Blockpit’s mission is to raise awareness of the tax revenue that can arise from cryptocurrency trading and also offers concrete solutions for B2B and B2C customers. Since the birth of Bitcoin more than 12 years ago, the blockchain has become indispensable as a basic structure for new types of financial transactions and the representation of digital values. As low as the transaction fees of some blockchain may be, the higher the price movements of some cryptocurrencies appear.. The associated profits or losses of modern investors are correspondingly high.
Based on our current study, tax revenues of 1.28 billion euros for Germany and 375 million euros for Austria could be determined. The figures for this projection are based on heuristic estimates and the analysis of anonymised user data. This corresponds to about 2% of Germany’s total income tax revenue in 2019. For an average cryptocurrency holder in both countries, portfolio values of 32,129 euros and potentially taxable gains of 10,836 euros and tax-free gains of 7,558 euros could be determined as of the reporting date of 31 December 2020.
Participants in the study were Florian Wimmer, managing director of Blockpit, Prof. Dr. Philipp Sandner, founder of the Frankfurt School Blockchain Center, Stefan Schmitt from the Frankfurt School Blockchain Center and with Prof. Dr. Joerg Andres, specialist lawyer for tax law and tax advisor of Dr. Andres Rechtsanwaltsgesellschaft mbH.
Using the tax revenues shown in the study data, an increasing distortion of the competition between the countries can be predicted for coming tax years. Currently, responsible authorities hardly receive any information about cryptocurrency-related trading volumes. Current EU regulations are still limited to the AML5 directive (Anti-Money-Laundering Direktive), which obliges centralised exchanges to store transaction volumes of their users.
The US is also working on tightening reporting standards. The IRS, for example, introduced a new tax form at the end of 2020 that requires taxpayers to declare the purchase and sale of cryptocurrencies. Further regulations are expected for 2021.
Among other things, the Common Reporting Standard (CRS) of the Organisation for Economic Co-operation and Development (OECD) will be extended to crypto trading platforms. This is intended to address tax avoidance through offshore bank accounts in the future by establishing a mandatory exchange of information between trading platforms, banks and tax authorities.
Similar extensions are also planned for the EU area. Thus, in addition to the existing AML5 requirements, further regulations obliging financial service providers to exchange information with authorities are to be expected.
Also the proposal of the Financial Crimes Enforcement Network (FinCen) to regulate so-called self-hosted crypto wallets, which the former US Treasury Secretary Mnuchin submitted shortly before his resignation, will also be pursued with the inauguration of Joe Biden..
In addition, the interest of listed companies, wealthy individuals and asset managers in digital assets is increasingly growing. The best examples of this serious development are the growing number of Security Token Offerings (STOs), which represents assets such as securities and shares on the blockchain, and the advancing battle for the first Central Bank Digital Currencies (CBDCs). As the leading provider in the D-A-CH region in terms of optimised portfolio tracking including tax calculation, we increasingly recommend all taxpayers to document all income from cryptocurrencies, as this evidence can also be demanded retroactively by the tax office.