You have until May 24, May 31 or June 8, depending on your department, to complete your tax return for the year 2021. A time dreaded by investors as the tax rules are numerous and complex. And followers of crypto-assets, digital currencies that are exchanged without going through banks but using decentralized networks called Blockchains, are not spared. Are you in a panic to declare your capital gains made thanks to Bitcoin? Do not panic! We take stock with Frédéric Poilpré, member of the circle of tax specialists.
What should be declared when it comes to crypto?
The first thing to share with the taxman is your exchange(s), i.e. the sites on which you bought your crypto-currencies (Revolut, Binance, Crypto.com, Coinbase, etc). “From the moment you hold crypto accounts abroad, you have to declare them”, assures Frédéric Poilpré. How to declare them? You must first tick the 8UU box in the Cerfa 2042 to have access to the form 3916 bis and then declare each account abroad, even those that have been closed. A fairly simple step but which can be expensive if forgotten. “The tax authorities can impose a fine of 750 euros per undeclared account, holding less than 50,000 euros, and 1,500 euros per account holding more than 50,000 euros, with a fine ceiling of 10,000 euros“, specifies the tax specialist.
Comes next statement of earnings. Most cryptocurrency traders are considered non-professionals which means a 30% tax on profits. What do you risk if you do not declare your income? “The tax authorities may, following an audit, make a tax adjustment and request the tax evaded in more than a penalty of 10% of the amount of the tax in the event of an error, or even 40% in the event of bad faith and even 80% in the event of fraudulent maneuvers”, warns Frédéric Poilpré.
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When to report profits?
Transactions between cryptocurrencies and euros (or other fiat currencies) are taken into account by the tax authorities. Concretely, if you have converted more than 305 euros of crypto-currencies into euros, in 2021, you must indicate it on your tax form. Below this threshold, however, nothing to report, you can wait until next year to look into form 2086.
Note, for holders of a card that allows you to pay at the cash desk with your crypto-currency account: “You must also declare your transactions when you sell a crypto against obtaining a good“, warns the expert . Be careful therefore, if you have purchased goods or services for more than 305 euros with your card or by bank transfer, you must note and declare all the payments made on your tax form.
How do I declare my profits?
This is the crux of the matter, and the hardest part to understand. Take the Cerfa 2086 form and note for each crypto / euro transaction (called assignment):
- the total value of your portfolio in euros at the time of your withdrawal (box 212)
- the amount you transferred in euros (box 213 with the possibility of deducting costs)
- your initial stake in crypto-currencies (box 220), less the previous withdrawals of the year that you have already entered on your tax form.
The impot.gouv site will then automatically calculate your capital gain or loss.
But if you’ve done a lot of transactions between cryptocurrencies and euros, it’s easy to get confused. “This requires very careful monitoring, you have to note all the transactions”, confides Frédéric Poilpré. If you have made dozens or hundreds of transactions between cryptos and euros, you will have to arm yourself with a blank sheet of paper and your patience to write them all down! Loads of administrative paperwork…
The trick: privilege transfers between volatile crypto-assets and stable coins (USDC, USDT, DAI, UST) which are based on the price of the dollar but which are considered as crypto-assets (therefore not taxable). Only change your cryptos for euros once a year when you want to repatriate your profits to your bank account. If your accounts are too complex or you have obtained 4, 5 figures or more gains, it may be worthwhile to hire a tax law firm or use (paid) declaration assistance software of your crypto-currencies (Waltio, Koinly, Coqonut).
NFT, mining and trading: other methods of taxation
There are dozens of activities revolving around crypto-currencies, and as many ways to be taxed… NFTs (non fungible tokens), trendy certificates of ownership, bought in crypto-currencies and held on a blockchain, are subject to the same taxation rules as capital gains. “NFT purchase and sale transactions must not be declared because it is an interim transaction, such as when you exchange one crypto for another“, presents Nicolas Message, associate tax specialist at FTPA.
Conversely, staking and mining, which consists of getting paid to validate transactions in crypto-currencies, are taxed differently! Since these are services, ” these activities are taxed on the progressive scale, as non-commercial profits (BNC) non-professional and sometimes professional”. To declare these activities, it will be necessary to fill in the form 2035-SD.
As for cryptocurrency traders who trade their assets several times a day, every day, the taxation changes. “Non-casual traders are taxed according to the status of industrial and commercial profits, on the progressive scale“, warns the tax specialist. You must then refer to Form 2031 to declare your trading capital gains.