in Germany. Crypto funds are regulated by The German Capital Investment Code (KAGB).

Mining in Germany requires no license; only sometimes do mining pools need a license as private investment funds (AIFs) (13).

Taxation

Tax name	Index
PIT tax Min	0%
PIT tax Max	45%
Min Individual CGT (for crypto)	0
Max Individual CGT (for crypto)	45
Corporate tax (CIT)	17
Wealth tax Min	0
Wealth tax Max	0
Mining tax
TDS tax

There are detailed guides about crypto taxation in the country in the German language:

👉Taxation Guide in German (Forbes) (14)

👉Official detailed VA tax guide from BFst (15)

PIT tax

Germany has(16) a personal Income Tax of 0-45%. Also, it may include a Solidarity surcharge - of 5,5%.

You don’t need to declare your crypto income if it’s less than €600 per year, and a profit lower than €10,632 is tax-free. Staking income is tax-free only after ten years of “hold.” For income between €61,971 and €277,825, the tax rate is 42%, and the highest speed is 45%.

However, individuals (not businesses) have a 0% rate in holding crypto for over a year. This 0% rate also works if you own more than one year and pay for goods and services in crypto. At the same time, according to Koinly, in most cases, for short-term profits, Germany applies not CGT tax but PIT. This includes even NFT rewards and mining rewards.

And one more detail(17) - if you get paid in crypto in Germany, you must pay income tax. Here, the exception for holders doesn’t work.

Also, personal income tax is imposed for some DeFi profits. BSt has canceled the 10-year holding period for staking. So, any DeFi income can be tax-free if you don’t withdraw it into fiat for one year. But it may be different if your crypto activity is qualified as professional or business.

CGT tax

Capital gain tax in Germany is rarely(18) applied to crypto income. Some possible cases are only crypto margin trading, crypto derivatives, and crypto futures. CGT has a flat rate of 25% in Germany, and €801 is a tax-free limit.

CGT tax also(19) applies to corporations doing crypto operations like crypto earnings, mining, and staking. It has no exception for 1-year holders, and the tax rate is 25%, plus a 5.5 solidarity surcharge on tax paid (in total, 26,375 plus church tax if applicable).

CIT tax

Crypto businesses like(20) public companies and LLCs must pay CIT and CGT taxes for their crypto operations. But partnerships pay not CIT, but PIT. Corporate income tax with solidarity surcharge has a 15.825% tax rate.

For more information on corporate taxation of cryptocurrency in Germany, Section 15 of the German Income Tax Act provides specific details. Additionally, Section 11 of the German Trade Tax Act may apply to cryptocurrencies.

WT tax

There are different assumptions according to wealth tax in Germany. According to the PWC tax guide (21), “At this point, no wealth taxes are levied in Germany.”. However, there are inheritance, estate, and gift taxes.

Progressive tax rates of 7% up to 50% and tax-free amounts between EUR 20,000 and EUR 500,000 apply, depending on the value and the degree of the relationship between testator/donor and beneficiary.

At the same time, some sources like Wikipedia conclude that Germany has a wealth tax. CMS guide (22) claims that “there is no direct wealth tax levied in Germany. However, property taxes are levied, for example, on real property (land tax)”.

If you have information about this topic, please write us in telegram @ilya_ii or by e-mail - editor@cryptopenetration.com

Links

1)Numbeo crime rating. Statistics

2)Homicide level. The list of countries by UNODC homicide rate.

3) Firearm-related death. Historical list of countries by firearm-related death rate.

4)Are Crypto Payments Legal in Germany? Article

5) Bitcoin.com

5¹)Cointelegraph.de

6)Gehalt in Kryptowährung – geht das? (Salary in cryptocurrency - is that possible?). Article

7)Treatment of virtual currencies and other tokens under German Income Tax Law. PDF-file

8)Crypto custody business. BaFin publishes information regarding the new legal situation. This website is updated on an ongoing basis.

9)Vego Consult. Cryptocurrency license in Germany.