The taxation of cryptocurrencies is mainly known from the angle of the 30% flat tax. However, this tax regime applies only in the event of occasional activity. If the activity is “usual”, the tax regime is that of industrial and commercial profits (BIC).

  1. Different taxation depending on the activity of the cryptocurrency investor
  2. The criteria of the usual activity of disposals of cryptocurrencies
  3. The imposition of habitual activity on BICs, instructions for use
  4. Changes to come in 2023 for the taxation of pro traders?

Different taxation depending on the activity of the cryptocurrency investor

Article 150 VH bis of the Monetary and Financial Code (CMF) is the main legal basis for the taxation of cryptocurrencies . It is moreover only 150 VH bis that we deal with in the article devoted to the taxation of capital gains in crypto-currencies.

However, the first words of this legal text specify that these provisions apply “ subject to the provisions specific to professional benefits ”. In other words, the tax regime of article 150 VH bis is limited to non-professionals , to what are considered occasional transfers.

So what are the famous provisions specific to the professional profits of cryptocurrency trading? It is not worth looking in the CMF, the general tax code (CGI) or elsewhere, since there is none . To find a legal standard applying to the “professional” activity of digital asset transfers, one must turn to case law and the judgment of the Council of State of April 26, 2018 .

This judgment, delivered before the creation of article 150 VH bis, had partly reformed the administrative doctrine of the BOFiP. Regarding the usual activity, point 15 refers to industrial and commercial profits (BIC), referring to Articles 34 of the CGI and L. 110-1 of the Commercial Code  :

” The profits derived from the usual exercise of an activity of disposal of “bitcoin” (sic) units  acquired with a view to their resale , including when the disposal takes the form of an exchange against another movable property, are taxed in the category of industrial and commercial profits . »

The criteria of the usual activity of disposals of cryptocurrencies

In this same judgment of April 26, 2018, the Council of State specifies, in point 8, that ” the mere fact of selling movable property, even repeatedly, is not sufficient to reflect the exercise of such a profession when these goods have not been acquired with a view to their resale . »

Thus, according to the administrative judge, the acquisition of cryptocurrencies with a view to their resale seems to be the number 1 criterion for estimating that a taxpayer carries out a usual activity of disposals of digital assets.

However, according to the comments made by the tax authorities, it is indeed the distinction between the occasional character and the habitual character which seems the most important. In other words, it is difficult to say which is the most important criterion to take into account…

It is possible to draw up a list of criteria that could be taken into account to distinguish transfers exercised on an occasional basis from those exercised on a regular basis:

  • The frequency of disposals;
  • The type of transfers concerned;
  • Purchases of crypto-assets for resale;
  • The holding period of crypto-assets between purchase and resale;
  • The use of derivatives or leverage effects;
  • The use of robots or bots that automate all these activities, with little or no human intervention from the taxpayer.

Moreover, by cross-analyzing Articles 34 of the CGI and L. 110-1 of the Commercial Code, we understand that the administrative judge assimilates this transfer of digital assets on a regular basis to a commercial act allowing profits to be made. “ from the exercise of a commercial, industrial or craft profession . “. The Council of State having considered that crypto-assets were movable property , the act of commerce in question would be the purchase of movable property for resale (1° of article L. 110-1).

Not following anymore? Everything is normal ! Because, to date, the criteria for distinguishing between habitual activity and occasional activity remain unclear , often on a case-by-case basis by the tax authorities and, where applicable, by the judge.

We are therefore talking about a set of clues to assess the situation of a taxpayer . These indices are more or less identical to those mentioned above:

  • The frequency of digital asset purchase AND resale operations;
  • The holding period between purchase and resale;
  • The use of derivatives, leverage effects or any other tool considered complex;
  • The use of bots;
  • The amount of transactions.

On Cryptoast, we had proposed a list of five criteria , the accumulation of two of which automatically resulted in assimilation to the habitual character regime . If this proposal was far from perfect, it had the merit of trying to resolve an uncertainty that still remains.

Finally, and this is perhaps the main thing, the current regime for “professionals” links taxpayers to the BIC category. However, if we compare with the closest activity, stock market trading, the latter is taxed as non-commercial profits (BNC) . In other words, a reform had become indispensable. It will arrive in 2023 and we will see it at the end of the article.

The imposition of habitual activity on BICs, instructions for use

You have therefore understood that the most important thing is not to know the BIC taxation regime, but to know if you are actually taxed as such. If you or your tax lawyer believe you fall into this category, here’s what to do.

As a preamble, it is necessary to specify that all of your transactions are taxable . Thus, unlike the occasional activity tax regime of Article 150 VH bis, there is no tax deferment or exemption for transactions between two digital assets .

