Germany legalizes cryptocurrencies and recognizes them as a means of payment

in cryptocurrency •  7 years ago 

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Germany recognizes cryptocurrencies as a means of payment, said the Ministry of Finance.

In a guide, published last Tuesday, Germany differs from the United States, where the Internal Revenue Service treats Bitcoin as property for tax purposes, which means that if an American buys a cup of coffee with bitcoin, technically it is considered a sale of property and potentially subject to capital gains tax.

Instead, Germany will consider Bitcoin as the equivalent of legal tender for tax purposes when it is used as a means of payment, according to a new document.

The Ministry of Finance based its guidance on a decision of the European Court of Justice of 2015 on value-added taxes (VAT). The court ruling created a precedent for European Union nations to tax bitcoin while offering exemptions for certain types of transactions.

In particular, the new German document justified its tax decisions by considering cryptocurrencies as a legal method of payment, stating:

Virtual currencies (cryptocurrencies, for example, Bitcoin) become the equivalent of legal means of payment, to the extent that the so-called virtual currencies of those involved in the transaction have been accepted as an alternative means of contractual and immediate payment "

For tax purposes, this means that converting Bitcoin into a fiduciary currency or vice versa is "a miscellaneous taxable benefit". The document explains that when an asset buyer pays with bitcoins, an article of the EU VAT Directive will be applied to the bitcoin price at the time of the transaction, as documented by the seller.

However, according to the EU ruling, the actual act of converting a cryptocurrency into fiduciary currency or vice versa is classified as a "service offer" and, therefore, a party that acts as an intermediary for the exchange will not be taxed.

Payment rates sent to providers of digital wallets or other services may also be taxed, according to the document.

Likewise, other aspects of the cryptocurrency ecosystem will not be taxed. Miners who receive block rewards will not be taxed, for example, since their services are considered voluntary, according to the document.

Similarly, exchange operators that buy or sell Bitcoin on their own behalf as intermediaries will receive a tax exemption, although an exchange that operates as a technical market will not receive such an exemption.

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