Since 2019, the income tax return has included a new type of income to declare: digital assets. This declaration became compulsory starting in 2020, in respect of income generated in 2019. Over the years, the tax regulation of cryptocurrencies has continued to evolve in order to better regulate transactions that were still in a tax grey area.
Although the new regulations have provided useful clarifications, the legal uncertainty has not entirely disappeared.
It is strongly recommended that you fully understand the cryptocurrency declaration system in order to comply with the regulations in force, which remain complex and often counter-intuitive. A properly completed declaration will indeed help you avoid penalties that are often very heavy.
Taxation of cryptocurrencies: what do you need to know in 2022?
First of all, it is important to understand that the tax rules applicable to occasional traders and to habitual investors are completely different.
For habitual traders, the "standard" tax rules for professionals apply. This topic is not covered in this article, which is aimed solely at occasional investors in cryptocurrency.
The declaration of cryptocurrency gains or losses is made at the same time as the standard income tax return.
Form 2086 is used to declare cryptocurrency gains or losses.
Form 3916-bis is used to declare cryptocurrency accounts located abroad (for example Kraken, Coinbase, Binance accounts, etc.).
The obligation to declare cryptocurrencies together with your income applies only to occasional investors. The declaration applicable to professionals is very different and is not covered here.
To unlock access to forms 3916-bis and 2086, go to step 3 of your income tax return, click on "DECLARATIONS ANNEXES" (additional declarations), select forms 2086 and 3916-bis, then click on "Valider" (confirm).
You will then have access to these forms: when you click on "suivant" (next), the forms will appear in the left-hand column of the screen; simply click on them to access them and make your declarations.
A closer look at form 3916-bis
Every foreign cryptocurrency account must be declared every year. All accounts you have opened on foreign exchanges (Coinbase, Binance, etc.) are subject to this obligation to declare to the tax authorities. In the vast majority of cases, cryptocurrency accounts are opened with foreign institutions, as there are very few commonly used French exchanges.
Once your cryptocurrency accounts have been declared, you will need to declare any cryptocurrency gain or loss.
A closer look at form 2086
The obligation to declare one's cryptocurrency gains has always existed, even for occasional investors.
Up to and including 2018 gains, however, there was no legal framework specifically dedicated to cryptocurrencies. The forms to be used were the 2048-M, and the declaration process was similar to that applicable to any ordinary item (for example, the sale of a collectible piece of furniture).
The forms were therefore very poorly suited to the reality of cryptocurrencies.
From 2019 gains or losses, which were to be declared in 2020, things changed and a more suitable legal framework was put in place, with a form that was also better suited: form 2086.
Since 2020, i.e. in respect of the year 2019, every French tax resident has been required to declare their cryptocurrency gains or losses every year.
Exchanges between cryptocurrencies are in principle not taxable. They do not have to be reported on form 2086.
Only exchanges of cryptocurrencies for fiat currency, goods or services are in principle taxable. They must therefore be included on the 2086.
Example of a non-taxable exchange: exchanging 1 BTC for 15 ETH.
Examples of taxable exchanges: exchanging 1 BTC for €38,000, or $40,000, or 37,000 pounds sterling, etc.; exchanging 1 ETH for a computer; withdrawing cash from an ATM using a crypto.com card (for example); paying at the supermarket with one's Binance Visa card; sending 1 ETH to pay for a trip abroad, etc.
Although the regime is now better suited, there unfortunately remain many legal grey areas. The tax authorities have since published and updated their administrative guidance (BOFiP BOI-RPPM-PVBMC-30, 23 April 2024), providing numerous clarifications on the regime now applicable.
In the meantime, many points remain unanswered. The aim is not to discuss them in this article, which is intended to be simple and educational. In situations where the stakes are highest, using a tax lawyer seems advisable, as each situation has its own particularities, and therefore its own risks.
Whether you prepare your form 2086 yourself, use an online tool or engage the services of a tax lawyer, the most important thing is to have all the supporting documents, very precise ones, explaining "down to the last decimal" the figures you have entered on your form 2086. Always bear in mind that, following your 2086, a tax audit is still possible, particularly where the stakes are high. You must then be able to justify and explain your declaration down to the last decimal.