It is therefore necessary to take into account all of your transactions, by converting transactions between cryptomonaies into euros. This is why it is more than advisable to hire a tax lawyer and an accountant familiar with cryptocurrencies.

Taxation under BICs involves the creation of a legal structure , which will generally be a microenterprise or a universal company with limited liability (EURL). Your tax lawyer will determine the appropriate structure for you, as each case is unique.

The thresholds are regularly modified, sometimes every year. So, if we try to update the article regularly, there may be a difference between changing the threshold and updating the article.

Determination of turnover

No definition has been given by the tax authorities on the determination of turnover in the case of cryptocurrency trading. The most commonly accepted interpretation is as follows:

  • You buy 1 BTC at €15,000 and 1 ETH at €1,000, i.e. €16,000 of purchase;
  • You resell your BTC at €70,000 and your ETH at €4,000, i.e. a resale at €74,000;
  • The turnover, which is assimilated here to the receipts, is therefore €74,000.

This ultra-simplified example is of course not the reality of the activity, whose number of transactions can rise to 4 or 5 figures per year. Nevertheless , it is the amount on resale that is considered as turnover and not the capital gain . In short, it is the same thing as a traditional commercial activity.

The micro-BIC diet

If the annual turnover excluding tax is less than €176,200, the activity is taxed under the so-called micro-BIC regime .

This threshold applies to so-called “trading activities”, of which purchase-resale is a part. Of course, it is generally real estate activities that fall into this category. However, as the Council of State has insisted on this purchase-resale criterion, it is a priori here that the cryptocurrency trading activity is included .

The micro-BIC scheme allows you to benefit from a reduction of 71% of turnover (turnover), with a legal minimum of €305 . For example, if your turnover is €100,000, you will be taxable on the sum of €29,000.

Regarding the amount to be paid, if you are a micro-entrepreneur, you have the possibility of opting for the discharge payment of income tax , corresponding to 1% of turnover.

If you do not opt ​​for the discharge payment, you must declare the turnover BEFORE the deduction . Indeed, the latter is automatically applied by the tax authorities. The declaration is made on form 2042 C Pro, box 5TA , even if you choose the option for the payment in full discharge.

Once the declaration has been made, the BICs are included in the taxable income of the tax household . For example, if you declare an annual salary of €20,000 + €15,000 taxable in BIC (after 71% deduction), you will be taxed on the sum of €18,000 (the flat-rate deduction of 10% is applied) + €15,000, i.e. a taxable income of €33,000, subject to the progressive scale of income tax.

Thanks to the allowance and/or the payment in full discharge, the micro-BIC option seems to be very interesting, even for an individual. Except that you have understood that the tax base is the turnover and not the capital gain . Thus, you have to be very profitable to choose the micro-BIC. If you bought for €500,000 and resold for €530,000, the tax base will be €530,000! And let’s not even talk about a loss…

The simplified real regime and the normal real regime

To date, the thresholds range from a turnover of €176,200 and €818,000 for the simplified real regime, and above €818,000 for the normal real regime . Note that you can opt for these two plans, even if you can choose the micro-BIC.

The choice of these two regimes presupposes the keeping of strict accounting, because it is a real activity, with the determination of a net profit after deduction of the expenses of the CA. In addition, the declaration is made on several CERFA forms. It is therefore more than advisable, not to say mandatory, to call on an accountant with excellent knowledge of cryptocurrency transactions or even a tax specialist.

These two plans are mainly intended for those who have very large turnover, with a nice capital gain and generally no other income on the side .

Changes to come in 2023 for the taxation of pro traders?

Article 70 of the finance law of December 30, 2021 for 2022 provides that ” the proceeds of the purchase, sale and exchange of digital assets carried out under conditions similar to those which characterize an activity carried out by a person engaged in a professional capacity in this type of operation . »

In other words, the tax regime of the usual activity will be modified. Indeed, this activity will be subject to the same tax regime as that reserved for “stock market transactions” (stock market trading). The main consequence is that the purchase-resale activity will now be subject to non-commercial profits (BNC) and no longer to industrial and commercial profits (BIC).

However, what are the famous conditions analogous to stock market transactions? The definition is ambiguous, because it is enough to have means similar to those of the professionals . However, if the activity of stock market trading has been known for a long time, that of cryptocurrency trading is much less so.

Consequently, to date, the similar conditions remain those of the set of indices mentioned above (frequency of transactions, use of complex tools, etc.).

Finally, and this is perhaps the most important, this change of regime will only be effective from the disposals carried out in 2023 . Thus, this system will be applied for the first time during the declaration of the year 2023 in… 2024. So we have time!

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