Everything you need to know about crypto-taxes in France
All European countries are on the wagon to regulate crypto transactions and France is no different. How do countries tax crypto? The General Directorate of Public Finances in France, also known as Direction Générale des Finances Publiques (DGFiP) have outlined tax rules surrounding crypto assets and they fall under the Income Tax Regime. In this complete crypto tax guide for France, we will explain the French crypto tax rules from how crypto is classified, taxed, reported and what to look out for when preparing your tax forms. When the crypto landscape continues to change, regulations surrounding it will be adapted too. So, this guide will be regularly updated to keep you ahead in the tax game.
In this tax guide, crypto will be called “crypto asset/assets” as the DGFiP treats crypto like a digital asset.
Let’s get started with the most important question during this tax season!
Do I owe taxes on crypto assets?
In France, crypto assets are considered a moveable asset and the General Directorate of Public Finances (DGFiP) treats them generally like stocks, bonds, and other capital assets. DGFip goes on to say that crypto assets do not have the legal status of a currency, but it is accepted as a medium of exchange.
Like any moveable asset, if you earn money or make a capital gain from disposing of crypto, it is taxed as an ordinary income, depending on how you got your crypto-assets and how you used them.
In France, you will create a taxable event only when you convert your crypto to fiat and when you receive crypto profits from activities like mining. You will not owe taxes when you buy crypto, trade, swap or exchange crypto among wallets. However, the amount of tax you pay will depend on whether you are a professional trader or an occasional investor.
Will DGFiP know that I have crypto?
Many people still think that crypto trading is not accountable or traceable. But in reality, the authorities are capable of tracking down crypto users. It is very likely that DGFiP already has your details and data if your crypto is held with a digital currency exchange established in the European Union.
Also, companies that provide financial services are regulated under the Anti-Money Laundering Directive of the European Union. This makes it necessary for crypto asset related organizations to report how they identify customers. EU member countries share this data to monitor and rule out illegal financial activities. The proposed EU directives DAC8 or MiCA (Regulation on Markets in Crypto-Assets) will also contribute to this initiative.
When do I pay crypto tax in France?
To put it simply, you should pay taxes when there is a taxable event. In French tax regime, a taxable event is created only in two scenarios.
Selling crypto assets for fiat currency
Sale of crypto assets and its rights in return for government-issued fiat currency creates a taxable event. For example, when you bought 0.1 Bitcoin in June 2018 for 1,000€ and sold it for 1,800€ in August 2020, you made a capital gain of 800€. This is a taxable event.
Crypto profits received from mining
Profits gained from mining also create a taxable event in France. These mining rewards are treated as non-commercial profits. However, there are also different tax rules for professional miners carrying out commercial activities.
How is crypto taxed in France?
The tax rate applicable for capital gains and income from crypto assets depends on whether you’re a professional trader, an occasional investor or a miner.
DGFiP declares that capital gains from the sale of crypto assets like bitcoins are taxed as:
- Occasional investors – flat tax rate of 30%
- Professional traders – BIC tax regime of 0-45%
- Crypto Miners- BNC tax regime of 0-45%
Occasional investor tax rate
Occasional investors must pay a type of Income-tax called a Single Fixed Levy (PFU) or ‘Flat Tax’ as it is known in France. This is a flat rate because it does not consider your tax bracket and your tax income base.
The Flat Tax applies to individuals with financial investments in crypto assets, and other investment income like dividends and life insurance, not to professional traders.
The DGFiP will only tax capital gains from crypto when crypto is converted into fiat currency if the total capital gain exceeds 305€ per year.
Are you an occasional investor or a professional trader?
The difference between occasional investor and professional trader lies in how often you initiate crypto transactions. If you regularly engage in crypto trading activities, you may be viewed as a professional trader in the French tax regime and the progressive income tax rate between 0-45% will apply to you. If you occasionally conduct crypto trading, you will fall into the group of occasional investors and the flat tax rate of 30% will apply to you.
There are no hard and fast instructions in the French tax law on how to decide whether crypto trading is occasional or on a regular basis, but it clearly states that this is viewed on a case-by-case basis. However, the DGFiP will base its decision on whether you’re an occasional investor or a professional trader based on the following.
- The total amount invested
- The total trade volume
- The frequency of crypto sales
You may gain more insight by consulting your tax advisor in France.
According to the new tax reform applicable from the 1st January, 2023, this distinction between occasional investor and professional trader will not be important. The frequency of crypto sales and the total trade volume will no longer determine whether you’re a professional or an occasional trader. The flat tax rate (PFU) of 30% will apply for capital gains from all crypto sales.
