Enlarge image
Value without substance?
The taxation of profits from crypto deals is controversial
Photo: Jens Kalaene / dpa
manager magazin: Mr. Andres, it is currently common practice
for investors to tax profits from transactions with cryptocurrencies in accordance with the Income Tax Act
, provided that the purchase and sale are within the speculation period of one year and the profit exceeds a limit of 599 euros.
You say, however, that this tax liability does not even exist, and you have received confirmation from the tax court in Nuremberg for this view.
How do you justify your point of view?
Joerg Andres:
The term crypto currencies is not laid down in any tax law.
I therefore actually consider the decision of the Nuremberg Tax Court to be a fundamental decision on the subject.
The judges decided in our spirit that there is no fundamental tax liability on profits from transactions with crypto
currencies
(
editor's note: Az. 3 V 1239/19
).
The reason is that bitcoins and other cryptocurrencies are completely new, purely digital, virtual phenomena from a tax point of view.
Taxation can neither be linked directly to ownership nor to a specific right in relation to the blockchain.
Section 23 of the Income Tax Act, which is currently used here for taxation, has not yet been checked by the highest tax court BFH for legally tangible criteria in relation to crypto currencies.
To person
Photo: Erik Spilles
Joerg Andres
leads the law firm Dr.
Andres Rechtsanwälte in Düsseldorf and has been working as a lawyer and tax advisor since the 1990s.
The taxation of cryptocurrencies is one of his specialties.
Andres has already published various books and also works as a lecturer.
What does it mean exactly?
Whoever buys a Bitcoin pays - to put it simply - for the possibility of having an entry in a signature chain.
Beyond that, there is nothing tangible or valuable.
The entry in this signature chain is everything on which the investor can build his hopes for price increases.
In this respect, the blockchain is comparable to a land register in the real estate sector.
With one crucial difference: the cryptocurrencies do not have the associated properties.
So the substantial object for taxation is missing?
A bitcoin has no substance.
It is just an updated documentation.
This means that it practically no longer exists if the documentation is no longer available.
There have been such failures on the market.
In terms of the Income Tax Act, the question raised by the Nuremberg Finance Court arises: What should actually be taxed with whom?
That sounds like a legally conclusive argument. In practice, however, ever larger sums of money are being moved on the investment market with crypto currencies, with enormous price gains recently. And these price gains are very real and often consist of many thousands of dollars or euros. Shouldn't that be taxed fairly, like stock deals and the like?
In doing so, they are addressing the issue of taxability.
That is a different topic than the question of whether there is already a legal basis for it.
The state may want to derive a tax claim from the profits made.
For this, however, the legislature must first create the basis in tax law.
Investors have been investing in Bitcoins and other crypto currencies for years, but the legislature has so far failed to "modernize" tax law accordingly.
The tax authorities take a different position, and numerous crypto investors are likely to be in the process of reporting profits from the past year on their income tax returns.
The tax authorities can practically no other than to collect taxes on the basis of the currently applicable incomplete law.
The legislature has left them alone with its inaction for years.
Most recently, the Federal Ministry of Finance announced at the end of 2020 that there was no need for action.
Nevertheless, we advise every Bitcoin investor to object to their tax bill.
In doing so, they at least keep all options open.
The decision from Nuremberg proves us right on this point of view.
What exactly do you think needs to be changed in tax law?
The point in dispute is the phrase "other economic good" that is used in the passage of income tax law in question.
At the moment, the tax authorities are assuming that cryptocurrencies are generally such a "different asset".
But the "objectively valuable position" is missing, as the Federal Fiscal Court regularly demands.
Therefore, it must first be precisely determined which requirements a crypto currency must meet, which structure it must have in order to be a "different economic good".
Legislators have been in demand for years - but so far they have not done anything.
It will be interesting to see when that changes.
cr