Information on the tax treatment of Crypto ETCs in Germany

On June 17, 2021, the German Federal Ministry of Finance (BMF) published a draft letter regarding individual questions on the income tax treatment of virtual currencies and tokens (Bundesfinanzministerium - Entwurf eines BMF-Schreibens: Einzelfragen zur ertragsteuerrechtlichen Behandlung von virtuellen Währungen und von Token). In marginal number 67 of the letter, it is clarified that the BMF case law on Xetra-Gold bonds (cf. BMF rulings of May 12, 2015, VIII R 35/14, Federal Tax Gazette (Bundessteuerblatt – BStBl.) II p. 834 and VIII R 4/15, BStBl II p. 835, BMF ruling of February 6, 2018, IX R 33/17, BStBl. II p. 525) and Gold-Bullion securities (cf. BMF ruling of 16. June 2020, VIII 7/17, BStBl. II 2021 p. 9) is to be applied mutatis mutandis to bonds that convey to the holder exclusively a claim to delivery of a fixed quantity of a virtual currency deposited with the issuer or a claim to payment of the proceeds from the sale of the virtual currency by the issuer. In this case, according to the BMF, there is no capital claim within the meaning of Section 20 para. 1 no. 7 German Income Tax Act (Einkommensteuergesetz), but a claim for payment in kind. The draft of the BMF letter is currently available to the associations for comment/consultation. Subsequently, the final version of the letter is to be published after renewed consultation by the federal and state tax authorities. If necessary, there may still be changes to the BMF letter. ETC will report on the further development of the BMF letter.

The draft of the BMF letter confirms ETC Group´s opinion, according to which the sale of the cryptocurrencies bonds issued by ETC Group is tax-free after one year of holding.