Capital gains, tax regime, qualification as an individual or professional… Tax on cryptocurrencies changed in France at the beginning of 2023.
Since January 1, taxation on cryptocurrencies has evolved in three main axes in France. Some provisions should make it easier for investors and even satisfy some.
The first change concerns capital gains in cryptocurrencies. Indeed, if an investor makes a taxable sale, he will have to declare this on his taxes. Among taxable transfers, we distinguish cryptocurrency transfers against fiat currency (legal currencies such as the euro or dollar for example) or the purchase of a good or service with a cryptocurrency.
Until now, the French who gained capital from cryptocurrencies in euros were subject to a specific regime. Indeed, as of 2019, capital gains exceeding €305 per year are subject to a single flat tax (PFU) (“flat tax”) of 30%, i.e. 12.8% tax and 17.2% social deduction. This also applies to capital losses: if a user has lost money by selling cryptocurrencies, this must also be declared.
A tax choice
But there is a change since January 1. Article 79 of the 2022 finance law provides that taxpayers “can choose to be taxed either at the flat rate of 12.8% or at the progressive rate of income tax,” it says Ministry of Economy.
A choice that can be interesting in some cases. Thus, if a person is not taxable, he only has to pay 17.2% in social security contributions.
“And if (it) falls within the 11% bracket of the scale, (it) will only withhold 28.2% of taxes and social security contributions. The additional advantage, the CSG paid (9.2%) will be deducted from your taxable income with 6.8%, while the one included in the PFU does not”, underlines an article What to choose cited by the ministry.
Individual and professional investors
The second change concerns the qualification of investors. Until now, some individuals who made substantial capital gains could be considered professional investors, according to the criteria established by Bercy. The latter were then subject to the regime of industrial and commercial profits (BIC), with a tax rate of up to 66.2%.
However, Bercy has clarified the ambiguity about these qualifications. Thus, transfers “carried out on a non-professional basis will systematically fall under the PFU regime”, specifies the Ministry of Economy.
“If you sell cryptocurrencies as part of your private wealth management, you will automatically fall under the PFU. It does not matter if you make sales on an occasional or regular basis, you will be subject to this regime even if you manage a large volume of transactions and large sums”, the article underlines.
Third change: the profits of professional traders will be taxed as non-trading profits (BNC) and no longer BIC. Thus, they will be subject to the tax rate and social security contributions, subject to the deduction of a reduction of 34% (micro-BNC scheme) or costs related to the activity (controlled declaration scheme)”.
On the other hand, no change on the side of capital gains realized from cryptocurrency mining, which also falls under the BNC regime.
“The taxable result arising from this activity is determined in accordance with the common law rules applicable to non-commercial gains, specifying that the purchase value used to calculate the taxable result is nil when the bitcoins are distributed free of charge” , according to article 92 of the general tax code.
To find out how to declare your capital gains, BFM Crypto has produced a detailed guide on the subject. Specifically, a user must track all cryptocurrency transactions made during the declaration year and be able to calculate the valuation of his wallet or wallets during the taxable transfer. Taxpayers can get help from tax specialists specializing in cryptocurrencies or private companies dedicated to this problem.