Updated tax treatment of crypto assets: significant changes due to updated German Federal Ministry of Finance circular

On 6 March 2025, the Federal Ministry of Finance published an updated circular on the income tax treatment of crypto assets. This replaces the previous circular dated 10 May 2022 (we reported) and introduces significant changes.

I. The most important changes at a glance:

1. Terminological adjustments: The previous term “virtual currencies and other tokens” has been replaced by the broader term “crypto assets” in order to do justice to the diversity of digital assets.
2. Introduction of the term “passive staking”: The Federal Ministry of Finance now differentiates between active and passive staking. Specific tax provisions apply to passive staking, where users make their cryptocurrencies available to the network without actively participating in block creation.
3. Introduction and explanation of decentralised finance (DeFi): DeFi is addressed for the first time in the updated Federal Ministry of Finance circular. DeFi comprises financial services that are processed via blockchain technology without traditional intermediaries. The circular explains the tax implications of such decentralised financial transactions.
4. Transaction overviews and tax reports: The Federal Ministry of Finance emphasises the importance of detailed transaction overviews to improve the traceability of tax transactions. Taxpayers should use tax reports to document their crypto activities in a transparent and traceable way.
5. New provisions for valuing crypto assets: The circular provides clearer guidelines on how crypto assets should be valued. Specifically, it addresses the use of market rates at the time of purchase or exchange and allows the use of daily rates without objection. This added flexibility makes it easier to assess the tax value of cryptocurrencies.
6. Tax declaration, cooperation and retention obligations: The Federal Ministry of Finance emphasises the obligations of taxpayers in the taxation process. It is essential that all relevant documents and evidence relating to crypto transactions are fully and correctly documented and securely stored to meet tax requirements.
7. Application and non-objection rules: Special application and non-objection rules apply for assessment periods up to and including 2024. These transitional provisions are designed to help taxpayers adapt to the new provisions.

II. Conclusion and outlook

The updated Federal Ministry of Finance circular introduces important clarifications and adjustments regarding the tax treatment of crypto assets. By incorporating new terminology and considering recent developments in the crypto market, including DeFi, the Ministry is establishing a modern framework for the taxation of digital assets.

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