The digital asset class, to speak of cryptocurrencies like Bitcoin and Ethereum, entered the legal framework on January 1, 2019. To be tax compliant, digital currencies and your cryptocurrency accounts must be reported, and a crypto-specific scale is now available through income tax. This tax compliance will not change in 2021. This affects your assets, but also your various accounts, especially if they are abroad.
In this tutorial, we explain in detail how you can declare your cryptocurrencies for income tax 2021. The forms and fields concerned, the amount of tax, the alternatives that should not be taxed on the income of Bitcoin and other cryptos … we will tell you everything.
Cryptocurrencies: the context in 2021
Bitcoin launched in 2020, followed by Ethereum. The stars have adjusted to cryptocurrencies: PayPal, the largest payment service, has started accepting and selling digital currencies on its platform. The national currency boards are spinning at full speed to face the crisis. and Bitcoin has captured the hearts of large companies such as some banks. So much so that millions of people have joined the adventure.
If you’ve invested in cryptocurrencies in 2020 or held assets for longer and regained your profits, the tax compliance issue has surely crossed your mind. How do I declare your cryptocurrencies for taxes in 2021? To find out everything, here is a full tutorial to learn more about the legal framework for Bitcoin and other cryptocurrencies in French taxation.
If the rules for the 2022 tax don’t change, you can also make sure that you are taking the right steps to avoid being taxed in fiscal 2021, even if you get your winnings back.
Cryptocurrencies: Declare Bitcoin and Ether in 2021
« Digital Assets », what are we talking about?
Bitcoin, Ethereum, Litecoin, Ripple … all cryptocurrencies, as well as tokens that were offered for sale in 2020, have been classified in the category of digital assets, imposed on the author by the 30% « flat tax ». (or one-time flat fee).
This taxation falls within the scope of income tax, and the 30% collected is concentrated on 12.8% taxes and 17.2% social security contributions. Commodities, stocks and other financial products that are not digital currencies do not fall into this category.
Taxing digital currencies
Since its integration in France on January 1, 2019, the category of digital assets must therefore be taken into account in income taxes. The first point to note about this statement is that French taxation focuses only on realized gains.
This is an important point to understand: as long as you have not converted your digital currencies to national currencies such as the euro or made money converting them against your outgoing investment, you will not be taxed.
To find out, the tax system will ask you to report all conversions made in 2020. You must therefore note the various profits that have been made since the time you exchanged your cryptocurrencies for a national currency, the fiat currency. At the end of the day, the bottom line between capital gains and losses is the amount assumed for taxation. If it’s negative, you won’t be taxed.
👉🏼 When you declare your cryptocurrencies, you must tax the capital gains made on buying and reselling digital assets.
Fair taxation of your cryptocurrencies means that you have necessarily made profits and have exchanged them for national currencies (fiat currency).
👉🏼 This capital gain from the purchase and sale of cryptocurrencies is subject to a flat tax of 30% when the 2021 tax return is submitted.
👉🏼 Note: If the amount of your capital gain when converted into euros (or foreign currencies) does not exceed 304 euros, you will not be taxed when specifying your cryptocurrencies.
How can you sell your cryptocurrencies without being taxed?
If you’ve made a profit using Bitcoin, Ethereum, Litecoin, or a digital token, you will understand that there may be alternatives that cannot be taxed. These follow a completely comprehensive logic: you have to choose a different digital asset when trading your cryptocurrencies.
There are a large number of stables, especially known under the term « stablecoin ». Here are the alternatives to avoid taxing your cryptocurrency earnings:
The stablecoin solution is by far the most popular in this regard. But what is a stablecoin? It is a digital asset that tracks the face value of a centralized and fiat currency. They are therefore a kind of clone that also follows the emission movements of the money supply to follow the national currencies while taking advantage of the blockchain architecture and its advantages to operate. They are specially designed to protect against the volatility of the cryptocurrency market.
Where can you declare your cryptocurrencies? Documents to know
Main form Cerfa No. 2042
This is the tax return form that everyone is familiar with. In it you need to enter the amount of taxable capital gain. The fields dedicated to this topic are the same as for the 2020 income tax return, namely the fields « Capital gains or losses from digital assets ». They are in fields 3AN and 3BN.
Cerfa No. 2086
Declaring cryptocurrencies requires care and attention, especially when completing this appendix. This is where you will be asked to write down all of your buying and selling transactions to highlight the size of the disposals that will determine your ultimate profit or loss.
Cerfa No. 3616-bis
Finally, note that you must state your foreign accounts on your income tax return. Many exchanges, whether for the purchase of cryptocurrencies or stocks, are based abroad, such as Coinbase and Bitstamp for digital assets and Degiro for trading. As with neobanks (Revolut, N26, etc.), you must therefore note your international accounts on the Cerfa form No. 3616-bis, even if they are no longer used but are still open.