Trading GmbH for crypto: is it worth it for investors?

Private investors in Germany are disadvantaged in many ways from a tax perspective. Setting up a trading company can be a good option here to save taxes on crypto profits. We will show you the advantages and disadvantages of a trading company for crypto, who it is worthwhile for and what needs to be considered when setting it up.

What is a trading company?

A trading limited liability company for crypto is a special form of limited liability company (GmbH) that specialises in trading cryptocurrencies and other digital assets. From a legal point of view, however, there are no other differences to a ‘normal’ GmbH.

Requirements for setting up a trading company

Setting up a trading company requires careful planning and attention to numerous legal, financial and regulatory aspects:

Legal requirements:

The minimum share capital of a GmbH is €25,000. At least half of the share capital (€12,500) must be paid up when the company is formed.

• Share capital: The minimum share capital of a GmbH is €25,000. At least half of the share capital (€12,500) must be paid up at the time of formation.
• A articles of association must be drawn up and notarised.
• The company must be entered in the commercial register.
• Registration of the beneficial owner in the transparency register
• Business registration

Financial aspects:

• Capital procurement: In addition to the share capital, sufficient capital must be provided for trading.
• You have to open a business account and deposit the share capital.
• You have to set up a special broker account for the trading company.

Tax and regulatory requirements:

• Tax registration: After its formation, the GmbH must be registered with the relevant tax office. It is given a tax number and must regularly pay corporate income tax, trade tax and VAT.
• LEI allocation: A Legal Entity Identifier (LEI) is mandatory for companies on the financial market.
• They must prepare an opening balance sheet.

Documentation and verification:

• You must create a corporate ownership structure.
• The original source of the funds for the business formation must be stated.
• A detailed explanation of the nature of the business is required.

For whom is a trading limited liability company an interesting option?

A crypto trading company may be particularly attractive for traders with high trading volumes or for those who trade in crypto derivatives and futures. It enables a more optimised tax structure and, if managed correctly, can lead to faster wealth accumulation.

Without Crypto Ltd., the profits are taxed at the personal income tax rate, which, particularly in the case of high profits, results in significant differences compared to the tax burden at Trading Ltd.

However, the trading company only makes sense if long-term investments in crypto are made and the profits continue to be used to build up assets. This is the only way to benefit from tax breaks in the long term and avoid unnecessary losses due to the distribution of profits to private assets.

What tax advantages does a trading company offer for crypto investors?

A trading company set up for crypto transactions offers advantages in the context of corporate taxation in the case of reinvestment and the possibility of offsetting losses:

Corporate taxation

• FFlat tax rate: Profits are taxed at a flat rate of approx. 15% trade tax and 15% corporation tax, regardless of the amount. This can be advantageous for private investors with high profits compared to the progressive income tax rate. If the trading GmbH is used purely for asset management, only corporation tax is incurred. It can also be advantageous to permanently assign cryptocurrencies to business assets.
• VAT exemption: Trading in cryptocurrencies is VAT-exempt in a GmbH (Section 4 No. 8 lit. b) UStG). Furthermore, special attention should be paid to the tax treatment of mining, as there is still no clear legal classification of this. In the company balance sheet, cryptocurrencies are mostly counted as other assets. If dividends are distributed, 25% capital gains tax is due, although the partial income method can also be a good option for saving taxes here.
• However, caution is advised with NFTs – these can trigger a VAT liability
• No speculation period: Unlike for private assets, there is no one-year holding period for tax-free profits.

Loss statement

Losses from crypto investments can be unlimitedly offset in the GmbH, regardless of holding periods. This is particularly advantageous when trading in derivatives, futures or margin trading.

Reinvestment and asset accumulation

Due to the lower taxation of profits, faster wealth accumulation is possible with Krypto Trading GmbH in the case of reinvestment.

Don’t forget: the legal obligations within the framework of Krypto Trading GmbH!

The crypto company offers several tax and legal advantages for active crypto traders, e.g. with regard to corporate taxation, the speculation period and the offsetting of losses. However, you also have to consider the disadvantages and obligations that the trading company entails:

• Higher costs: Additional costs are incurred for accounting, annual financial statements and tax returns. All crypto transactions must be recorded in the accounting.
• More complex accounting: Cryptocurrencies must be accounted for in the business assets, which makes taxation more complex.

We would be happy to advise you on the possibilities for optimising your tax situation by setting up a trading company or assisting you with your accounting and tax returns.