Virtual currencies such as Bitcoin have long been the talk of the table with private investors, because they have quickly established themselves as an object of speculation for those who take risks.

The Stuttgart Stock Exchange has been offering a free app for trading Bitcoin & Co. since January 2019.

Mark Fehr

Editor in business.

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    In terms of tax law, the new phenomenon is now becoming more and more common in everyday life. On June 17th, the Federal Ministry of Finance published the draft of a BMF letter that is intended to regulate individual questions about virtual currencies and tokens. It is a draft, so changes are still possible due to tips or criticism from practitioners. Oliver Braatz, tax advisor at Möhrle Happ Luther, has already dealt with the details of the draft, because the tax treatment of crypto currencies is one of his main areas of work. What does the rules mean for investors?

    Specialist Braatz points out, above all, that the withholding tax applicable to securities investments will not apply in the case of crypto investments. "So investors here do not benefit from the flat-rate and simple taxation in which the custodian takes care of almost all aspects," says Braatz. Instead, they have to declare their transactions with Bitcoin & Co. as private sales transactions in their tax returns. These are taxed at the individual tax rate, which, depending on total income, can be significantly higher than the flat-rate withholding tax of just 25 percent.

    In both cases, depending on religious affiliation, there is also church tax on top and the solidarity surcharge, which has not yet been abolished for particularly high incomes.

    In addition, the saver lump sum of 801 euros or 1602 euros does not apply to married couples who are jointly assessed for tax purposes.

    This applies to dividends, interest or capital gains from securities, but not to private sales transactions.

    "Anyone who invests money in stocks, bonds or ETFs is used to the fact that the custodian bank takes care of almost all tax matters," says Braatz.

    "With investments in crypto currencies, however, investors have to take care of a lot of their own."

    Tax-free after speculation period

    According to the tax advisor Braatz, the classification as a private sale also has an advantage: investors benefit from the speculation period, which also applies to investments in physical gold. "Realized crypto profits from a holding period of at least 12 months are tax-free," says Braatz. So there has to be a year between buying and selling. However, this also means that losses cannot be deducted from tax after the speculation period has expired - even if the BMF letter does not comment on the issue of losses.

    According to the assessment of tax advisor Braatz, the BMF letter is fiscally oriented, i.e. driven by the idea of ​​taxing the phenomenon of cryptocurrencies as broadly and completely as possible. "The BMF experts know exactly what they are talking about, because they have dealt with the new technology in detail," says Braatz. This was shown by the definitions in the detailed explanatory part of the letter. This can even be recommended for investors who want to deal with the technical and economic basics of cryptocurrencies.

    According to the BMF definition, an important aspect of virtual currencies is that they are not issued or guaranteed by any central bank or public body and that they are not legal tender. However, they are accepted as a medium of exchange and can be traded electronically. This independence from states and central banks is appealing from the point of view of those investors who are looking for protection against inflation in virtual currencies. The independence argument recently got a tough crack as governments crack down on digital currencies and financial regulators are calling for stricter regulation. In May, Turkey and recently China took tough measures against cryptocurrencies.