To your calculators, or rather your Excel tables! – As planned, we are going to come back to the subject of the capital gain on the sale of digital assets, so that you are able to correctly complete your tax return for 2021.
Automatically calculate your capital gains thanks to the Coin Trading and its algorithmic trading solution finally accessible to individuals.
Disposals of digital assets exempt from taxation
First, it must be borne in mind that not all transactions in digital assets are considered to be taxable events. So the non-taxable transactions are the following :
- Buying cryptocurrency with legal tender (fiat)
- Cryptocurrency exchanges against other cryptocurrencies
- Crypto transfers against stablecoins
On the other hand, the sale of cryptocurrencies against fiat as well as the purchase of goods or services in cryptocurrencies, are considered as transfers of digital assets taxable.
One of the amendments proposed by Stone PERSON to the 2022 Finance Act consisted of setting up an exemption for purchases of goods or services below €3,000. Unfortunately, this amendment was rejected by the National Assembly during the first reading…
The calculation of the capital gain for disposals of taxable digital assets
Trading operations carried out on a regular or occasional basis
The provisions of article 150 VH bis of the General Tax Code (CGI) applicable to the disposal of taxable digital assets invite to distinguish according to whether these operations are considered to be carried out in a professional capacity Where Not professional. However, the provisions of the article do not specify the criteria for determining whether an activity is carried out on a professional basis or not.
However, the difference is significant since the transactions considered to be carried out on a regular basis will be taxed according to the provisions applicable to industrial and commercial profits (BIC), because this activity will be considered commercial. On the other hand, those considered to be carried out on an occasional basis are taxed according to the realized capital gain to which the tax applies. flat tax at the rate of 30 %.
However, the distinguishing criteria are unclear, then the boundary between the usual and occasional criterion is sometimes tenuous. The tax doctrine invites to take into account several clues such as:
- Used tools for the benefit of trading activity;
- Level of rationalization and sophistication of the activity ;
- Transaction frequency and holding period actives…
In addition, the tax authorities were able to specify that the use of a computer tool to carry out the exchanges, and the fact that the income from trading activity is higher than professional income are not not enough to consider that a taxpayer exercises the activity on a regular basis.
Finally, for persons carrying out cryptocurrency trading on a regular basis, taxation should change from January 1, 2023. One of the provisions of the finance law for 2022 provides that from this date, the activity of trading digital assets carried out on a regular basis will be subject to the non-trading profits regime. This change allows to align the tax system for transactions in digital assets on that of stock market transactions.
The calculation of the added value
First, it must be borne in mind that the calculation of the capital gain must be made at each taxable disposal. These taxable disposals can be the resale of digital assets in legal tender (fiat)Where the purchase of goods or services in cryptocurrencies.
Then, article 150 VH bis of the CGI provides for the method of calculating the capital gain on the sale of digital assets. Three elements are important:
- Sale price : it is the effective sale price (amount of sale of digital assets against fiat, or the nominal value of the good or service purchased) minus the transaction costs. You will be able to deduct the costs provided you are able to justify them.
- Buying price : this is the amount corresponding to the acquisition value of the assets actually transferred.
- Overall portfolio value : total value of the portfolio on the day of the sale.
here is algorithm the capital gain or loss on the sale of digital assets:
These amounts must be converted into euros according to the rate applicable on the day of the sale. Thus, it is necessary to keep the date of transfer in order to be able to determine the exchange rate in the case where the transfer is made in dollars.
Mr JDC, occasional trader bought for €5,000 of digital assets in April 2020 (this amount is the total acquisition price). In April 2021, thanks to the rise in the price of Bitcoin Mr JDC had the chance to double his initial investment. He thus has a wallet digital asset that has a global value of €10,000.
He thus decides to secure his situation by assignor for €4,000 of digital assets against euros.
Thereby, calculate the added value from Mr. JDC:
Mr JDC released a capital gain of €2,000 on this taxable disposal. Thus, he will have to declare this capital gain in his 2021 tax return. Then, the 30% flat tax will apply to this capital gain. Thus, Mr. JDC will be liable for a €600 tax for this operation.
This calculation of capital gains or losses must be carried out for each operation taxable, then you will have to add them up and then calculate the amount of tax (by multiplying the sum of your capital gains and losses by 30%).
Let’s take the example of Mr JDC, in addition to having to declare his digital asset accounts with the Cerfa 3916 bis, he will have to complete the form no. 2086 relating to ” capital gains following disposals of digital assets “. He will then have to fill in the number of taxable transactions carried out in 2021. In our case, Mr. JDC only carried out one. He must therefore complete the boxes corresponding to assignment 1:
Once Mr JDC has completed this form, the amount of his capital gain will be automatically reported in the tax return in the box 3 YEAR (in the case of the online declaration). The capital losses will be reported in the box 3BN. You should make sure that the amounts correspond to your calculations.
In some cases, it is not useless to be accompanied by a lawyer tax specialist or use accounting aids available on the Internet, in order to avoid errors.
Subject to the adoption of the provision as it stands, the Finance Act for 2022 provides that from January 1, 2023 it will be possible toopt for the progressive scale income tax (IR). To this rate should be added the rate of social security contributions equal to 17.2%. Thus, this option will only be advantageous for taxpayers who declare less than €25,711 of income per year. Please note that this provision will only apply to tax-generating transactions carried out as of January 1, 2023. Thus, for transactions carried out in 2022, you will not be able to opt for the IR scale and they will be subject to to the current tax system, i.e. to the flat tax by 30%.
Does the tax return scare you? Rest assured, Coin Trading is there to help you in this daunting exercise. Automatically calculate your capital gains using the software CryptoTax™.