Tax tip: Bitcoin under the Christmas tree

Every year, the question of the right Christmas present arises. In addition to classic gifts such as money or vouchers, Bitcoin, Ethereum or other cryptocurrencies could also be found under the Christmas tree this year.

Giving digital currencies as a gift is now easy: On the one hand, they can be stored on a hardware wallet, i.e. a digital wallet, and handed over. Alternatively, they can also be transferred like money to an account held with a trading platform for cryptocurrencies. However, you should keep a few points in mind. Income tax is particularly relevant.

For the donor, the transfer to the donee generally does not give rise to income tax because a gift does not constitute a sale.  For the donee, however, it depends on when he sells. From a tax perspective, he or she follows in the footsteps of the donor: the sale is tax-free for him or her in private if one year has passed since the donor's purchase. If the cryptocurrency is sold earlier, it is a private sale transaction. Income tax is due on this if the profit from all taxable private sales transactions within one year amounts to more than EUR 1,000. Not only the gains are added together. Losses within a year are deducted and only a positive balance is taxable. If the losses are higher than the gains, they are automatically carried back to the previous year. They can also be carried forward to the next year on request. In both cases, the losses can be offset against gains from private sales transactions to reduce tax. It is advisable to document all transactions with cryptocurrencies in order to be able to prove the tax-relevant data to the tax office. The time of purchase by the donor is particularly important. If this cannot be proven, the tax office could take the date of the gift as the basis. In this case, the one-year period would only begin on this date. The same problem arises with the original purchase price. If it cannot be determined, the tax office may estimate the purchase price. In this case, however, only the lowest market value in the year prior to the gift may be used.

Complete documentation also includes the name of the donor and the recipient, the relationship, the type and number of cryptocurrencies transferred and their market value at the time of the gift. It is precisely this information that could be relevant for gift tax purposes. It is payable if the value of all gifts exceeds the personal allowance. Depending on the family relationship, this amounts to between 20,000 euros and 500,000 euros. All gifts within the past ten years are added together. However, Christmas gifts will not usually exceed this threshold. With a little preparation and care, nothing stands in the way of a digital Christmas present.