Capital gains from trading digital assets under conditions similar to those of professional traders will be taxed as non-commercial profits (BNC) and not as industrial and commercial profits (BIC).
How to calculate your capital gains?
Let’s look at how you can actually determine whether you made a capital gain from your crypto sales.
The general formula for calculating capital gain/loss is:
Gross capital gain/loss = Sale price (reducing the sales costs) – Acquisition Cost
Acquisition Cost = [Total acquisition price of all crypto assets (increased by acquisition costs)*Sale price (not reduced by sales costs)]/Total value of the portfolio
Sounds complicated? Let’s shed some light on this.
Sales price – You can start calculating the sales price. You can deduct costs related to the sale if you have complete documentation. The more costs you can deduct, the lower the sale price for tax purposes, the better for you.
Acquisition cost – You should deduct acquisition costs from your sales price. The calculation takes into account the acquisition costs of all your crypto assets. If you can show the acquisition costs, you get to deduct them and save on taxes. If you can’t show the acquisition costs of an asset, the tax law assumes €0 acquisition cost and you lose out on the deduction.
If you still find this calculation of taxable gain complicated, read our blog article. With a simple example, you will understand what this means.
Pro Tip: Blockpit crypto tax tool keeps track of all your crypto and acquisition costs. You can import your data from any exchange or wallet and generate your tax report automatically. The best thing about Blockpit is that you only pay a fee for the year you need a tax return. You can register here to try it for free.
When do I not have to pay crypto taxes?
There are multiple scenarios when you don’t have to pay taxes on your crypto.
“Exchange” and “swap” of crypto assets are used interchangeably. That’s actually not correct. An exchange is when you exchange one crypto asset for another (e.g. BTC → ETH) and a swap actually means an exchange of coins within a crypto project, such as temporarily issued BSC20 tokens that are “wrapped” into the original blockchain tokens of the project. Both these events are not considered taxable events in France.
Gifting crypto assets to family and friends is not a taxable event in France. The French tax law views the act of gifting bitcoins or other crypto assets as any other gift. But if the individual who received these crypto-assets sells them at a later date in return for fiat currency, this will be taxed as a capital gain.
ICOs and IEOs Initial Coin Offerings (ICO) and Initial Exchange Offerings (IEO) are similar to the IPO. Companies receive crowdfunding from investors in exchange for an investible token (security token) or future access to a product or service (utility token). For French tax purposes, this is not considered a taxable event. However, if investors sell these crypto assets in exchange for cash payments at a later date and make a capital gain, ordinary income tax rules will apply.
Airdrops, bounties, hard fork, master node, lending and staking are “deposits” (inflow) of crypto. For occasional investors, this inflow of crypto assets may not constitute a taxable event. However, it is taxed when these crypto assets are sold for fiat currency in the future.
DeFi (Decentralized Finance) is currently the most attractive use case of crypto. It refers to financial services that take place in the crypto world like borrowing and asset securitization. These activities take place without central establishments like banks, solely based on a smart contracts. As mentioned earlier, inflow of crypto assets is not taxed. Therefore, when transferring your crypto to dApps for yield farming or liquidity mining, there is no applicable tax in the French Tax Regime. However, a taxable event will create in future if a capital gain from these activities is realised in fiat currency.
Margin Trading and Future Trading are forward transactions. Margin trading is when you take a crypto loan from a third party to increase your rewards when trading. Crypto future trading is when you speculate the value of a crypto asset. In both these scenarios, a taxable event is created only if you make a capital gain and decide to materialize the said gain with fiat currency.
NFTs are Non-Fungible Tokens. These are unique crypto tokens existing on the blockchain representing ownership of creative assets. It is not fungible because it cannot be exchanged with one token for another. Buying, minting, swapping and farming of NFTs are not taxable in France. However, if you make a capital gain from the use cases of NFTs and realize this gain in fiat currency, it will create a taxable event.
What happens if I don’t pay crypto tax?
If you fail to report your capital gains from crypto, you are punished with a fine of 750€ for each unreported account, or 125€ for omission or inaccuracy, up to a limit of 10,000€ per declaration. These amounts of 750€ and 125€ are respectively increased to 1,500€ and 250€ when the value of the accounts exceeds 50,000€ at any time during the year.
How to minimize your tax liability?
There are several ways you can minimize your capital gains and in return reduce your tax liability.
