This article explains how to report your crypto income and helps you complete your annual income tax return.
First of all, you need to understand your situation.
If you want to cash-out, that is to say reconvert your digital assets (BTC, ETH, EUR-L, ...) into current currency such as the euro, you must know if you are in a situation of capital gain or in a situation of capital loss. You are in a situation of capital gain if the total value of your investment portfolio exceeds the value of your initial capital.
Example # 1: John invests € 6,000 in different cryptocurrencies in January 2020. In December 2020 his investment portfolio has a total value of € 15,000. John is in a capital gain situation, if he wishes to withdraw his gains by converting them back into euros, he will be taxed on his capital gain at 30%.
Example n ° 2: John invests € 6,000 in different cryptocurrencies in January 2020. In December 2020 his investment portfolio has a total value of € 3,000. John is in a situation of capital loss, if he wishes to withdraw his money despite his losses by converting his crypto-currencies back into euros, he will not be taxed and may declare a loss. This capital loss may be deducted from a declared future capital gain.
How to calculate the taxable amount:
The formula for calculating the taxable amount on its capital gain is as follows:
Taxable capital gain = Cash-out - Cash-in * (Cash-out / Total value of the portfolio on the date of sale).
Example: Taxable capital gain = € 6,000 (cash-out) - (€ 6,000 (cash-in) x 40% (fraction of cash out on the value of the portfolio on the date of sale)) = € 3,600.
Then your € 3,600 will be taxed by the “flat tax”, up to 30% (12.8% tax and 17.2% social security contributions).
How to declare your crypto taxes ?
Only capital gains are taxed in crypto-currencies.
However, if you have an account on a foreign cryptocurrency exchange, you must declare it. For this you will need to provide yourself with the declaration by a resident of a digital asset account opened, held, used or closed abroad: Cerfa 3916-bis.
To declare your capital gains in crypto-currencies, you will need the additional income statement: Cerfa 2042.C. He can then declare the amount of the total annual capital gain or loss must be declared each year in the dedicated box (“Capital gains or losses on digital assets”) of the income tax return.
To complete the declaration with your capital gains, you will have to report your taxable amounts in box 3AN or 3BN of the declaration.
On the other hand, an appendix detailing all taxable transactions during the year must be attached to the income tax return. You can find these declarations on the government website: https://www.impots.gouv.fr
Taking into account the presented characteristics of the regime, the appendix involves declaring a very large amount of information relating to the taxpayer's trading activity and his or her digital assets when a taxable transaction has been carried out during the the year. Thus, for each taxable transaction, the following must be indicated:
- The sale price of digital assets;
- The total acquisition price of the portfolio (i.e. the amount of cash-in), specifying the fractions of this total acquisition price already deducted in the context of previous taxable transactions;
- The overall value of the digital asset portfolio at the time of disposal, when it comes to valuation, the administration admits that taxpayers refer to "websites that provide daily average quotation histories on major exchanges," such as CoinMarketCap;
- The amount of the capital gain or loss realized on the taxable transaction.