Crypto-to-crypto trades remain tax exempt, says French finance minister
Crypto-to-crypto trades will remain tax exempt, iterated French finance minister Bruno Le Maire. The stance stands in stark contrast to tax treatment for crypto-assets in the United States, marking a major boon for cryptocurrency traders domiciled in France.
France reaffirms crypto-to-crypto tax exemption
In a historical stance, France has reaffirmed that crypto-to-crypto trades are tax exempt. As said by French finance minister Bruno Le Maire in a comment to Bloomberg:
“We believe that the moment the gains are converted into traditional money is the right time to assess tax.”
Following that position, value-added taxes (VAT) would only be assessed when a cryptocurrency is used to acquire an asset or service, he continued.
How cryptocurrency is currently treated for tax purposes
Currently, most of the world follows the United States’ approach to taxing cryptocurrency. For most crypto trades, the gain or loss from the trade is taxed at the short-term capital gains rate. This means that gains are taxed at a person’s ordinary income, ranging from 10 to 37 percent depending on a person’s tax bracket.
As an example, if someone purchases a Bitcoin for $10,000 and sells that same BTC for $11,000, they would have incurred a gain of $1,000. This $1,000 would be taxable at the short-term capital gains rate.
Alternatively, if someone holds a crypto-asset for a year or more, it would qualify for the long-term capital gains rate. This ranges from 0 to 20 percent for most taxpayers, saving as much as 19.6 percent off the short-term rate.
Previously, traders argued that the “like-kind” exemption, which applies to real estate, would also apply to cryptocurrency. This would mean crypto-to-crypto trades would not trigger capital gains taxes.
However, in May 2014, the IRS clarified in a notice that cryptocurrency is treated as property for tax purposes. As such, crypto-to-crypto trades would trigger capital gains. Moreover, using cryptocurrency to pay for goods or services would also be a taxable event—creating an accounting headache for firms which intend to use Bitcoin for small transactions.
To mitigate tax impact, some advocates are lobbying for a “de minimis” exemption for crypto payments, meaning small transactions under a certain threshold would be exempt from capital gains.
In the meantime, it seems like France is the place to be for traders looking to minimize their tax bill.
This is not tax advice. Please consult a professional before making a decisions that may impact your tax liability.