If you don’t sell your crypto assets for fiat currency and hold onto them, you don’t pay any tax on your profits. Less tax means less stress for you!
Keep your crypto as stablecoins instead of fiat
As the French tax regime only taxes crypto capital gains when converting them to any government-issued fiat currency, you can convert your crypto to stablecoins. This can reduce your tax liability significantly. This may also be a good strategy to reduce exposure to the volatility of the crypto market and have some fiat currency pegged stablecoins such as USDT or USD. You can even hold stablecoins indefinitely without paying any tax on your capital gains.
However, you should remember that you will pay taxes on your capital gains if you spend your stablecoins for goods or services at a later date.
Deduct crypto losses
If you sell a crypto asset and receive less than the calculated purchase price, you will have realized a capital loss on the asset. In France, capital losses can be used to offset capital gains of the same year. This means that you will only pay tax if you have positive capital gains during the tax year.
Unlike securities such as stocks, capital losses for crypto cannot be carried forward to future years if your total loss exceeds your total gains.
Most exchanges charge trading fees when you buy, sell, or trade crypto. Trading fees are considered costs that can be deducted from the sales price when selling a crypto asset for fiat currency.
Not only that, but you can also include trading fees from interim crypto to crypto trades at the effective acquisition cost of your crypto portfolio. This means that all trading fees are fully deductible. However, you should remember to keep detailed records of your crypto transactions, acquisition costs and trading fees.
What are the due dates for tax filing?
The French tax year is from 1 January to 31 December.
The reporting due dates are set according to your department:
- May 24, 2022: departments 1 to 19 and non-residents
- 1 June 2022: departments 20 to 54
- June 8 2022: departments 55 to 976
Online reporting is possible from Thursday, April 7, 2022.
How to file your crypto taxes in France?
You can report all capital gains from the sale of crypto assets along with other income such as mining rewards in your annual tax return, or déclaration des revenus in French.
Formulaire n°2042 is the main tax return form where you must declare all income from employment, gains and losses from securities or other financial products, and your gains, losses, and income from crypto assets.
There are three tax forms you must attach to Formulaire n°2042 as annex when reporting your crypto taxes:
- Formulaire n°2086 – Capital gains and income transactions
- Formulaire n°2042 C – Capital gains and income summary
- Formulaire n°3916-bis – A list of crypto accounts outside France
This Formulaire n°2086 can list transactions realizing either a capital gain or capital loss during the tax year, but it is limited to 20 transactions. Fortunately, Blockpit shaped its 2086 form to take care of the hassle: you can enter an unlimited number of transactions.
When you have calculated your net capital gain or loss, simply fill in this value on Form 2042-C on line 3AN if you made a net gain, or on line 3BN if you made a net loss.
How to calculate crypto taxes with Blockpit?
It may feel like a very difficult task to calculate and prepare tax forms for your complete crypto portfolio every season. Worry no more. Crypto tax tool of Blockpit can automate the entire process and take the tax headache away.
Here’s how it works. Check it out yourself!
Connect your crypto wallet or exchange
The first step in automating your crypto tax report is to import your data from your wallets and your exchanges. You can create a depot and import your crypto transactions easily with an API or using CSV and Excel files. Blockpit crypto tax tool supports a wide variety of exchanges and wallets. Here you can find the exchanges and wallets Blockpit supports and learn the first steps on setting up in detail in our Help Center.
Check the settings on the web app
When you have created an account and linked all your crypto transactions to the web app, you should make sure all settings are in order with your account before you calculate your tax report. So, no errors or warnings are displayed. Then, go to the Reports tab and select the desired year you wish to calculate the tax report for. We will go with 2020.
Next, you can click on Account Settings to confirm the country, France and customize other details like language and currency. Choosing France as a country will automatically apply the French tax regulation.
Calculate the crypto-tax report
Once the account settings are confirmed, you can click on the Reports tab to see when you last calculated the report and to recalculate it. This is very quick and automated. You should always recalculate the report before downloading it.
Download the tax report
Finally, you can download a comprehensive tax report by clicking on the Export as PDF button. When you open the file, you see a summary of taxes you owe on taxable capital gains and losses for the relevant tax year.
The summary of taxes is followed by automatically filled tax forms Formulaire n°2086 and Formulaire n°2042 C. The best thing is that you don’t have to enter details manually.
These forms are accompanied by an Appendix and a general overview of all your crypto transactions within the relevant year to use as proof of funds if needed.