WLThere are some myths in cryptocurrency investments. One is that these are completely anonymous and therefore untraceable. This goes hand in hand with the assumption that the pursuit of tax liability is not far off. “In the past, the tax authorities had some technical catching up. This is why the demand for tax payment in the crypto area has not been followed as closely as elsewhere. The Austrian company specializes in tax document generation and money laundering software for blockchain applications and has Private and institutional clients in six countries.
But anyone who thinks that the tax authorities are still far behind is likely to be mistaken. For the third quarter, the European Union Commission announced the expansion of the automatic exchange of information for crypto systems and electronic money as part of the Action Plan for Fair and Equitable Taxation. This could be implemented by the beginning of 2023 under the acronym DAC8 (the eighth edition of the “Directive on Administrative Cooperation”).
It’s also about the past
It’s billions of dollars in taxes. According to an extrapolation from Blockpit, the blockchain hub at Frankfurt School and law firm Dr. Andres to at least €1.28 billion in tax year 2020. With DAC8, the obligation to provide information to all financial service providers operating in the European Union will be extended. The exchange must take place down to the transaction level. “You will notice the activities at the latest when making deposits and withdrawals,” says Wimmer.
Internationally, tax tracking has been tightened. The US first requested tax information from cryptocurrency exchanges in 2018, and Europe will follow suit. Wimer says expanding registration requirements for financial service providers was the first step. In Germany in particular, investors should be careful. The Federal Ministry of Finance is currently working on a step-by-step guide for taxing income from mining and mining, i.e. from producing coins and confirming transactions.
Don’t be so naive
Wimmer warns in other respects as well, crypto investors shouldn’t be too naive. Because with a ten-year restriction period, previous transactions are still taxable. In principle, income from cryptocurrency trading in Germany and Austria is counted as profits from private sale transactions. These are taxable if less than a year has passed between purchase and sale.
The Fifo (“first in, first out”) method is applied): if the values match, then it is assumed that the first obtained was also the first sold. It cannot be excluded that the speculative period of cryptocurrency investments that are used for storage will increase to ten years, since these values create current income. “The EU directive will effectively remove the identity of the governor,” says Wemmer. “The next level of tax prosecution will be that cryptocurrency trading will be fully traceable on entry via any regulated exchange due to the mandatory identification of financial service providers.”
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