The tax draft of the Federal Ministry of Finance is causing outrage throughout the crypto space. Pekuna boss Werner Hoffmann explains which cornerstones harm the scene.
The recently published tax draft of the Federal Ministry of Finance (BMF) caused outrage in large parts of the crypto space. Especially with staking and lending, the targeted increase in the tax holding period to ten years led to a lack of understanding. To find out what advantages and disadvantages the draft will bring investors, BTC-ECHO met with the managing director of Pekuna, Werner Hoffmann. The company offers expert opinions with profit and loss accounts for its customers for submission to the tax office. Hosted on the draft Pekuna A free information event on July 1, 2021 at 6:00 p.m., to which anyone interested is cordially invited.
BTC-ECHO: Hello Werner, we are pleased that you are with us. Before we get into the matter, it would be great if you could briefly introduce yourself to our readers.
Werner Hoffmann: “During my computer science studies, I first came into contact with the subject of cryptocurrencies through fellow students. In 2015 I bought my first Bitcoin and with the Bullrun 2017 I started to deal with the topic even more intensively. In doing so, I noticed how complicated the subject of taxes in the crypto area actually is.“
“As a consequence, I founded Pekuna in 2019 with my co-founder Constantin Steininger … Our customers are private individuals and entrepreneurs. We write appraisals with profit and loss accounts so that the tax office can understand. A bit like a translator from the crypto world into an understandable tax office language.“
“An impudence”
BTC-ECHO: What is your general impression of the BMF’s crypto draft?
Hoffmann: “So when I look at the overall tenor of the writing, I have to say that this is more of a slap in the face for the crypto space than it promotes it. One tries almost compulsively to subject everything to a very negative taxation. Especially in the context of the upcoming federal election, I think it’s a cheek that a federal government that has written a blockchain timetable in the coalition agreement is now pulling out something like that weeks before the end of the coalition. The consequences for the crypto space are super negative and will probably have a decisive impact on at least the next five, if not ten years.“
BTC-ECHO: Do you think that the draft can even be implemented? Especially with regard to decentralized exchanges?
Hoffmann: “So there are a few points that are difficult to implement. One example is: the fork. Previously, it was generally assumed that the new coins created by the fork did not represent any income. There was no activity here and was therefore not taxable, and the sale was also tax-free as there was no purchase. As usual, the original coin was taxed with a one-year holding period.“
“However, that would change with the BMF draft. According to this letter, the fork is divided: the acquisition cost of the original coin into two new assets. And here is the problem. Because the exact price at the time of the fork can hardly be traced. It’s just not practical enough. ”
BTC-ECHO: Another big point of contention can be found in the regulation on mining. Some are bothered by the general suspicion that the new paper assumes digital prospectors. What do you think about that?
Hoffmann: “In the end, that was only clarified again. It has always been relatively similar. Here, too, we had the basic tenor that mining is a commercial activity and that it can be proven that the scope now does not correspond to a company. That was more or less confirmed to us in the BMF letter. ”
“An Antminer in the living room is OK”
BTC-ECHO: In one passage it says that a commercial activity is “presumed to be refutable”. This means that the burden of proof lies with the individual. In the context of the legislature, is there actually an upper limit as to when mining becomes commercial?
Hoffmann: “No fixes to say, “Ok, up to this hashrate or up to this income”. The statement is that it must not be a commercially set-up company. So from the time you start to professionalize the whole thing a bit. ”
“If your Antminer is in the living room, then it’s ok, then it’s a hobby device. From the moment you hire an employee, it is a clear sign that this is a business activity. From the moment you start doing this full-time, that’s a clear sign too. But there is still a lot of leeway.“
BTC-ECHO: That means you have to apply it individually.
Hoffmann: “Yes exactly, that has to be interpreted individually. Therefore, of course, a bit problematic, as there are no clear limits that you can rely on. ”
BTC-ECHO: Would such upper limits be desirable in order to define more understandable rules?
Hoffmann: “If there were such a clear regulation in the letter, I would say that the BMF would have clearly exceeded competencies here. Then they would have legislated and they are not allowed to do that. After all, laws have to be passed through the Bundestag. The crypto draft is purely an administrative opinion in order to be able to give the tax offices of the countries uniform rules. ”
“Here, the Bundestag is more responsible. And I can still see that because there are still things that have not been fully or not yet regulated. For example NFT or things from DeFi space such as liquidity mining. ”
Crypto location Germany in danger?
