Key takeaways
- Crypto capital gains tax is calculated based on the profit made from selling cryptocurrency, similar to taxes on stocks or real estate.
- European countries such as Italy, France and Germany have different approaches to taxing crypto, with varying rules on capital gains and income from trading.
- A comparison of crypto capital gains taxes shows that Italy, France and Germany offer distinct advantages depending on the investor’s strategy and trading activity.
- To navigate crypto tax differences across Europe, it’s advisable to contact a tax adviser who can ensure compliance and help tailor your tax strategy to local regulations.
When you sell crypto for more than you have paid for it, you may incur crypto capital gains tax. It’s similar to paying tax on the money earned from selling a share or real estate for more than you paid for it.
Different countries in Europe have their own rules for crypto taxes. Italy, France and Germany approach capital gains taxes differently, which can affect how much you will have to pay when you sell your crypto.
Laws surrounding crypto taxation in many European countries are still being finalized and can often be open to interpretation, making it tricky to navigate for investors.
Understanding these differences is key to staying compliant and choosing where to become a tax resident. The guide will help you understand how to calculate crypto capital gains taxes if you are a resident of Italy, France or Germany.
How to calculate crypto capital gains tax
If you made a profit trading crypto, that profit is your capital gain. To calculate profit, subtract the price you paid for the crypto from the price you sold it for. To figure out how much tax you will have to pay, multiply profit by an appropriate tax rate.
For example, consider you bought Bitcoin (BTC) for $65,000. After some time, you sold it for $70,000 and, therefore, made a profit of $5,000. This $5,000 will be taxed by a percentage applicable to your tax residency.
Did you know? Capital gains tax can complicate tax filings, especially for frequent traders. Correctly reporting each transaction and calculating gains or losses may require detailed record-keeping and potentially the assistance of tax professionals.
Understanding crypto capital gains tax in Italy, France and Germany
Crypto capital gains tax overview in Italy
In Italy, cryptocurrencies are taxed just like traditional currencies, such as the euro, meaning that you’ll need to pay taxes when you:
- Buy, sell or trade crypto
- Convert crypto into euros
- Trade non-fungible tokens (NFTs) into another cryptocurrency.
In Italy, crypto income is classified as “miscellaneous income.” Before 2023, it was treated like foreign currency gains.
Italy does not distinguish between short-term and long-term profits from crypto. Whether you keep your cryptocurrency for a month or a year won’t affect your tax obligations in Italy.
What is the crypto capital gain tax in Italy?
As of October 2024, if your crypto gains exceed 2,000 euros in a tax year, there’s a 26% tax on crypto capital gains. Gains below 2,000 euros are not subject to Italy’s tax.
However, in October 2024, the Italian government announced plans to raise the capital gains tax on cryptocurrency from 26% to 42%.
Italy’s plan to increase the capital gains tax on cryptocurrency is part of Prime Minister Giorgia Meloni’s economic strategy to fulfill election promises and address the fiscal deficit while also aligning with upcoming Markets in Cryto-Assets (MiCA) regulations on crypto.
Capital gain taxes on crypto mining in Italy
The Italian tax authority, Agenzia Entrate, hasn’t yet provided detailed guidance on certain crypto activities such as mining, staking and lending. Even without specific rules, it’s likely these activities are still taxable.
In Italy, mined crypto presumably will be taxed as personal income when sold. Still, some may be subject to up to 43% business activity taxes and companies facing a 24% corporate tax (potentially rising to 42%).
Did you know? Italy also has Wealth Tax, which can apply to your crypto holdings at the rate of 0.2% per year.
Crypto capital gains tax overview in France
The French tax authority, known as the Direction Générale des Finances Publiques (DGFiP), considers cryptocurrency a movable asset. This means that any profit you make from selling or trading crypto is subject to tax.
However, not all crypto activities are taxed; here are some transactions that are tax-free in France:
- Trading or swapping one cryptocurrency for another
- Buying crypto with cash
- Transferring crypto between your wallets
- Holding crypto.
Here’s a straightforward breakdown of what you need to know about crypto capital gains taxes in France.
What is the crypto gains tax in France?
It’s important to differentiate between occasional and professional traders, as the tax rates can vary significantly depending on how you engage with crypto. Here’s how the tax rates break down based on your trading activity:
- Occasional trader’s tax rate: A 30% tax applies to casual investors who occasionally sell crypto.
- Professional trader’s tax rate: Up to 45% applies to those who trade crypto regularly and in a more professional manner.
- Crypto mining tax rate: Up to 45% applies to individuals who earn crypto through mining.
Capital gains under 305 euros are tax-free, meaning that if your total capital gains from selling crypto are less than 305 euros in a year, you won’t owe any tax.
Crypto capital gains Tax overview in Germany
In Germany, there are some activities that are not taxed:
- Purchasing cryptocurrencies with fiat money, such as the euro.
- Transfers between your wallets or exchanges; accurate records are needed.
- Gifting or donating cryptocurrencies up to 20,000 euros per year.
- Swapping cryptocurrencies within a project.
- Holding cryptocurrency for longer than 365 days.
The regulations set forth by the German Federal Central Tax Office, also known as Bundeszentralamt für Steuern, or BZSt, offer clarity to investors, encouraging a long-term holding strategy.
What is the crypto capital gains tax in Germany?
Since cryptocurrencies in Germany are classified as “private economic goods,” their trading profits are subject to income tax, not capital gains tax.
In Germany, income tax rates can go from 0% to 45%, depending on your annual income. In addition to income tax, a 5.5% solidarity tax may also apply, as well as an 8%–9% church tax. Profits from crypto mining are also subject to income tax.
One key advantage in Germany is the one-year holding period. If you hold your cryptocurrency for at least one year before selling, you can sell it tax-free. This means no capital gains tax or private income tax on the profit, regardless of how much it has appreciated.
Germany can also offer a tax-free threshold for casual investors. Any gains are tax-free as long as they stay under 600 euros per year. The same goes for crypto income from things like staking or lending, which are tax-free, up to 256 euros per year.
Did you know? It is believed that Germany’s one-year holding period for exempting capital gains tax was established to encourage investment and prevent the economic instability reminiscent of the hyperinflation experienced after World War I.
Crypto tax rates: Comparing Italy, France and Germany
When comparing crypto capital gains taxes in Italy, France and Germany, the choice of tax residency depends heavily on your trading activity and profit level.
Italy could be an optimal choice for short-term traders who plan to make smaller gains, as only profits over 2,000 euros are taxed at 26%. However, the potential increase to 42% may discourage those with larger gains or long-term strategies. It’s also less appealing for crypto miners due to high business tax rates.
France offers a mixed approach. Occasional traders with modest gains can benefit from the tax-free threshold of 305 euros, but the 30% flat rate on larger gains and up to 45% for professional traders could make it a high-cost option for active or large-scale traders.
Thanks to its one-year holding exemption, Germany emerges as the most attractive for long-term holders. Traders with smaller annual gains (under 600 euros) or crypto income (under 256 euros) can also enjoy tax-free benefits.
In any case, it’s best to contact a qualified tax adviser or specialist to ensure compliance with local regulations and tailor your tax strategy to your unique situation