Cryptocurrencies like Bitcoin and other competitors experienced record-breaking growth in recent years, leaving many investors and their accountants uncertain about the overall state of the taxes involved, which lead to a big misconception around the tax bills and which transactions are taxed to begin with.
Cryptocurrencies’ taxation varies from one country to another, with regulation especially in Europe where each EU has its own regulations. If the new amendment in France is passed, cryptocurrency traders will have to pay 30 percent of any capital gains in tax, a drop of 6.2 percent.
Cryptocurrencies Taxation Policy in France
The French Council of State recently announced that the tax rate for retail crypto traders will be significantly reduced. The profits earned from digital currency trading are considered as “industrial and commercial gains”, but this only applies to those making regular earnings from bitcoin trading. Gains generated from occasional transactions are regarded as noncommercial profits.
Profits from cryptocurrency speculation and mining are treated as industrial and commercial profits subject to the progressive income tax schedule (45% of marginal plus social contributions). For companies, profits from cryptocurrencies are liable to tax under the general corporation tax regime for profits and losses. Currently, corporate income tax is levied at the rate of 33.33% . The standard rate is to be gradually reduced to 25% in 2022.
As of now, official regulation regarding cryptocurrency taxation exists in about 25% of countries.
There is no specific VAT law or guidance on the VAT treatment of cryptocurrencies. According to the French Supreme Court, cryptocurrency assets are associated for tax purposes to intangible assets which means that, for now, their VAT treatment should be the following:
– Revenue received from cryptocurrency mining activities is subject to VAT as a supply of services.
– When cryptocurrency is exchanged for fiat currencies, such as Euros or Dollars, no VAT is due, on the value of the cryptocurrency and in respect of the fees, if any, charged by the intermediary.
– Charges made over and above the value of the cryptocurrency for arranging or carrying out any transactions in Bitcoin, except forex transactions with official currencies, are subject to VAT.
– Acquisitions of goods or services via cryptocurrency payments are also subject to French VAT.
– The sale of cryptocurrencies is not subject to VAT unless made for the purpose of obtaining income therefrom on a continuing basis.
No transfer taxes are payable in France on cryptocurrencies.
Find out more about the Finance Group members and their publication topics on Finance and Cryptocurrency here.