BTC-ECHO: So more of a topic that should concern the coming government. Let’s get to staking and lending. Could you explain the difference again?
Hoffmann: “So lending is about the process of surrendering my existing assets to a platform or DeFi protocol. Then lend them to other users and get interest for them. You can really think of it as the crypto counterpart to the interest rate system. ”
“Staking is about income generated from the proof-of-stake algorithm. The PoS algorithm is an alternative to mining. The point here is that I deposit my “stake”, a kind of deposit in the network. As a result, I am entitled to participate in this algorithm and receive newly generated coins for it and assigned transaction fees from other users. ”
BTC-ECHO: Before the draft, this area was a kind of tax gray area. The ten-year period was already considered controversial. With the draft, however, the BMF is now defining clear rules for staking and lending and now intends to introduce a binding period of ten years. How do you rate this innovation? Does it make Germany unattractive for crypto start-ups that are proof-of-stake-based?
Hoffmann: “Yes absolutely! I also see the biggest problem that we, as a location in Germany, keep away from such interesting technologies through tax law. With us (Pekuna, editor’s note) it must also be said that the inquiries have exploded. So on the subject of emigration. Portugal is now a huge topic in the scene and many say: Okay, if this draft goes through like that, then it is clear to you that you will be going to Portugal soon. They then ask us whether we can support them there too.“
“In addition, many tax experts also considered an increase to be unrealistic. For example, there was once a court ruling. Someone had invested several million marks in US dollars and received interest on them. When he wanted to exchange it back for marks, the question arose during the conversion whether the whole thing is subject to the ten-year period or not. The verdict was “no” because the interest has nothing to do with the original asset at all, it only relates to the capital claim.“
“With staking it is also the case that the fees are not paid for the stored stake, but for the network verification and the amount of the remuneration depends on this. Therefore, a lot of people actually assumed that the ten-year period would not come.“
“In general, you can see in the letter that an attempt is made to argue as much as possible in terms of tax liability. ”
“The crypto scene has to stick together”
BTC-ECHO: Now there is a lot of criticism from the crypto space and the associated calls from various representatives of the scene to submit a joint statement. Are you planning something similar in that direction?
Hoffmann: “So first of all this is really a topic where the crypto scene has to stick together, where more feedback is really valuable and can come from different corners. ”
“We will issue our own statement on this on behalf of Pekuna. But I am also present for another statement from the Federal Blockchain Association (Bundesblock), which will also submit a statement and Bitkom may also write its own statement. So you can already tell that the crypto scene is organizing and getting involved. ”
BTC-ECHO: Is it possible to take legal action against it?
Hoffmann: “Yes, there are options. For now it’s an administrative letter. In other words, it comes from the executive, i.e. the BMF. So it is only binding for the tax authorities. This means that we as private individuals or even companies do not have to adhere to these guidelines. ”
“The tax office can of course urge us to return to the BMF opinion. But we are not obliged to do so. And if you can’t come to an agreement here, the whole thing goes to a tax court. The process would first be the finance court. And if they decide for each tax office, then one instance goes to the Federal Fiscal Court (BFH). ”
BTC-ECHO: Are there any positive aspects in the crypto draft?
Hoffmann: “On the one hand, that mining can also be private. It is positive to have that in writing once. There is still such a sword of Damocles. That is the commercial crypto trader or trader. So I can trade so much that it’s actually more of a trading business than a private thing. For commercial crypto traders, however, the points are set very high. So you have to have a commercially set up business and you have to work in a typical banking way. So you could do a thousand trades a day, as long as you do this from your living room, this is not typical of banking.“
BTC-ECHO: How should you best document your crypto trades?
Hoffmann: “So documentation is actually a big point. Incidentally, one that was not even mentioned in the draft. This is edge point 51 and there is simply nothing there, although that is one of the most important issues. ”
“For us as a company this is of course a huge issue because it is our product. Otherwise, the more documentation, the better. Now you can get started with the simple Excel spreadsheet, which is actually still the main tool. Then there are a couple of portfolio tracking tools like CoinTracking or Blockfolio. And then there are other tools that are designed precisely for this tax area, such as block pit or accointing. ”
“However, if the whole topic is too complicated for you, you are welcome to contact us.“
Many Thanks!