Since 2019, bitcoin, ethereum and other dogecoins are taxable. Gains generated by the purchase and sale of cryptocurrencies are taxed and must be included in your tax return.
Cryptocurrencies, at least fiscally, are misnamed. Indeed, the tax authorities do not consider them as means of payment but as investments. Result, in the same way that a shareholder is taxed on his capital gains, a person who resells bitcoin, ethereum or his dogecoins at a price higher than the purchase price pays a tax.
Logically, therefore, crypto-investors, who took advantage of the variation in prices in 2021 to recover some cash, will be taxed on their earnings. The same goes for those who used their crypto to buy a good paid directly in bitcoin. On the other hand, you are only taxable on capital gains made in euros. In other words, as long as your cryptocurrencies remain warm in your wallet, they will not be taxed. A feature that some investors take advantage of to avoid or delay the tax.
In the event of net gains, the deduction then corresponds 30% of the capital gain (i.e. 12.8% taxes and 17.2% social security contributions). Unlike more traditional investment income, it is not possible to subject capital gains in crypto to the progressive scale of income tax, often attractive to low-taxed households. At least, for now. Because article 79 of the finance law for 2022 provides that investors will be able to choose between the PFU and the progressive scale of tax when declaring their capital gains from January 1, 2023.
To note: some trading sites offer exposure to cryptocurrencies through derivative products, CFD calls. In this case, the investor does not own the cryptocurrency itself. It holds a contract that pays its holder the difference between the price of the crypto at the end of the contract and that at the time of buying the derivative. If the cryptocurrency has lost value in the meantime, the investor loses the difference. These crypto-derivative products are taxed in the same way as shares held in a securities account. But this is another story. In this article, we only discuss, step by step, the reporting procedures for people who resell the bitcoins, XRP and other dogecoins that they actually held.
Tax: how to avoid your bitcoins being taxed
Step 1: calculate the net gain
In concrete terms, the first step in respecting one’s tax duty is calculate the total capital gain or loss for the year 2021. To do this, the investor must complete a specific document, the form 2086. And the calculation is not so straightforward, because, unlike traditional investments, the capital gain is not strictly speaking obtained by subtracting the capital losses from the gains. The exact formula to apply is: capital gain or loss = transfer price (Total acquisition price x Transfer price / Overall value of the portfolio).
Let’s take an example, let’s imagine that you acquired bitcoin for 1000 euros. A few months later your portfolio is valued at 5000 euros. You decide to sell some for a value of 2000 euros. Result, the capital gain = 2000 (1000 x 2000/5000) = 1600 euros.
Worse: this same operation must be repeated each time the investor makes a new transfer of assets. In other words, if in 2021 an active trader made one crypto-euro arbitrage per week, he must perform 52 calculations. Little fun: the 2086 form includes 5 boxes for 5 annual sales transfers…
By adding all these capital gains (and capital losses if the resale price is lower than the purchase price), the investor obtains the amount given on his main income statement (the usual form 2042).
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Step 2: fill in the boxes
In the event of a net gain, the capital gain is fill in line 3YEAR. Unless this is less than 305 euros. In this case, the investor is not taxed, box 3AN remains empty, in accordance with article 150 VH bis of the general tax code. But to prove that the crypto-saver is in his right, the filing of the 2086 declaration remains necessary. In the event of a deadweight loss, the amount of the capital loss is indicate the box 3BN. This capital loss cannot be carried over to subsequent years, as losses on securities can be.
Finally, do not forget to declare your bitcoins purchased abroad
Cryptocurrency is a global market. If there are platforms and brokers made in France, many investors go through foreign platforms and intermediaries, such as Binance, Kraken, Coinbase, Bitpanda… Whether or not they resold crypto in 2021, the crypto-savers must report to the French tax authorities the accounts held, used or closed abroad during the year 2021. This happens by completing the document 3916-3916bis. A 3916-3916 bis declaration must be subscribed for each foreign account. If the investor has two foreign accounts, he therefore completes 2 forms. On the 2042 form, there is also an action to be taken in the event of foreign accounts opened, held, or closed in the last year, namely check the 8UU box.
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