Cryptocurrency is subject to Income Taxes in France. The General Directorate of Public Finances has set out guidelines on how cryptocurrency buying, trading and mining is taxed. In this guide we take a closer look at how the crypto tax rules to help has set out guidelines on how cryptocurrency buying, trading and mining is taxed. In this guide we take a closer look at how the crypto tax rules to help occasional traders avoid notices, audits and penalties. We'll also explain how to calculate your crypto tax, the forms you need, and tips on how to reduce your tax bill.
This guide is regularly updated
One last thing before we start - the rules on crypto tax are in constant flux. At Koinly we keep a very close eye on the DGFiP's crypto policies and regularly update this guide to keep you informed and tax-compliant.
Update 19 August 2021
First Published 24 May 2021: Welcome to your France cryptocurrency tax guide!
Yes, cryptocurrency is taxed in France
In France, cryptocurrency is viewed as movable property by the Direction générale des Finances publiques, or DGFiP.
This means that cryptocurrency sales, transfers, and income from mining are all taxable. If you’ve bought or sold cryptocurrency in the last financial year, you'll need to declare your crypto totals on your income tax return.
You'll only pay the tax on crypto
- If you convert your crypto into fiat currency.
- If the total gains exceed 305€ in one financial year.
How will the DGFiP know about crypto accounts?
If you have an account with a European digital currency exchange, then it's likely that the DGFiP already has your data.
Also, under the European Union’s Sixth Anti-Money Laundering Directive, every company that provides financial services to cryptocurrency customers and businesses will have to comply with much tougher regulations about when and how they identify customers. Data is made available between EU member states in a bid to stamp out money laundering and illegal activities.
What happens if you don't declare your crypto activity?
In France, failure to report crypto tax to the DGFiP is punished with a fine of 750€ per 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 is Cryptocurrency taxed in France
Cryptocurrency is taxed in the same way that movable property is taxed. How your crypto is taxed depends on whether you're an occasional investor, or a miner, or a professional trader.
As per the French tax authority, capital gains from the sale of digital assets, bitcoins or other cryptocurrencies, are taxed as:
Occasional trader tax rate
Occasional traders must pay a type of Income tax called a Single Fixed Levy (PFU) or 'Flat Tax' as it's known in France. This is a flat rate because it does not take into account your tax bracket and your benchmark tax income.
The Flat Tax applies in particular to income from financial investments such as crypto, investment income like dividends, securities and life insurance.
The Flat Tax rate on crypto is 12.8% + 17.2 for social security contributions. This gives an overall tax rate of 30% in 2021.
The option for the income tax schedule
While Flat Tax is the default it is possible to opt for taxation at the progressive income tax scale. You will have to choose this option when filing your annual income tax return by checking box 20P of the 2042 return. This is a strategy best discussed with your accountant or financial advisor.
Crypto gains cannot be offset
The bad news? Crypto gains cannot be offset by related business expenses: without the possibility of tax deduction, nor of abatement, nor of progressive scale taxation, nor of deduction or carryforward of loss over the following year.
No tax on crypto-to-crypto
In good news, France does not tax crypto-to-crypto trades.
Tax on crypto to fiat
Instead the DGFiP will only tax cryptocurrency when the crypto is converted into fiat currency if the overall capital gain exceeds 305€.
When will you not pay tax on crypto in France?
The sale of cryptocurrency for Euros or other legal currencies is what triggers a taxable event in France. Cryptocurrency owners who hold onto their crypto-assets without converting them into fiat currency therefore do not have to pay taxes.
Secondly, If the total value of crypto gains made in one financial year is less than 305€, gains made are exempt from tax. This is the only real cryptocurrency tax exemption currently in force.
Crypto mining tax in France
In France, crypto mining falls under the regime of non-commercial profits (BNC), within the framework of article 92 of the general tax code. Mining profits attract a BNC Tax of 45%.
Crypto miners who raise turnover less than 70,000€ might be eligible for Micro BNC tax benefits.
The rules for commercial miners is different.
The French tax year runs from 1 January to 31 December. Online reporting is possible from Thursday, April 8, 2021.
