CRYPTO CURRENCY: WHAT TAXATION? HOW TO DECLARE?

By Kenny19 | good bar | 4 Sep 2020


Each year, taxpayers must file their income tax return duly completed in June (the exact date varies by department). And the happy owners of Bitcoin, Ripple, Dash and other cryptocurrencies must mention on their return the gains made. What is the current tax system? How to declare your earnings to the tax authorities? All our explanations.

TAXATION OF GAINS RELATED TO ITS INVESTMENTS IN CRYPTO CURRENCY
The taxation of virtual currencies has recently evolved with the 2019 finance bill and, for the first time, the French are required to calculate and report their taxable earnings in crypto currencies at the same time as their tax return. In fact, the taxpayer is taxed on the capital gains generated by his activity of buying and reselling digital assets on an occasional basis.

Namely: before January 1, 2019, virtual currencies were subject to the same taxation as movable property, which involved declaring each transfer, the capital gain of which was taxed at 36.2%. Since this date, crypto currencies are taxable under "digital assets", a new category born out of the desire of the State to give a regulatory framework to crypto assets.

The new regime provided for in Article 150 VH bis CGI subjects the overall capital gain on digital assets to a flat tax of 30%. The taxation of this new type of asset is therefore similar to capital gains since it is the single lump sum or flat tax that applies (12.8% tax and 17.2% social security contributions).

Note: there is a transfer allowance of 305 euros per year. Thus, if the total amount of sales did not exceed 305 euros, it is not even necessary to indicate the amount of the capital gain.

* Your capital is subject to risk

CALCULATE YOUR EARNINGS IN VIRTUAL CURRENCY TO TRANSMIT THEM TO TAX

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All digital portfolios are concerned with taxation and enter into an overall portfolio. To calculate the overall value of the portfolio, it will therefore be necessary to take into account all the crypto currencies owned and exchanged during the year (Bitcoin, Ripple, Ethereum, etc.) on the various accounts held on all the platforms used ( Coinbase, Kraken, etc.). For each taxable transaction, it is recommended to assess the value of the capital gain (or capital loss) with the help of websites offering daily quotation histories for the various crypto currencies, as in our crypto file. currency, for example.

You will then have to calculate your gains (or losses) by adding up all the capital gains and losses realized over the year of all the “taxable transactions”, which the subject specialists Waltio and ORWL Avocats describe as "a transfer of a digital asset with a counterparty other than a digital asset", specifying that "exchanges between digital assets do not constitute taxable transactions".

Transactions are therefore only taxable when they change to the euro, dollar, Swiss franc or any other national currency, including if the money remains on the exchange platform without moving.

Taxation occurs on any capital gain (or capital loss) generated during a conversion against a legal tender currency, an exchange for a good (other than a digital asset) or a service ( therefore a payment) or an exchange with a balance against another digital asset. For each taxable transaction, the capital gain or loss corresponds to the sale price of the digital assets less a fraction of the cash in (amount invested) equal to the fraction of the cash out. Let's take an example: you sell 20% of your portfolio. You will therefore have to deduct from the amount of the sale 20% of its cash in (that is to say the amount actually spent on the purchase of digital assets) to determine the gain or loss.

In the event of an overall capital loss, the latter is neither deductible from other income nor carried forward to the following year.

Please note, these calculations require you to carefully monitor all of your cash in, but also to be able to value your entire portfolio in euros during each taxable transaction (to determine the fraction represented by the taxable transaction on the wallet).

DECLARE FOR TAX THE EARNINGS ARISING FROM ITS INVESTMENTS IN CRYPTO CURRENCIES
The annual amount of the taxable capital gain must be indicated in the dedicated box (“Capital gains or losses on digital assets”) of the income tax return.

In addition, you will be asked to complete an annex attached to the income tax return, providing details of all taxable transactions for the year. This is form 2086 which will include:

the sale price of digital assets;
the total purchase price of the portfolio;
the overall value of the digital asset portfolio at the time of disposal;
the amount of the capital gain or loss on the taxable transaction.

 

DECLARE CRYPTO CURRENCY ACCOUNTS HELD ABROAD
The taxpayer must also report accounts held on overseas domiciled sites and platforms such as CoinBase, Kraken, Binance, etc. If the site on which you hold virtual currency tokens is French (like Coinhouse or Paymium), you don't need to mention it.

The declaration must be made using form 3916 Bis. Again, this form can be accessed from your personal tax declaration space by going to step 3 "Additional declarations".

Be careful, even empty accounts held abroad must be declared. You will also need to declare accounts in which you have crypto currencies for which conversion to traditional state-issued currencies is not possible. On the other hand, digital assets held on a Ledger are not affected by this reporting obligation. You can indeed hold tokens in a physical wallet without having to declare them.

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