As tax returns have been open since April 7, BFM Crypto explains how to declare its capital gains on cryptocurrencies.
• I hold cryptocurrencies, what should I declare to 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 in form 3916-BIS even if his account is closed during the tax year. subject to declaration. This does not matter how much money he holds on the platform. A user will have to fill out as many forms as there are platforms on which he is. He incurs a fine of 750 euros per undeclared account.
On the other hand, if a user is a customer of a French platform, like Coinhouse, he will not need to declare it to the tax authorities. Similarly, there is an exception for decentralized platforms, which can be wallets (physical or virtual wallets for storing cryptocurrencies), such as Ledger or MetaMask.
“But that could potentially change with the European Mica regulations. Even decentralized platforms could have a KYC (for “Know Your Customer” or “know your customer”, a system to verify the identity of a customer, editor’s note) and some additional standards, including account reporting,” said Adrian Felden, business manager at 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 this to taxes. Among the taxable transfers, we distinguish the transfers of cryptocurrencies against fiat currency (legal 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 of the taxable disposals over the whole year are less than 305 euros of capital gains. This also applies to capital losses: if a user has lost money selling bitcoin, this must also be declared.
• How to declare capital gains?
Cryptocurrencies fall within the scope of the 30% flat tax (the single flat-rate levy or PFU, with 17.2% social security contributions plus 12.8% income tax) of the Pacte law, with a dedicated regime for digital assets. To know how to report their capital gains, a user must track all cryptocurrency transactions made during the reporting year and be able to calculate the valuation of their portfolio(s) upon taxable disposal.
Here is the calculation formula to apply for each taxable disposal:
sale 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 rise in the price in February, his bitcoin wallet is worth 2100 euros and that for ethers 900 euros. The overall valuation of the taxpayer’s portfolio is therefore equal to 3000 euros (2100 + 900 euros).
The taxpayer, following this increase, decides to sell 600 euros of ether (this amount therefore constitutes the sale price).
To calculate the taxable capital gain, it is necessary to subtract from this sum the relationship between the total acquisition price of the client’s portfolio of digital assets on the date of the transfer as well as to subtract the ratio between the transfer price of these digital assets on the overall value of the taxpayer’s portfolio on the 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 start), which represents 320 euros (1600 x 20% = 320). The transfer price being 600 euros, the taxable capital gain of the taxpayer will be 280 euros (600 – 320). With a PFU of 30%, he will therefore have to pay the tax authorities 96 euros (320 euros x 30% = 96 euros).
• What if I hold stablecoins?
Stablecoins – these cryptocurrencies backed by classic fiat currencies such as the euro or dollar – allow you to stay in the market for a long time without being subject to capital gains. If a user has realized capital gains because they sold bitcoin for stablecoins, they will not be taxable. On the other hand, if he sells stablecoins against the euro, he will need to know the valuation of his 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-to-crypto transfers may explain the fact that it is not authorized to carry forward its capital losses from year to year, unlike other tax regimes in the financial world”, specifies Adrian Felden.
• What if I have NFTs?
There is legal uncertainty regarding capital gains made on NFTs (non-fungible token). To date, NFTs are not considered digital assets. They do not fit into this definition, which would mean that NFTs could soon have dedicated taxation. A customer can buy an NFT at an initial price which can quickly increase tenfold after its purchase: when he sells his NFT, he can calculate the flat tax in accordance with the regulations in force for digital assets in the absence of a specific regime. It is possible that within the next few months there will be a dedicated regime for NFTs.
• Is the system in place adapted to the cryptocurrency ecosystem?
“The calculation method which consists of following the valuation of the portfolios during each taxable transfer is complex. Especially since the prices can be different from one platform to another and the uses and different applications of the crypto ecosystem are changing very quickly,” says Adrian Felden.
It is well understood: for an individual who wishes to keep his accounts on an Excel file, this remains almost impossible. The latter will have to seek help from experts, whether lawyers, tax specialists or even companies specializing in the taxation of cryptocurrencies.