Cryptocurrency as remuneration – what are the tax implications?

Cryptocurrencies are now widely used as means of payment or investments. However, they can also be used as remuneration, offering great potential for employers and employees, but also many risks and challenges.

In our article ‘Wages in cryptocurrency: what is possible and what is not?’, we looked at the basic possibilities and requirements for paying wages in cryptocurrency against the backdrop of a ruling by the Federal Labour Court (BAG). The following article will now focus on the tax aspects of cryptocurrency as remuneration.

Tax implications of crypto as salary

From a tax perspective, remuneration in cryptocurrency poses several challenges that affect both employers and employees. The most important points include:

Cryptocurrencies as benefits in kind or cash payments?

Since virtual currencies are not legal tender but are classified as financial instruments by the BaFin, they could initially be understood as benefits in kind. However, according to the BMF (letter dated 15 March 2022, BStBl I 2022, 242), the following applies: In particular, established cryptocurrencies such as Bitcoin or Ethereum are treated as cash payments for income tax purposes (Section 8 (1) EStG). This means that they are fully taxable like cash wages. The £50 non-cash benefit exemption limit or flat-rate rules for non-cash benefits are therefore not applicable here.

However, according to the BMF letter dated 6 March 2025 (BMF: Individual questions on the income tax treatment of virtual currencies and other tokens), whether a cash payment or a payment in kind is involved must always be examined on a case-by-case basis.

Entrepreneurs must therefore pay close attention to how, in what form and to what extent they use employee benefits in the form of cryptocurrencies.

Valuation at the time of receipt

The taxable income arises as soon as the cryptocurrency is available to the employee, i.e. when it is credited to their wallet and can be traded. However, fluctuating exchange rates lead to uncertainties in valuation and make it difficult to calculate wages correctly.

In addition, the dry income problem plays a role here, i.e. the tax situation in which someone has to pay tax on income without actually having received liquid funds (e.g. euros) to pay the tax liability. Since the value of the cryptocurrency is calculated in euros at the time of receipt (i.e. transfer to the wallet) and is immediately taxable, the employee may have to sell part of their cryptocurrency in order to pay the tax in euros. If the price of the cryptocurrency falls after the inflow, it may happen that the equivalent value in euros is no longer sufficient to pay the taxes – or the sale leads to losses.

Anyone who receives crypto as remuneration should be aware of this risk and, if necessary, convert part of the cryptocurrency into euros in good time.

Documentation and proof of crypto remuneration

Employers and employees must keep detailed records of every cryptocurrency transaction: date, amount, market value and type of cryptocurrency. Incorrect or incomplete documentation can lead to additional payments, penalties or, in extreme cases, criminal proceedings for tax evasion.

The euro value of the cryptocurrency must also be used as the basis for social security contributions. Incorrect valuation can lead to additional claims or fines.

Double taxation possible

Employees may have to pay tax again when they later sell the cryptocurrency they have received (private sales transactions). The background: profits from sales within one year of receipt are taxable if the exemption limit of €1,000 is exceeded. After the one-year holding period has expired, profits are tax-free.

This means that double taxation may occur: once upon receipt as wages, and once upon sale as private profit.

Crypto as remuneration? Definitely an option, but always check the tax implications!

Remuneration in cryptocurrency can be an attractive payment option for employers and employees. However, the tax treatment involves a number of risks, such as correct classification as a cash benefit, valuation at the time of receipt and documentation requirements.

Apart from that, there are even more complex issues surrounding the possibility of paying remuneration in crypto and its tax implications.

This concerns, for example:

• Paying employees entirely in stablecoins – after all, stablecoins are a special form of cryptocurrency whose value is linked to a stable asset such as a fiat currency (e.g. US dollar or euro), a commodity (e.g. gold) or a basket of currencies
• Employee participation with VSOP tokens
• ICO tokens for employees

Employers and employees should therefore seek tax advice before using cryptocurrencies as remuneration.

Our tax experts specialising in crypto will be happy to assist you with any further questions you may have about remuneration in cryptocurrencies and are of course also available to help with any other issues relating to business and private crypto environments.