Four questions on the taxation of cryptocurrencies and NFTs

What tax regimes apply to cryptocurrencies? How to declare them? We address these questions to Me Olivier Martin, partner of the Halt Avocats specialist firm, head of the tax law department.

What does the law in France say about cryptocurrencies and NFT in terms of taxation?

First, it should be understood that different tax regimes are likely to apply to transactions in digital assets:

  • the specific regime for occasional investors (art.150 VH bis TU)
  • the BIC regime for regular investors until 31 December 2022 and for companies with digital asset purchase / sale activities
  • the BNC regime for mining operations and regular investors from 1uh January 2023

The regime applicable to casual investors has provided for a number of rules that allow some conclusions to be drawn on the treatment of NFTs.

Legally, cryptocurrencies and NFTs are two distinct categories of tokensthe first are the “protocol tokens” that allow you to manage a blockchain, the second the tokens intended to digitally represent an individualized asset.

For tax purposes, reference is made to the provisions of the Monetary and Financial Code, which reminds us that there are two types of tokens that can be considered “digital assets” (art. L 552-2 and L 54-10-1):

  • the tokens they represent “One or more rights” in digital form
  • the tokens that represent a value “Which is not issued or guaranteed by a central bank or public authority, which is not necessarily linked to a legal tender currency and which does not have the legal form of a currency, but which is accepted by natural or legal persons as medium of exchange and which can be transferred, stored or exchanged electronically “

Hence, cryptocurrencies are part, without debate, of the second. NFTs could be part of the former depending on the non-fungible asset that is encapsulated (loyalty card, right of access to benefits, etc.). Cryptocurrencies therefore fall within the specific regime for the taxation of capital gains from the sale of digital assets provided for by articles 150 VH bis and following of the General Tax Code. NFTs, on the other hand, are subject to the tax treatment linked to their content: either the NFT is a digital asset and treated as such, or it falls into another category.

On January 25, 2022, MP Véronique Louwagie (LR) proposed to present the NFTs “To the notion of works of art pursuant to Article L. 111-1 and following of the Intellectual Property Code. From a fiscal point of view, transfers for consideration and exports of works of art are subject, for private individuals, to a flat-rate tax proportional to the transfer price (or customs value), instead of the taxation of capital gains. at the global rate of 6.5%, if the seller is domiciled in France (articles 150VI to 150VM of the General Tax Code and article 1600-0 I of the same Code) “.

This would obviously presuppose that the content of the NFT can be classified as a work of art within the meaning of Section 98A of the CGI. This is less and less the case with the more recent projects that we have been able to examine within the company. Furthermore, the aforementioned potentially applicable tax regimes may entail different treatments depending on the nature of the transactions carried out by the taxpayer.

For the simpler operations (occasional purchase and resale carried out privately by a natural person) it is possible to make a declaration by filling in the form 2086 made available by the Revenue Agency. Capital gains are calculated taking into account the transfer price, the purchase price and the overall value of the portfolio. It is therefore essential to keep all supporting documents for your purchases, as well as the value on the day of sale.

As soon as you are subject to a regime other than that of the occasional investor, the calculation of income will be subject to the rules of the BIC or BNC with application of the specific rules provided for these categories of income. In this case, it is highly recommended that you contact a professional who specializes in digital asset taxation.

What do industry professionals think of current laws?

Some actors and professionals believe that it would be necessary to specify the tax treatment of all tokens (fungible, non-fungible). Others, including ourselves, believe it is premature to want to change the rules that have just been implemented.

The 2022 Finance Law contains several provisions that have changed the system in force since 1uh January 2019. The changes will certainly come through the 2023 finance law, but it is too early to know which ones.

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