This article explains how to declare your crypto earnings and helps you fill out your annual tax return.
If you want to cash-out, that is to say, convert your digital assets (BTC, ETH, EUR-L, ...) into fiat money like the euro, you need to know whether you are in a capital gain or capital loss situation. You are in a capital gain situation if the total value of your investment portfolio exceeds the value of your initial capital.
- Example #1: Baptiste invests €6000 in various cryptocurrencies in January 2020. In December 2020, his investment portfolio has a total value of €15000. Baptiste is in a capital gain situation, and if he wishes to withdraw his gains by converting them into euros, he will be taxed on his capital gain at a rate of 30%.
- Example #2: Baptiste invests €6000 in various cryptocurrencies in January 2020. In December 2020, his investment portfolio has a total value of €3000. Baptiste is in a capital loss situation, and if he wishes to withdraw his money despite his losses by converting his cryptocurrencies into euros, he will not be taxed and can declare a capital loss. This capital loss can be deducted from a future declared capital gain.
The formula to calculate the taxable amount on your capital gain is as follows:
Taxable capital gain = Cash-out - Cash-in * (Cash-out / Total portfolio value at the time of sale).
Example: Taxable capital gain = €15000 (cash-out) - (€6000 (cash-in) x 40% (fraction of cash-out relative to portfolio value at the time of sale)) = €3600.
Therefore, your €3600 will be taxed with the “flat tax” at a rate of 30% (12.8% tax and 17.2% social contributions).
Only capital gains are taxed in cryptocurrencies.
One of the advantages of having a Coinhouse account is that we are a French company based in France and registered with the AMF as a PSAN, so you do not have to declare a foreign account, the only declaration you need to make is when you sell for euros (cash-out) in a capital gain situation.
However, if you have an account on a foreign cryptocurrency exchange platform, you must declare it. To do this, you will need to provide the declaration by a resident of a digital asset account opened, held, used, or closed abroad: Cerfa 3916-bis.
To declare your cryptocurrency capital gains, you will need to use the additional income tax return: Cerfa 2042.C . It will then allow you to declare the total capital gain or loss for the year, which must be reported every year in the dedicated section (“Capital gains or losses on digital assets”) of the income tax return.
To fill out the declaration with your capital gains, you will need to transfer your taxable amounts to box 3AN or 3BN of the declaration.
In addition, a detailed annex must be attached to the income tax return covering all taxable operations carried out during the year. You can find these declarations on the government website: https://www.impots.gouv.fr
Given the characteristics of the regime, the annex requires declaring a very large amount of information related to the taxpayer's trading activity and their digital asset holdings once a taxable operation has occurred during the year. Thus, for each taxable operation, the following must be provided:
- The sale price of the digital assets.
- The total acquisition price of the portfolio (i.e., the cash-in amount), specifying the fractions of this total acquisition price that have already been deducted in the context of previous taxable operations.
- The total value of the digital asset portfolio at the time of the sale, including all assets; for the valuation, the tax authorities allow taxpayers to refer to “websites providing daily average prices on major exchange platforms,” such as CoinMarketCap or Coingecko.
- The amount of the capital gain or loss realized on the taxable operation.
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