The reporting deadlines are set according to your department:
- May 26, 2021: departments 1 to 19 and non-residents;
- 1 June 2021: departments 20 to 54;
- June 8 2021: departments 55 to 976.
How to report crypto tax in France?
The DGFiP wants to know about gains made from crypto sales, crypto income and mining.
You'll need to declare this in your annual tax return - impôt sur le revenu(IR) - in the same way you need to report your regular income, net gains and net losses.
Once you, or your accountant have calculated your French crypto tax (we have an app for that!), the easiest way to file your taxes is online via your FranceConnect account.
In fact, the online income tax declaration is now mandatory for everyone. Only persons who are technically or otherwise unable to complete an online form may continue to submit a paper form.
In France, to report your crypto tax you'll need 3 forms to complete an individual tax return:
- Form 2086 to calculate the taxable capital gain.
- Form 2042C to declare mining income.
- Form 3916-bis to declare crypto currency accounts opened outside of France.
To your annual income tax declaration form (Formulaire 2042) you must attach an appendix: Form 2086. Here you will list all the capital gains or losses realised on the occasion of each taxable sale made during the financial year.
Formulair 2086 (Appendix)
WHO NEEDS TO FILE THIS?
Any French resident who has earnt income or made capital gains from crypto.
WHAT INFORMATION IS NEEDED?
This form requires you to enter your crypto income tax information.
Fill in line 3AN of Formulaire 2042 C in the event of an overall capital gain or line 3BN in the event of an overall capital loss.
Formulaire 2042 C
WHO NEEDS TO FILE THIS?
Anyone who has traded in cryptocurrency in the last financial year and made a capital gain or loss.
WHAT INFORMATION IS NEEDED?
This form requires you to enter all your crypto income totals (income and gains).
Individuals, associations and companies not having the commercial form domiciled or established in France are required to declare, at the same time as their income or income statement, the references of the digital asset accounts opened, held, used or closed with companies, legal entities, institutions or organizations established abroad.
Declare each foreign exchange using Form 3916-bis. Fill out a 3916-bis declaration by foreign exchange (if in 2020 you had 3 foreign exchanges, you will therefore have to fill out 3 3916-bis forms).
WHO NEEDS TO FILE THIS?
Anyone who has traded in cryptocurrency in the last financial year trading crypto for foreign fiat currency.
WHAT INFORMATION IS NEEDED?
Declaration of crypto currency accounts opened abroad: declare each foreign exchange.
What happens if you don't report your crypto activities?
Failure to report is punished with a fine of 750€ per 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.
It's advised to keep records
Most tax offices around the world require residents to keep detailed records of cryptocurrency transactions for 5 years. France is no different. It's advisable to keep the following records:
- the date of your crypto transactions
- the value of the cryptocurrency in Euro at the time of the transaction (which can be taken from a reputable online exchange.)
- what the transaction was for and who the other party was (even if it’s just their cryptocurrency address).
Koinly can help with record keeping. By synching your wallets and exchanges to your Koinly account you will have one central dashboard from where to record and view all of your crypto activity. Portfolio tracking is available on a FREE Koinly plan.
Who can help you calculate your French crypto taxes?
Crypto tax reporting is fairly new, and a road less travelled for most accountants. That doesn't mean the taxman is going to cut you any slack. Here are 4 ways you can tackle your crypto taxes and keep in the General Directorate of Public Finances good books. We'll start with the easiest and most accurate method first.
- Use a crypto tax calculator like Koinly to create a report of crypto activity. Send the report to your accountant to complete your tax return. Super accurate, super easy.
- Use a crypto tax calculator like Koinly to create a report of crypto activity. Add the necessary data to your tax return and file it yourself. Accurate, and easy, if you know what you're doing.
- Get your accountant to work out your crypto activity by supplying transaction histories, statements etc. Let them work it out and file for you. Not very accurate, lots of admin.
- Work out your activity yourself, and file yourself. (Best of luck to you.)
