France’s supreme court for administrative justice, Conseil d’Etat (Council of State), has ruled that the government should treat profits from cryptocurrency sales (by amateur investors) as capital gains on “movable property”; this results in a significant tax cut for individuals trading cryptocurrencies as a hobby or as part of a personal investment strategy.
The French court, which made its ruling on Thursday, 26 April 2018, was prompted to act due to appeals from earlier this year by tax payers unhappy with the way profits from sales of cryptocurrencies has been taxed since July 2014.
Old Tax Regime
Under the old tax regime, gains from cryptocurrency sales were considered either as “industrial and commercial profits” (BIC) in the case of usual activity (e.g. a professional daytrader), or as “non-commercial profits” (NBC) in the case of occasional activity (e.g. an individual investor who is only trading occasionally). This classification meant that the tax rate could be as high as 45% in the case of the highest income tax payers; this was in addition to the 17.2% “social charges”, which are applied to a wide variety of income sources, and total 17.2% in the case of investment income and capital gains.
New Tax Regime
Under the new tax regime, according to the Council of State, “sale of bitcoins” fell into the category of “capital gains of movable property.” This category has traditionally covered both certain types of physical goods that can be moved (unlike, buildings, for example) such as cars and boats, as well as intangible goods such as patents and copyrights. In the case of transfer of movable property, a flat tax rate of 19% will in future be applied.
However, the Council of State pointed out that “certain circumstances specific to the transaction” of cryptocurrencies “may imply that they fall under provisions relating to other categories of income.” In particular, this seems to suggest that this classification would not apply to profits from crypto mining, which would continue to get considered as “non-commercial profits”, or in the case of gains resulting from commercial activity, which would continue to be classified as “industrial and commercil profits”.
Changes In Cryptocurrency Regulations
France has been focusing on clarifying and improving regulations surrounding cryptocurrencies since 15 January 2018, when the French Finance Minister, Bruno Le Marie, announced that he had asked Jean-Pierre Landau, former Deputy Governor of the Banque de France(also known as Bank of France, or the French central bank), to head a cryptocurrency task force. He told the press that “we want a stable economy: we reject the risks of speculation and the possible financial diversions linked to bitcoin” and the purpose of this task force was “proposing guidelines in the evolution of regulations.”
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