Decree of German Ministry of Finance on crypto assets–investors must act

Authors: Dr. David Hötzel, Dr. Marcus Niermann, Nikola Hertel, Dr. Andreas Richter, Dr. Stephan Viskorf, Dr. Katharina Hemmen, Dr. Martin Liebernickel, Dr. Maximilian Haag, Dr. Hardy Fischer, Dr. Sebastian Löcherbach, Dr. Erik Muscheites, Dr. Jan-Eckhard Wegener

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EXECUTIVE SUMMARY

The German Federal Ministry of Finance (BMF) has revised the 2022 letter on the taxation of crypto assets and published it in a new version on 6 March 2025.

The substantive legal assessment of most issues has not changed – but the tax authorities are significantly increasing the procedural pressure, particularly on private investors. Some expected issues have still not been addressed.

1. What you need to consider?

Every crypto investor should consider the following points now – and retrospectively for all open tax years:

  • Regular documentation of all transactions – ideally, you should create and save a full report every month. If you use multiple wallets, you should keep a complete overview.
  • Timely data retrieval from crypto exchanges – data loss can be expensive.
  • Use of control software with API connection for real-time data.
  • Review of past tax returns for undeclared income from staking, lending or airdrops.

2. Much remains…, some is new

The substantive legal basis has hardly changed. Private investors sell tax-free after one year, and the criteria for distinguishing between commercial activity with crypto assets (trading, staking, mining) and private asset management have essentially remained the same. However, the circular contains a very important addition in practice with regard to crypto investors' tax return, cooperation and record-keeping obligations. Those who fail to properly document their crypto transactions risk tax estimates and potentially open the door to criminal sanctions. The tax authorities are tightening the requirements for tax compliance.

3. Stricter catalogue of obligations – also for private investors

All crypto transactions must be documented in detail, including the time of purchase and sale, quantity, type of crypto asset, market value in euros, and order of use (FIFO or individual consideration). When using foreign or

decentralized trading platforms, extended cooperation obligations apply (Sec. 90 (2) German GTC). Tax reports from software providers (e.g. CoinTracking, Blockpit) are generally accepted or even recommended, provided they are plausible and consistent and the data is complete and recorded in a tamper-proof manner. Negative holdings or unexplained inflows and outflows may lead to rejection of reports. Lack of supporting documentation can lead to unfavorable estimates. It should be noted that tax reporting software providers will probably also need a short transition period to implement the requirements of the new circular in their programs.

Not only commercial crypto investors, but also private individuals must keep complete records. In concrete terms, this means that every transaction must be stored in a traceable manner. Anyone earning more than €500,000 per year (as of 2027: €750,000) must keep relevant documents for six years.

This point deserves to be emphasized in a system where the principle of official investigation applies. While such strict data preparation and documentation is part of everyday life for business assets, it goes beyond what is usual for private investors. It is to be expected that the tax courts will soon have the opportunity to examine whether the BMF is overstretching the powers of the tax authorities.

4. A more specific valuation approach for capital gains

The BMF has specified its requirements for the valuation of crypto assets (and thus the determination of taxable income). Trading platforms (e.g. Kraken, Bitpanda) or aggregated price lists (e.g. CoinMarketCap, CoinGecko) can now be explicitly used as market price for acquisition costs and sales proceeds. This is already the practice of most tax offices. For reasons of simplification, the BMF accepts the use of a single daily rate for all transactions of a day – this can be advantageous for tax purposes and it remains to be seen how the providers of reporting tools will deal with this.

5. Claiming staking rewards: Tax trap or relief?

One issue that will be relevant to many stakers is the claiming of staking rewards. In its circular, the BMF seems to demand that unclaimed but claimable staking income must be realized for tax purposes by the end of the year at the latest. This would result in taxes being incurred on crypto assets that the investor has not yet actively claimed. An argument against this interpretation of the circular is that it may only be intended to create a simplifying option: If staking rewards are realized during the year, the investor should be free to record the realization only as as 31 December. However, there is no legal certainty in this regard.

6. Conclusion and outlook

 With its new circular, the BMF is creating a procedural basis for the practice of the tax authorities, which will increase the pressure on taxpayers. It should not be forgotten that tax returns with incomplete information will soon be noticed automatically – according to reports, the tax authorities themselves will in future use software (providers) to create tax reports based on collected data and compare them with the contents of the tax returns. The parallel obligation of European crypto exchanges to provide customer data in accordance with the so-called DAC-8 Directive should only be mentioned here as a supplement.