How to use a crypto tax app like Koinly to calculate your French tax
Don't get stuck in the busywork. Don't get it wrong. Don't rely on your accountant to know where to look. Use Koinly. Here's how easy it is:
- Sign up for a FREE account.
- Select your base country and currency.
- Connect Koinly to your wallets and exchanges. Koinly integrates with Binance, Bitwala, CoinSpot, CoinJar, Kraken, Swyft, and 300+ more. (See all)
- Let Koinly crunch the numbers. Make a coffee.
- Ta-da! Your data is collected and your full tax report is ready!
- To download your crypto tax report, upgrade to a paid plan from $49 per year.
- Send your report to your accountant, or complete your tax submission yourself, using the figures from your Koinly report.
Now that you know how to go about calculating and submitting your taxes, let's explore France's bitcoin & crypto tax rules in more detail.
How are cryptocurrencies taxed in France?
Here's a breakdown of the most common crypto scenarios and the type of tax liability they result in:
Taxable crypto scenarios
In France, the gains made from selling crypto for euro or any fiat currency is taxed as Flat Tax, if you are an occasional trader.
Marcine buys 0.1 Bitcoin in July 2019 for 1,000€ and sells it for 1,800€ in August 2019. Marcine has effectively added 800€ to her annual income. She will be taxed on this gain, according to her income tax bracket.
Futures / contracts / options trading with crypto
In futures trading, you are not actually buying or selling any crypto. Instead you are speculating on the rise or fall of the price of a crypto asset in the future. When the future arrives you will either make a profit or a loss (P&L).
Note: If you are using Koinly to calculate your taxes then you can control how the P&L is taxed on the Settings page.
Profit from mining must be declared. It is taxed under the BNC system.
Different guidelines exist for commercial miners.
Getting paid in Bitcoin
Whether you are freelancing or working for a company that pays employees in crypto, in France your crypto income will be taxed as income.
Tax Free crypto scenarios
Like in most parts of the world, there are no taxes on buying or hodling cryptocurrencies in France. However, keeping accurate records of the purchase is very important so that you can calculate the cost basis of the transaction when you decide to sell or 'dispose' of your crypto.
Koinly is not just a crypto tax calculator but a crypto portfolio tracker too - the perfect tool to keep a hold on your crypto purchase and sale dates.
Selling or swapping crypto for crypto
Tax is only applied to crypto trades once the crypto is sold for fiat. All other activities are tax free.
In January 2019, Pierre buys 10 ETH for an amount of 1,300€. His portfolio in January 2019 = 10 ETH.
In May 2019, he exchanged 5 ETH for 10 BTC. This transaction is considered interim and is therefore not taxable.
In May 2019 his portfolio = 5 ETH / 10 BTC. In 2019, he has no tax declaration to make related to his income
Gifting crypto to friends & family
Giving Bitcoins or other cryptos to your family or friends as a gift is regarded as any other gift in France. The activity is only taxable once the recipient exchanges the gifted crypto for Fiat.
As the giver, you will pay no tax in this scenario.
Transferring crypto between own wallets
Moving crypto between different wallets or accounts is not a taxable event and doesn't trigger income tax. Having said that, it's important to keep track of these movements. Try an automated crypto tax software like Koinly to keep track of your cost-basis.
Let's say Sam buys 4LTC for 1000€ on Coinbase. She later moves the funds into her private LTC wallet. A few days later she transfers the LTC from her private wallet to her Binance account and sells it for 2000€, making a profit of 1000€.
If Sam wants to use Koinly to generate her crypto tax report, she will have to connect all three wallets. If she doesn't sync her private wallet but only syncs the Coinbase and Binance account, Koinly won't be able to identify that the funds she transferred into her Binance account are the same funds she purchased on Coinbase. However, once Sam adds her private wallet address, Koinly can match the transfer by tracing it from Coinbase to her wallet and then from her wallet to Binance. This will help in producing an accurate tax report.
If she no longer has access to her private wallet, she will have to make some manual changes using the Koinly web interface. She will have to mark the transfer from Coinbase as Ignored so that Koinly doesn't realize gains on it and she doesn't have to pay taxes twice. She would then change the value of the incoming transaction to Binance to match the cost-basis of the outgoing transaction from Coinbase.
