From cryptocurrency to crypto art: seeing through digital returns

The Corona pandemic does have its positive sides: Thanks to it, digitization has progressed rapidly and has found its way into all areas of life. We now work mainly remotely, buy more online, and invest more in stocks. Moreover, it is still trendy to trade in cryptocurrency.

In this context, the topic of “digital art” also went through the roof. The auction house Christie’s, auctioned off a digital artwork called “Everydays: The First 5,000 Days” for $59 million in February this year. The artwork is a non-analog collage of 5,000 small images by artist Mike Winkelmann, artist name Beeple.

This success has made many people sit up and take notice and is now tempting many to enter the digital art trade, regardless of whether you are a market maven or a trend chaser.

So how is a profit from crypto art or cryptocurrency taxed?

A few swear that NFTs (= non-fungible tokens, “not replaceable) are the future, and the pioneers are profiting. Bitcoin has clearly illustrated this trend before.

But assuming one is successful in this field and generates income, the question arises whether and how one has to pay taxes on it. And what if one suffers losses, can these then be offset against the remaining income and thus diminish it?

So how is a profit from crypto art or cryptocurrency taxed?

Trading in digital art is treated in the same way as trading in cryptocurrency.

With the known capital investments such as shares, fund shares, etc., the investor does not have to worry about tax matters nowadays, because the banks independently transfer the final withholding tax with offsetting of profits and losses to the tax office.

It is completely different with cryptocurrencies (Bitcoin, Ethereum, Ripple and Co), especially since they are traded decentrally. Although they are treated neither as a foreign currency nor as a capital investment, transactions in connection with cryptocurrencies can nevertheless become relevant for tax purposes.

Trading in cryptocurrencies is treated as a disposal transaction, as with other private assets. This means that only a speculative profit generated within one year since the acquisition must be taxed. This is not subject to the final withholding tax, but to the personal income tax rate.

All details about taxation as well as tax-relevant process when paying with cryptocurrency, offsetting with speculation losses, exemption limits and what else there is to know can be found in our service area under Digital Income / Crypto Trading.

Tax cryptocurrency & crypto art?
Our expert advises:

Fachanwalt für Steuerrecht
Geschäftsführer der ACCONSIS

Dr. Christopher Arendt

Internationales Steuerrecht

+ 49 89 547143
or by e-mail

Crypto & Steuern I Interview mit Dr. Christopher Arendt I Trends #280

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My recommendation?

The tax aspect behind trading cryptocurrencies or crypto art also poses many dangers and challenges. I would be happy to provide you with individual advice on this and work with you to find solutions to safeguard your digital returns.

Please do not hesitate to contact me.
I will be happy to assist you in an advisory capacity.