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Bitcoin, cryptocurrencies, digital assets: what taxation?

Every year, each taxpayer must declare his taxes. When he carries out a transaction that generates gains (purchase and resale of crypto currencies), it must be declared. It should be noted that if this obligation is not fulfilled, heavy penalties are foreseen. Since 2020, holders of Bitcoins and crypto currencies are thus obliged to declare any capital gains made on the sale of their digital assets.

Gains from cryptocurrency transactions are taxable

Following the publication of the 2019 finance bill, the taxation of crypto assets has undergone an evolution: for the first time in 2020, French taxpayers are required to declare their earnings in crypto assets at the same time as their usual income. The tax relates to the capital gains generated by the transactions of purchase and resale of crypto assets on an occasional basis.

Since January 1, 2019, cryptocurrencies are taxable as digital assets. This is a new category created by the state. The methods of taxing digital assets are provided for in article 150 VH bis of the General Tax Code revised on April 17, 2020: the overall capital gain realized on crypto asset transactions is subject to the flat tax, a flat tax of 30% (12.8% tax + 17.2% social security contributions). It should be noted that every year, taxpayers are entitled to a transfer allowance of 305 euros: this means that if the overall capital gain does not exceed this amount, no tax is due.

Reporting obligations and calculation of taxable capital gains

To declare the overall capital gain, the taxpayer must complete two specific forms: form n ° 2086 and form n ° 2042C. Taxpayers who hold digital assets abroad (Kraken, Binance, Coin Base, Bitfinex, Btstamp, etc.) should complete Form No.3916 Bis. The taxpayer must add up all the capital gains and losses realized during the year in order to obtain the total taxable amount. If the result is negative, it must always be declared, but it will not be taxable on the capital gains from the sale of different goods (shares), nor on the capital gains of the following years.

Fill out form n ° 2086 annex and calculate the amount of the overall capital gain

The annex form n ° 2086 was created by the tax administration to make the calculation of the taxable capital gain easier and it must be carried over to the 2086 declaration. Article 150 VH bis of the General Tax Code (CGI ) specifies that each taxable transaction carried out during the fiscal year must appear in the form.

Any form of exchanging digital assets for a state monetary currency or using a digital asset to pay for an actual good or service is considered a taxable transaction. This appendix includes a lot of information on trading activities and assets of crypto assets: the sale price of crypto assets, the overall value of the portfolio at the time of the transaction, the total acquisition cost of the portfolio, the most or the overall capital loss realized during the year, etc.

Calculation of the gain or loss and calculation of the overall value of the portfolio

All data from accounts opened on trading platforms and in the taxpayer’s portfolio must be gathered. Each time a taxable transaction is carried out, the crypto assets in the portfolio must be valued by referring to the histories presented by the most used trading platforms. Thanks to these histories, it is easy to find the average of the daily price.

To find out the amount of the capital gain or loss realized as part of a taxable transaction, multiply the total purchase price by the sale price and divide the result by the total value of the portfolio , before subtracting the price of the transfer.

Capital gain or loss = Sale price – (Total purchase price x Sale price / total portfolio value)

The identification of all taxable transactions is provided for by the new tax regime applicable to cryptocurrencies. It is strongly recommended that you carefully monitor the sale price of all portfolio transactions in order to determine their true value.
If the calculations made lead to capital losses, they can only be charged to capital gains on crypto-assets and realized during the same year. At the end of the fiscal year, you must add all the capital gains and losses realized in order to find the overall capital gain. If it is an overall capital loss, the regulations are the same: this overall capital loss can only be attributed to capital gains of the same nature (crypto-assets) and in the same year. Thus, it is not possible to attribute them to the capital gains of crypto assets realized in the following fiscal years.

Enter the overall gain or loss in form n ° 2042 C

The General Tax Code, in its article 150 VH bis, provides for the amount of the overall capital gain to be reported on form n ° 2042 C. In fact, a dedicated box is provided to indicate the overall capital gain or loss. global value found at the end of the fiscal year.

Fill out form 3916 Bis to declare active crypto accounts abroad

When the overall gain or loss in crypto assets has been calculated and reported on form No. 2042 C, there is one last step: the taxpayer must complete form 3916 Bis , created by the tax administration to declare digital asset accounts opened, held, used or closed abroad. The reporting requirement applies to all active crypto accounts, even those that do not convert cryptocurrency to state currency currencies.

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