Staking, Masternodes, DeFi
Staking activity is directly associated with the proof of stake( PoS) validation method used on the Ethereum Blockchain. There are currently no clear guidelines on how staking is taxed, although it's possible that staking may be viewed as a crypto-to-crypto activity, which is tax free.
Equally for Masternodes tax, however it's likely that the PoS associated with masternodes is similar to mining, and we know that mining attracts BNC tax.
Currently, the lines are also blurry on how DeFi interest should be taxed.
Token address change / mainnet launch
When a cryptocurrency changes its underlying tech for ex. when EOS went from the ETH blockchain to the EOS mainnet or when DAI changed its contract address and named the old coin SAI - there are no tax liabilities.
Calculating your crypto taxes (example)
Let's look at how capital gains are calculated by way of an example.
- Francois bought 1 BTC for 1000€ on 1st July 2020.
- He traded it for 20 ETH on 5th July 2020. The market value of 20 ETH at this point was 1500€.
- He also received 0.15 ETH (worth 10€) from Coinbase as a signup bonus.
To calculate the crypto taxes for Francois we are going to use Koinly which is a free online crypto tax calculator.
After entering the 3 transactions into Koinly manually, this is the output:
We can see the gain/loss on each transaction clearly. Navigating to the Tax Reports page also shows us the total capital gains.
As you can see, Francois will have a taxable capital gain of 500€ along with taxable income of 10€ from cryptocurrencies.
The good thing about crypto tax software is that whether you have 10 transactions or 10,000 - it is equally easy to generate your tax reports! You can sign up for a free Koinly account and view your capital gains in a matter of minutes.
Accounting methods used in the calculations
To include the income from your bitcoin sales in your tax return, you can use the FIFO method. This means that you first sell the bitcoins that you bought first.
Minimising Your Tax Liability
Deducting Trading Fees
The first step towards minimising your tax liability is ensuring that transaction and trading fees are recorded as part of your crypto's cost basis. Koinly does this automatically.
You pay no tax if you hold your Bitcoin, Litecoin, Ether, Ripple, or other altcoins. It's only once your sell your crypto for any fiat currency that you will be taxed.
Lost, hacked or stolen crypto
If you lose your private key or your crypto is stolen, you may be able to claim a Capital Loss, although there is currently no crypto currency tax exemption on capital losses. If this ever changes, to claim a Capital Loss, you would probably be required to provide evidence such as:
- The wallet address that the key belongs to
- When you acquired the key and when you lost it
- The cost of acquiring the stolen/lost cryptocurrency
- The fact that the wallet was controlled by you
- The amount of cryptocurrency at the time that you lost the key
- That you possess the hardware where the wallet is stored
- The transactions to the wallet from an exchange which is linked to your identity
Bonus: Use cryptocurrency tax software to automate your reports
While the task of preparing your crypto taxes can seem quite daunting - especially if you traded on multiple exchanges - there are tools like Koinly which can make your life really easy.
Here's how it works with Koinly so you can see for yourself:
Step 1: Connect your exchanges and wallets
Most exchanges have API's that can allow Koinly to download your transaction history automatically. You can also import CSV or excel files with your transaction history if you prefer that (or if your exchange does not have an API).
Step 2: Preview your capital gains
Koinly does a number of things under the hood in order to calculate your capital gains and income.
First it fetches the market rates at the time of your trades, then it matches transfers between your wallets and exchange accounts and finally it calculates your capital gains. You can easily configure the accounting method used for the gains (it supports FIFO, LIFO, HIFO, Spec ID and a number of other methods). The default in France is FIFO.
All this is automated so the only thing you have to do is head over to the Tax Reports page to see a summary of your gains:
Note that you can also use the Dashboard to stay on top of your taxes as you carryout trades. This can help you make good tax-friendly trades and avoid surprises at tax time! It also helps with record-keeping.
Step 3: Download your tax reports
The final step is to download your tax reports. The tax report you want is called the Complete Tax Report.