The crypto trap

In recent years, many crypto investors have made considerable profits. However, not all tax-relevant transactions were declared in the income tax returns. However, those who relied on pseudonymous trading could be surprised by a letter from the tax office: “We know that you have traded in cryptocurrencies, please submit the relevant documents.” The authorities use IT forensic procedures and suspected money laundering reports to track transactions. In this way, they receive data on purchases, sales and exchanges of cryptocurrencies with the corresponding personal data of the holders, including from foreign trading platforms. The risk of discovering undeclared income from trading in cryptocurrencies is constantly increasing. Since the introduction of Bitcoin in 2008, the taxation of profits from crypto trades has been largely clarified and Germany is considered a tax haven for private crypto investors. Nevertheless, a few rules need to be observed. The tax treatment of cryptocurrencies is complex and requires careful documentation of all transactions, which must be submitted upon request by the tax office. The BMF letter dated May 10, 2022 and the revised letter dated March 6, 2025 set out the obligations to cooperate and keep records. Profits from private trading in cryptocurrencies are generally taxable as private sales transactions if the increase in value is realized within the holding period of one year. Gains of less than EUR 1,000 per calendar year remain tax-free. The European Union has largely regulated trading in crypto-assets. The MiCA Regulation and the DAC 8 Directive are intended to ensure investor protection, market integrity and financial stability. The new reporting obligations come into force on January 1, 2026. A tax correction is often the last option for obtaining immunity from prosecution. A voluntary disclosure can be used to obtain immunity from prosecution if it covers all tax offenses of a tax type that are not time-barred. The requirements for the content of a voluntary disclosure are high, and reasons for blocking such as the discovery of the offense by the tax office must be taken into account. Those affected should urgently seek tax advice in order to avoid potential pitfalls and prepare an effective voluntary disclosure. Let us advise you so that you can fulfill your tax obligations correctly and obtain immunity from prosecution.