Cryptocurrency is subject to Income Tax 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 work 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.
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.
In France, cryptocurrency is viewed as a moveable asset by the General Directorate of Public Finances, or DGFiP. Capital gains from the disposal of movable assets (e.g. securities, bonds) are taxed as ordinary income.
You won't pay tax when you buy crypto, swap crypto for crypto, hold crypto, or move your crypto between wallets.
You'll only pay tax on crypto:
Income Tax in French is called impôt sur les plus values.
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 has 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.
There is a new EU directive on data sharing - Dac8 - which is likely to take effect later this year. Under the proposed directive - it's likely the DGFiP will have the ability to check whether someone owns crypto, as well as have the authority to look into crypto companies' accounts and gain insight into crypto assets.
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 increase to €1,500 and €250 when the value of the accounts exceeds €50,000 at any time during the year.
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 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.
High earners may also need to pay an exceptional income tax, at a maximum marginal tax rate of 4%.
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 capital losses can be applied to gains made in the same financial year. They cannot be carried forward.
In good news, France does not tax crypto-to-crypto trades.
Instead the DGFiP will only tax cryptocurrency when the crypto is converted into fiat currency if the overall capital gain exceeds 305€.
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, total capital gains, including those from crypto disposals, up to €305 per year are tax-free.
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:
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, attached to Form 2042:
Fill in Form 2042: Income Tax Return. Married persons file a joint tax return, with no option to file separately after the year of marriage or before the year of divorce.
Attach to Form 2042:
Taxpayers who declare capital gains need to attach an appendix: Form 2086 to Form 2042. Here you will list all the capital gains or losses realised during the financial year.
Note that form 2086 only allows for 20 itemised disposals. If you made more than 20 disposals, be it crypto or otherwise, navigating this limitation might be a challenge best left to your tax professional.
Any French resident who has earnt income or made capital gains from crypto.
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.
Anyone who has traded in cryptocurrency in the last financial year and made a capital gain or loss.
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.
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.
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:
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.
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.
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:
Here's a breakdown of the most common crypto scenarios and the type of tax liability they result in:
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.
Profit from mining must be declared. It is taxed under the BNC system.
Different guidelines exist for commercial miners.
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.
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
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.
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.
Let's look at how capital gains are calculated by way of an example.
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.
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.
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.
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:
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:
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).
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.
The default cost basis in France is the Weighted Average Acquisition Price (PMPA).
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.
The final step is to download your tax reports. The tax report you want is called the Complete Tax Report.
The information on this website is for general information only. It should not be taken as constituting professional advice from Koinly. Koinly is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. Koinly is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.