This how-to guide to declare crypto taxes was written by Blockchain Legal, in partnership with Cryptio. We present you with the steps to follow from analyzing transaction data to reporting.
Cryptio is a service provided for information purposes only. This service is not a substitute for professional tax, accounting or legal advice. The information presented in a general way in this how-to guide to declare crypto cannot in any way engage the responsibility of their editors and host.
It is the responsibility of each user to take the necessary steps to comply with the tax rules applicable to them.
For personalized assistance, we invite you to contact our partner, the law firm Blockchain Legal.
We thought an how-to guide to declare crypto taxes in France would be useful since, from now on, several tax plans coexist in terms of earnings from cryptoactive trading.
After determining the plan applicable to you and extracting the relevant data from Cryptio, you will need to follow the following procedures to complete your tax return.
Are you subject to the capital gains tax on movable property?
If you consider that your activity is of an occasional nature, your earnings may be declared under the regime of capital gains on movable property (PVBM) provided for in Article 150 UA of the General Tax Code.
To do this, it will be necessary to: 1° identify your capital gains; 2° determine the taxable amounts; 3° declare on the appropriate form; 4° pay the corresponding tax.
As a preliminary remark, it should be noted that the regime was initially intended for physical and non-fungible movable property. The latter therefore applies to cryptoactives with some inconsistencies that we will certainly note.
1. Identify the transactions to be reported
The first difficulty arises: what does “transfer of movable property” mean? Is it the transfer of a unit of the cryptoactive transferred; a single operation; a set of operations carried out in a short period of time?
→ As a precaution, and to get as close as possible to the spirit of the plan, it is advisable to reason operation by operation. Thus, under this regime, each transaction involving a cryptoactive is likely to generate a taxable capital gain.
→ Moreover, it should be stressed that, as the law stands at present, there is no legal basis for exempting capital gains realised on transactions between cryptoactives, which therefore remain taxable.
In summary, all transactions that generate added value should be of interest to you. However, capital losses may not be used to offset them.
2. Determine taxable capital gains
→ The PVBM regime provides for an exemption for transactions whose sale price is less than €5,000. Thus, all transactions below this amount do not have to be reported to the tax authorities. Be careful, however, it is not the amount of the capital gain but the selling value of the cryptoactives.
→ The taxable capital gains are equal to the difference between the sale price and the purchase price of the cryptoactives. As indicated above, the plan is intended for non-fungible assets. It is therefore appropriate to apply the first-in-first-out (FIFO) method of calculation.
→ To identify these capital gains on cryptio, download the capital gains report “FIFO”.
You will find all the coins sold in 2018, with the purchase price (cost basis), the sale price (total transaction cost) and the realised capital gain.
All you have to do is declare all the transfers whose sale price is higher than €5,000.
Acquisition costs may be added to the acquisition price and disposal costs may be subtracted from the disposal price (transaction costs).
→ The PVBM regime also provides for a deduction for the duration of the holding period. This allowance is progressive: the allowance is 5% per year after 2 years of ownership.
3. Declare capital gains and pay taxes
→ Taxable capital gains are subject to a flat-rate of 19% plus social security contributions of 15.5% for 2017 and 17.2% for 2018.
→ The capital gain must be declared using form 2048-M (CERFA n°12358) which must be sent, with payment of the corresponding tax, to the tax authorities responsible for the seller’s domicile within one month from the date of the transaction.
→ Proof of the calculation of the declared capital gain (acquisition price, transfer price, costs) must be kept, as the administration may require them at any time.
→ No declaration is required when the capital gain is exempt.
→ Net taxable capital gains must also be reported on the tax return filed the following year in box 3VZ so that they can be considered when calculating the reference tax income. However, they will obviously not be subject to a new tax.
Do you fall under the industrial and commercial profit system?
In the event of an activity that can be qualified as usual, it will be necessary to declare your earnings under the Industrial and Commercial Profits (BIC) regime.
It will therefore be necessary, as a first step, to determine the declaratory regime that must or can be applied.
There are three reporting systems whose application depends on the amount of turnover generated.
The threshold for the application of the micro-BIC scheme remains subject to interpretation, although the recent decision of the Conseil d’État has removed some doubts. Indeed, to benefit from the micro-BIC, the annual turnover must be less than €170,000 for goods sales activities and €70,000 for other activities.
The Conseil d’Etat considered that Bitcoin – potentially all cryptoactives – should be qualified as intangible movable property. The activity of buying and reselling cryptoactives should therefore be considered as an activity subject to the €170,000 ceiling.
1. Are you on the micro-BIC plan?
Determination of taxable profit
The taxable profit will consist of all income less a flat-rate allowance for costs and expenses.
By revenue, we mean all the securities received in return for the transfer of cryptoactives, whether they are other cryptoactives or traditional currencies.
The micro-BIC plan provides for two deductions for costs and charges of different amounts. The choice of the applicable allowance implies the same considerations as the choice of threshold: thus, if cryptoactives are movable property, it is reasonable to apply the allowance provided for the sale of goods activities for an amount of 71 % (the second allowance provided for being 50 %).
Thus, this method of determining taxable profit is very interesting for crypto-investors with significant capital gains.
Finally, it should be noted that – in micro-BIC – the benefit is not likely to be increased by 25% in the event of non-membership of an approved management centre (CGA).
