What tax regime for cryptocurrencies in 2023?

Digital assets made their appearance on the tax return in 2020. From 2023, several changes to the tax regime for cryptocurrencies will come into effect. These will make it easier to distinguish between private and professional investors.

Taxation of capital gains on cryptocurrencies

Every year, taxpayers must declare any profits made on the sale of crypto-assets. Capital gains recorded on the sale of cryptocurrency, whether for cash or for goods or services, are taxable, but the rules differ depending on whether this digital asset trading activity is carried out on an occasional or professional basis.

Private investors, for whom this is an occasional activity, benefit from a tax exemption if the overall capital gain on crypto-assets does not exceed 305 euros per year. Above this ceiling, profits are subject to the single flat-rate withholding tax (PFU) and taxed at a rate of 30%. This overall rate corresponds, in detail, to 17.2% in social security contributions and 12.8% in income tax.

Professional investors, on the other hand, see their gains on the sale of digital assets taxed as industrial and commercial profits (BIC). They benefit from a 50% allowance under the micro-BIC regime, or an allowance corresponding to their business expenses if they have opted for the actual regime. The tax rate then climbs to over 60%, or even 65%, depending on whether the transactions are occasional or regular.

From January 1, 2023, the rules will change

In order to avoid doubling the tax rate for private individuals who carry out a large number of transactions, all sales made on a non-professional basis will be subject to the single flat-rate withholding tax, regardless of their volume or frequency.

When filing their tax returns, non-professional investors can choose between the 12.8% flat-rate or the progressive income tax scale. The progressive scale is particularly advantageous for non-taxable taxpayers: gains made on crypto-assets are thus only subject to the 17.2% social security levy, rather than the 30% overall tax.

As for professional investors, their capital gains will no longer be taxed as industrial and commercial profits, but as non-commercial profits (BNC).

Taxation of mining profits

Profits from mining activities are subject to a different tax regime from that applicable to capital gains on the sale of crypto-assets. Mining refers to the process of creating new cryptocurrency units in exchange for a fee.

The people in charge of this task are called miners. They incur expenses to carry out their activity (powerful computer, electricity), but can make a profit if earnings exceed expenses.

A degree of legal vagueness has given rise to various interpretations as to the tax regime applying to these gains. However, since a decision handed down by the Conseil d'Etat on April 26, 2018, the gains generated by mining activity are considered taxable and fall under the category of non-commercial profits (BNC).

Paragraph 1080 of the BNC scope of application in the Bulletin officiel des finances publiques (Bofip - Impôts) specifies, with regard to mining activity, that " the acquisition value used to calculate taxable income is zero when bitcoins have been allocated free of charge ".

In other words, the tax authorities consider that when bitcoins and other cryptocurrencies received through mining have been acquired for no consideration, it is the entire revenue that is taxable, and only if the gains are converted into euros (in the absence of any indication to the contrary from the legislator). These sums are taxable on the basis of their value when received by the beneficiary.

Cryptocurrency miners can choose between two regimes when declaring their earnings: the micro-BNC regime, if annual revenues are below €72,600, or the controlled declaration regime for revenues above €72,600.