what will change for your crypto investments from January 1, 2023

From January 1, 2023, cryptocurrencies will benefit from (slightly) more favorable taxation. Update on the new developments awaiting French investors, whether professional or private.

Have you invested in cryptos? Since 2019 you have to report your capital gains to the tax office. And if these are exceeded 305 euros per year you have to pay the withholding tax, ie 12.8% taxes and 17.2% of social security contributions.

But from January 1, 2023 you have another option. Article 79 of the Finance Law for 2022 provides that from that date, private investors will have the choice of being subject to flat tax or progressive income tax.

This new option is interesting when you are imposed 11%. Then you are liable for it 28.2% taxes and social security contributions. Better: If you are not liable for taxes, you only have to pay them 17.2% of social security contributions.

On the other hand, beyond these two tranches, 30% of the flat tax remain more interesting. In other words, no big changes this year for tax investors. 30 From where 45%. Unless…

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Professional trade

Unless you are very active in managing your crypto portfolio. Because it is one of the great dangers of the French system. The tax authorities actually differentiate investors casual and common.

The former are subject to withholding tax. During The latter are considered professionals and pay (much) more taxes. The problem? it’s time the tax officer had trouble telling the difference between these two types of investors.

The tax administration relied on two criteria when deciding whether to classify a trader as a trader: the speculative intent, which they considered to be met by default, and the “habitual” nature of the transfers, explains Axel Sabban, founder of Revo Avocats, Dedicated of web3 taxation and is co-founder of the multidisciplinary support service Law for Code.

However, the tax authorities actually had few elements to know whether a transfer was made regularly or occasionally. The decision was therefore mainly based on the tax authorities quantitative criterialike the amount of the fee, Axel Sabban continued.

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control error

However, this information was often insufficient. And several investors have paid the price. For example, a person who would have invested in bitcoin in 2015 when it was worth it 300 Eurobefore departing a few years later by realizing a substantial capital gain, previously risked being taxed as a professional.

After several setbacks, the legislature has therefore decided to include the criteria for the requalification of a trader in tax law. Whether a transfer of crypto assets is common or not is to be judged by judges in the future qualitative criteria, explains Axel Sabban. We first ask whether the transactions were carried out in Conditions similar to those of professionals. This depends on several criteria, such as B. the degree of complexity of the processes and the degree of automation of the activity. In short: anything that allows for almost systematic profit-taking or almost systematic loss reduction.

Result? From January 1, 2023, you will have less risk of the administration re-qualifying you as a trader, even if you carry out transactions several times a day and with large amounts. As long as you carry out these actions as part of the management of your private wealth, you remain taxed as an individual.

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new diet

Professional investors will also benefit from certain changes introduced by the Finance Act 2022. Industrial and Commercial Benefits (BIC). They were therefore subject to the progressive income tax and social security tariff system.

However, this diet had a major downside. In France, Individuals do not pay taxes on crypto-crypto transactions, Axel Sabban recalls. Taxation only applies if you exchange your cryptos for euros. Conversely, taxation under the Industrial and Commercial Profits regime applies once there is a capital gain, whether in euros or cryptos.

Bottom Line: The taxation of the professionals was done across the water rather than at the time of payout when the investor gets their profits back. This forced some professionals to sell assets to pay their taxes. Even if the prices were not cheap, Axel Sabban regrets.

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From January 1, 2023, the situation will change. Indeed, professional traders fall under the regime of Non-Commercial Gains (BNC). Result? You will continue to be subject to progressive income tax. But the way wins are calculated will be less strict.

As part of the Non-Commercial Profits regime considering the profit calculation methods (income / payout) when I sell 10000 euros to buy bitcoin 10000 euros ether, my profit is considered zero. This allows in practice z neutralize tax when exchanging from one crypto to another, observes Axel Sabban.

So many changes that should please investors in cryptocurrencies, whether professional or private. However, no new tax breaks are planned for next year. Several changes have been proposed under the 2023 Finance Act, such as the ability to carry forward capital losses from one year to the next. But none of them were chosen, regrets Axel Sabban.

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