Your accounting obligations in micro-BIC
Taxpayers subject to the micro plan must keep at the disposal of the administration:
- on the one hand, a daily journal book containing details of their professional income, supported by invoices and all other supporting documents;
- a purchase logbook.
As such, the transaction history provided by Cryptio could constitute a relevant supporting element to be presented to the tax authorities. Once on the solution, download the report in the “Activity” section.
Your reporting procedures in micro BIC
Crypto-investors subject to the BIC regime must declare:
- on the one hand, their activity by filing a declaration of existence and identification with the competent centre for business formality within fifteen days of the start of activity;
- on the other hand, their turnover not reduced by the allowance in box 5KO of form 2042 C PRO where the trading activity is carried out on a professional basis or in box 5NO in the opposite case; in any event, the amount of turnover less the allowance must be entered in box 5HY relating to social security contributions.
However, it is not necessary to file a results statement.
In practice, if your transaction histories are complete, contact Cryptio to have the “Turnover” sent to you and enter it in boxes 5KO or 5NO of your tax return
If you are a Cryptio customer and you want to report your turnover, please contact the team so that they can accompany you.
2. Do you have simplified real plans or normal real plans?
The simplified real regime must be applied to taxpayers whose turnover exceeds the €170,000 annual threshold and on option for others if it remains below €788,000 per year.
The normal actual regime must apply to taxpayers whose turnover exceeds the €788,000 threshold.
However, there are only negligible differences between these two plans, which it is not useful to mention in this article since, in the event of an option or tender for these schemes, you are strongly advised to consult a specialist.
Determination of taxable profit
Simply put, taxable profit is determined by considering net capital gains. Indeed, the accounting and tax rules applicable to the determination of taxable income amount, in terms of the purchase and resale of cryptoactives, to declare the overall net capital gain realised over the tax year.
You can therefore have a relatively accurate overview of your taxable income by consulting your net income, calculated by Cryptio in the “Reports” section according to the FIFO method.
However, as there are still uncertainties regarding the accounting methods for cryptoactives, we invite you to consult a specialist for the calculation of your tax result and the preparation of your accounts and declarations.
In addition, it should be noted that expenses related to the activity may be deducted from taxable income in the financial year in which they are incurred, if they are incurred in the interest of the activity and that they are supported by supporting documents.
A subscription to a service such as the one offered by Cryptio could thus constitute a deductible expense, the expense being directly incurred in the interest of the trading activity.
Finally, taxpayers are invited to join an approved Management Centre in order to avoid a 25% increase in their taxable income.
Your accounting obligations in BIC
Taxpayers subject to the normal or simplified real or simplified real regimes bear particularly heavy accounting obligations provided for by the General Chart of Accounts, the Commercial Code and the General Tax Code.
The accounts kept by these taxpayers must comply with the methods and procedures provided for in the above-mentioned texts. In particular, there are some documents that must be kept at the disposal of the administration, in French and in euros, for a period of 10 years: a journal book recording transactions per transaction and day by day the movements affecting the company’s assets; a general ledger on which the entries in the journal book are broken down according to the chart of accounts; an inventory book.
It is strongly recommended to consult a professional for the implementation and maintenance of accounting documents imposed on taxpayers subject to BIC taxation.
Reporting procedures in BIC
In addition to the declaration of their activity, taxpayers subject to the real plan (normal or simplified) are required to subscribe, each year, at the latest on the second working day following 1 May, a special declaration of results n° 2031-SD accompanied by a certain number of documents including:
- accounting tables: such as balance sheets – assets, balance sheets – liabilities, an income statement, tables relating to fixed assets, depreciation, etc;
- tax tables: such as tables for determining taxable income, determining capital gains and losses, composition of share capital, etc.
The preparation of these documents requires the intervention of a professional.
In addition, the taxable results must be reported on the taxpayer’s tax return no. 2042 C PRO, in box 5KC when the trading activity is carried out on a professional basis or in box 5NC otherwise.
In any event, the amount of turnover less the allowance must be entered in box 5HY relating to social security contributions.
Do you wish to benefit from the non-commercial benefits plan?
Some will wish to retain the benefit of the BNC plan for the reporting of their capital gains. It will then be possible to rely on the administrative doctrine until it is withdrawn.
These investors will then have to determine the reporting plan that they must or wish to apply either the controlled reporting plan (mandatory if the amount of annual revenues exceeds the €70,000 threshold, otherwise optional) or the micro-BNC plan operating under conditions relatively like those provided for by the micro-BIC plan.
It should be noted that the micro-BNC plan, while easier to implement, may be quite unfavourable in many situations due to the way in which taxable profit is determined and the amount of the flat-rate allowance of only 34 %.
Finally, it is recommended to consult a tax lawyer beforehand to determine your room for manoeuvre as to the enforceability of the administrative doctrine.
Indeed, if any taxpayer can in principle apply the recommendations of the administration – whether or not they have been declared contrary to the law – by being guaranteed not to be accused during a tax adjustment, it is only under certain conditions: nature of the taxation, existence or not of an interpretation, date of application of the doctrine invoked, etc.
Cryptio is an accounting tracking tool that allows you to have a track record of all your cross-exchange transaction history, with identification of capital gains and losses. Based on this history, we have built a fiscal report and a monitoring tool.
For personalized tax assistance, please contact Blockchain Legal.