This article was created in collaboration with dr Andreas Höpfner.
The trade press is currently reporting that the tax authorities are comparing data from a German trading platform for cryptocurrencies with tax returns from investors. But what happens if it turns out that profits were not or not fully taxed in the past? There is then a risk of criminal tax proceedings being initiated and possibly a fine or even imprisonment.
When do cryptocurrencies have to be taxed?
One of the prerequisites for criminal tax evasion is that an incorrect or incomplete tax return has been submitted. With regard to profits from virtual currencies or other tokens, this is the case if these are not, or not in full, stated in the tax return. It should be noted that there is a general obligation to declare profits from cryptocurrencies. Because unlike “conventional” capital investments, there is no capital gains tax deduction. A tax return must be submitted even if there was previously no obligation to submit a tax return because, for example, only capital gains and wages were generated.
Another prerequisite for tax evasion is that the taxes were not set or were set too low as a result of the incorrect or omitted declaration, whereby even the attempt is punishable.
Impunity through self-disclosure?
The act must also be committed intentionally. From the point of view of the prosecuting authorities, the limit for intentional behavior is quickly exceeded. In the case of intentional tax evasion, there is a risk of fines and imprisonment of up to ten years. An unintentional, but careless tax reduction can be punished with a fine.
However, there is a way out, because the path to impunity is made possible by effective self-disclosure. However, this is no longer possible once the crime has been discovered. Crypto investors are therefore well advised to quickly seek expert advice and – if necessary – to act. This applies in particular if it is feared that previous misconduct could be uncovered by the current data comparison. However, the danger has not been averted for the future either. Rather, the approach taken by the tax authorities in similar circumstances such as foreign black money accounts shows that further investigative measures are to be expected in both the short and long term.
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