Professional handling of your cryptocurrency taxes

A cryptocurrency is a purely digital currency. There are therefore no physical banknotes or coins. Alternative terms are cyber currency or crypto money.

The main difference between a cryptocurrency and conventional means of payment is that the digital currency is not controlled and issued by a government or central bank. Instead, it is organized decentrally by private individuals, legal entities or third parties who hold shares in the respective cryptocurrency.

For cryptocurrencies to work, all transactions must be encrypted, verified and stored. However, the capacity of an ordinary database is not sufficient for this. In addition, conventional databases are vulnerable to manipulation.

To obtain enough computing power and maximum security for the complex digital currency, cryptocurrencies therefore need a decentralized database. This means that the same version of the database is distributed across different computers. This makes hacking the database much more difficult than with a central database. In this decentralized database, all transactions are stored in data blocks permanently and traceably.

When a data block is full, a new block is attached. It contains information that refers to the previous block. Step by step, these data records form a chain of many individual blocks. This is how the blockchain is created.

In principle, cryptocurrencies in the form of payment tokens count as assets and are declared in the statement of securities and assets. They are therefore subject to wealth tax. They must be declared at their market value at the end of the tax period (usually on 31 December).

However, they can also fall under income tax. This includes income from cryptocurrencies such as mining, staking, lending or operating masternodes.

Common wallets and crypto exchanges do not always (almost never) provide tax documents on income and holdings that you can use for your tax return. It is therefore recommended to keep your own traceable records, which can then be attached to the tax return.

A price gain is generally tax-free (tax-free capital gain).

Commercial trading, commercial mining (proof-of-work method), the commercial operation of a staking pool (proof-of-stake method) or similar activities lead to taxable income from self-employment, even for natural persons.