Let’s go for cryptos in the tax return! – The declaration of income received in 2021 has open on April 7, 2022. It is therefore worth recalling what should be declared if you hold digital assets, and if you have carried out certain transactions such as transfers or payments.
Declaration of accounts opened, held or closed in an entity based abroad
First, since 1989 all foreign financial accounts held by a French taxpayer must be declared to the tax authorities. With the finance law for 2019this obligation has been extended to digital asset accounts opened, used or closed in an entity based abroad. Back on this obligation to declare digital asset accounts!
Targeted account holders
The obligation to declare accounts located abroad concerns physical personsthe associations and the companies not having the commercial form (1649 bis C of the General Tax Code) who are domiciled or established in France.
Thus, if the foreign accounts are held by a SARL (or EURL)a CNSa SAS (or SASU)a HER or a Partnershipthere will be no reporting obligation.
The type of account to report
First, it will be necessary to declare the accounts opened, used or closed with a neobank which is based abroad (for example: Revolut, N26). Similarly, accounts opened with financial services brokersas robinhoodare covered by the reporting obligation.
Next, this reporting obligation also concerns the digital asset accounts opened, used or closed with a exchange abroad during the year 2021. Thus, if you have opened, used or closed an account with Binance, FTX, kraken or KuCoin (to name a few), they will have to be declared. On the other hand, if your digital asset account was opened with a French platform like Justmining, Paymium Where Feel Mining then it won’t be not necessary to make his statement.
How is the declaration of accounts based abroad carried out?
If you hold one or more accounts described above, you must declare these accounts to the tax authorities by completing the form Cerfa n° 3916 for bank accountsand the Cerfa No. 3916-bis for digital asset accounts. These Cerfa must be completed at the same time as the tax return for natural persons, or of results for associations and non-commercial companies.
It should be understood that it is necessary to fill so many forms that you have accounts opened, used or closed in an entity that is located abroad.
This approach is quite tediouseven if we can now find the addresses of the different exchanges quite easily in their terms and conditions, or on the internet. Additionally, if you have already reported accounts on last year’s tax return, you will have the option to click on “report” when filing online. This action will allow you to win time by directly reporting the information given in your tax return for 2020.
What are the risks of not reporting these accounts?
Failure to report digital asset accounts is subject to a tax penalty. The taxpayer having no not declared a digital asset account covered by the obligation is liable to a €750 fine (per undeclared account). Assuming an omission or an errorthe fine is 125 €. These fines are limited to €10,000 by tax return.
Furthermore, the amount of these fines will be double whether the market value of digital asset accounts opened, used or closed with foreign exchanges is greater than €50,000 has a any time of the year subject to declaration.
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Declaration of capital gains from the sale of digital assets
Not all transactions you make with your digital assets are necessarily taxable. We must therefore go back to those that are, before explaining to you how to declare taxable transactions to the Administration when you file your 2021 income tax return.
Let’s start on the bright side! In the event that a taxpayer has bought cryptocurrencies in order to keep themthen he will not have to declare his transactions to the tax authorities.
Then, in the event that the taxpayer has purchased cryptocurrencies, that he has resold for stablecoinsthere too it will not have Nothing to declare.
Finally, the exchanges of cryptocurrencies against other cryptocurrencies are also exempt from taxation and therefore do not have to be declared to the Administration. In short, in these three cases the taxpayer is not taxable on its transactions carried out in digital assets. So, if you only made these types of transactions, you can stop reading at this point.
Let us now turn to the transactions which constitute a chargeable event. This is the case of resale operations of your digital assets, against a currency that is legal tender (fiat). Also, if you buy goods or services using cryptocurrencies, these payments should be taken into account in the calculation of your capital gain. These two transactions are chargeable events according to the tax regime applicable to digital assets.
How to declare your capital gains of digital assets in the tax return for 2021?
In the event that you have carried out one or more taxable transactions, then you will need to complete the appendix Cerfa No. 2086 “Declaration of capital gains or losses following disposals of digital assets”. You will then need to enter the number of taxable disposals that you have made. The online space limit their number to 100.
In case you realized more than 100 taxable disposalswe advise you to send a message from your declaration space via secure messaging, explaining your problem. You will thus be able to ask the tax authorities for authorization to send a painting similar to Cerfa n° 2086, in order to make a declaration in good and due form. Generally, the Administration’s response is positive.
Next week we will come back to the calculation of capital gains disposals of digital assets. This calculation is essential to fill in Form 2086 correctly.
Finally, with regard to the activity of cryptocurrency mining, the earnings from this activity must be declared in the category of non-commercial profits (BNC). Thus, taxed in the BNC category, these earnings will be subject to the scales and progressive rate of income tax.
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