Tax Obligations for Cryptocurrency Holders: Understanding the Risks

Aleksei Dmitry Melnik May 28, 2023

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The declaration of income is an unmissable event each year including for cryptocurrency holders . It is essential to fulfill your tax obligations and declare all relevant information even for crypto platforms . Failure to comply can have unfortunate consequences . Understanding the risks associated with omission is crucial .

Obligations Regarding Crypto Accounts and Capital Gains

Since 2019 individuals and associations are required to declare their crypto accounts held abroad and capital gains from the sale of crypto-assets . Article 1649 bis C of the general tax code outlines the obligation to declare digital asset accounts opened, used or closed with foreign companies . This includes platforms such as Binance or OKX as well as neobanks like Revolut or Wirex .

Exemptions and Record-Keeping

Platforms headquartered in France and non-custodial wallets are exempt from declaration . It is important to maintain a record of the platforms you have already declared for future reference . While the process may seem tedious it is essential for compliance .

Taxable Events and Calculating Capital Gains

Certain transactions trigger a tax event such as converting digital assets into fiat currency exceeding €305 per year . Transactions between digital assets themselves generally do not require declaration . Payment of goods or services in cryptocurrencies is also taxable . Familiarize yourself with the specifics to ensure accurate reporting .

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Penalties and Fines for Non-Compliance

Failure to declare an account, even if unused can result in a fine of €750 . For simple omissions or forgetfulness the penalty is reduced to €125 . Accumulative fines apply for each undeclared account with higher penalties for balances over €50,000 . Total fines are capped at €10,000 per year . Non-compliance can have significant financial consequences .

Unique Flat Tax and Consequences of Fraud

Capital gains from the sale of digital assets are subject to the Unique Flat Tax (PFU) amounting to 30% of the declared amounts . Calculation errors incur a 10% increase which can be canceled if corrected within thirty days . Intentionally omitting to declare capital gains results in a 40% increase while proven fraud can lead to an 80% increase and potential criminal sanctions .

Account Examination and Extended Assessment Period

Tax authorities can examine accounts for up to three years and extend the assessment period to ten years in cases of illicit activity or complete absence of declaration . Given the complexity and risk of errors, seeking assistance from professionals such as Waltio a French company providing automated and error-free declaration services can be advantageous .

Conclusion:

Complying with tax obligations as a cryptocurrency holder is essential . Failure to do so can result in fines, penalties and even criminal sanctions . Seeking professional assistance and utilizing dedicated services can help ensure accurate reporting and avoid costly mistakes .