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Taxation of Bitcoin

Laurent Auricoste's picture
Published: 06/06/18 - Country: France

Until the ruling of the Conseil d'Etat on April 26, 2018, the gains from the sale of cryptocurrency units, mainly "Bitcoin", were the subject of two instructions published in the BOFIP already dating from 4 years old ... (published on July 11, 2014).

These instructions provided that the gains from the sale of cryptocurrencies fell within the BICs or the NCBs depending on whether their transfer was a normal or occasional activity.

In both cases, the income from these sales supported the progressive income tax schedule (marginal rate of 45%), social security contributions CSG CRDS (now at 17.2%), and even some case the contribution on high incomes (3% or 4%).

It is the treatment of occasional earnings that has generated the litigation that the Conseil d'Etat had to know.

Taxpayers criticized the Tax Administration for not applying to occasional gains the 19% flat-rate taxation provided for by article 150 AU of the CGI.

The decision of the Conseil d'Etat of April 26, 2018 now clarifies the situation.

The Conseil d'Etat considers first that Bitcoins and other cryptocurrencies are movable property. It considers, therefore, that the gains from occasional sale of cryptocurrencies must benefit from the provisions of article 150 AU of the CGI (flat tax rate of 19% + social security contributions 17.2%).

But what will happen when these gains result or materialize the exercise of an activity deployed by the taxpayer? Some taxpayers do, indeed, with their computer hardware mathematical calculations for the Bitcoin network. In return for their services, they collect newly created Bitcoins. Their revenues are proportional to the power of calculations they have deployed. This is called "mining". To these taxpayers the capital gains regime will not be applicable, their earnings will continue to fall under the progressive scale of income tax in the category of NCBs to the extent, says the Conseil d'Etat "where they do not constitute a capital gain resulting from an investment transaction but the consideration of the taxpayer's participation in the creation or operation of this virtual unit of account system ".

As for customary disposition gains, they remain subject to the BIC category to which gains from normal purchase transactions for resale are attached.

Since the border between usual and occasional transactions has not been clearly defined by the Conseil d'Etat, the taxpayers concerned will have to remain vigilant about the number of their transfer transactions to avoid taxation in the BIC category.

The Conseil d'Etat could also have reserved treatment in BIC to those taxpayers who make it profession. It did not go that far ...

*Translated by Google Translate

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Laurent Auricoste's picture

Laurent Auricoste was a conseil juridique from 1990 to 1992. He has been practicing as an Avocat since 1992.

Partner in Unijuris since 1995.