Moreover, French tax regulations currently provide for no taxation on the mere holding of cryptocurrencies. Thus, if you merely held cryptocurrencies in 2021, without carrying out any exchange, form 2086 does not in principle need to be completed. The same applies in the case of mere exchanges between cryptocurrencies (if you fall under the regime for occasional investors).
When you have carried out taxable exchanges, form 2086 must be completed; it is the main form. However, other forms must also be completed:
The tax authorities need several items of information to calculate the amount of tax you must pay. To declare your digital assets, you must complete the following 3 forms:
- the main form, which is therefore the 2086: several items of information are required: disposal dates, acquisition prices, disposal prices, exchange fees, etc.;
- form 2042-C: enter the capital gain or loss realised on your disposals of digital assets in boxes 3AN or 3BN of this form;
- form 3916-bis: if you hold one or more accounts on one or more platforms established abroad
The tax authorities use the information you provide through these forms to calculate the amount of tax due and to know which exchanges you use.
Form 2086 is the most complex to complete. Bear in mind that a tax audit is always possible afterwards: you must therefore be able to justify precisely each of the figures you have entered on this form.
A 30% tax rate (31.4% for capital gains realised from 2025, LFSS 2026)
Depending on the results of the investments made, the taxpayer is taxed on the capital gains of the past year, in this case the year 2021.
The tax will be equal to 30% of the net gain realised in respect of 2021 (rate raised to 31.4% for capital gains realised from 2025, under the 2026 Social Security Financing Act, LFSS 2026).
Example: disposal of 1 ETH bought for €300, for €1,000. The net gain is €700. The tax payable is €210.
What do you risk if you do not declare your cryptocurrencies?
Declaring income and cryptocurrencies is both a tedious and time-consuming process, but that does not mean you are entitled not to do it. Failing to declare exposes you to a tax reassessment. You then face penalties such as surcharges, fines and, in the most extreme cases, even prison sentences.
For each undeclared account, you will have to pay a fine of 750 euros (1,500 euros if the value of the accounts exceeds 50,000 euros). Each omission or error also exposes you to a penalty of 125 euros (250 euros above the same threshold), although the tax authorities currently recognise a right to make mistakes. The most serious cases (very rare in practice) expose you to a heavy criminal penalty: a fine of 3 million euros and a prison sentence of 7 years.
The obligation to declare income and cryptocurrencies must therefore be handled with the greatest rigour. The transactions to be declared must be traced back over an entire year. You will therefore need your complete transaction histories.
Key deadlines for declaring cryptocurrencies
You will be able to declare your 2021 income online from early April 2022.
Please note that the deadlines vary from one département to another.
For the majority of taxpayers who use the website of the French Public Finances Directorate (Direction générale des finances publiques, DGFiP), the deadline for filing the income tax return online varies according to their area of residence. Thus, for spring 2022, the deadlines to be met are as follows:
24 May: if your département is between 01 (Ain) and 19 (Corrèze);
31 May: for départements from 20 (Corsica) to 54 (Meurthe-et-Moselle);
8 June: for the other départements, i.e. from 55 (Meuse) to 976 (Mayotte).
Declaration obligations: which cryptocurrency transactions are concerned?
French regulations applicable to individuals provide for the taxation of the following categories of transactions on crypto-assets:
- The sale of cryptocurrencies exchanged for government-issued currencies such as the euro or the dollar, or any other government-issued currency;
- The use of cryptocurrencies to acquire goods or services;
- Gains arising from cryptocurrency mining;
- Income arising from centralised or decentralised finance, the taxation of which is still unclear (lending, masternodes, farming, staking…).
The applicable tax rules therefore remain complex and unclear in many respects. On top of this legal complexity comes the complexity of each taxpayer's practical situation, which is always unique and very often full of pitfalls.
If the stakes are significant for you, the assistance of a tax lawyer seems advisable.
