Article 41 of Law No. 2018-1317 of 28 December 2018 created a specific tax regime, in the form of flat-rate taxation, for gains realised by individuals on the occasional disposal of digital assets (which covers both "tokens" and cryptocurrencies such as bitcoin).
This regime, codified in Article 150 VH bis of the French General Tax Code (Code général des impôts, CGI), applies to disposals made since 1 January 2019.
Gains realised in 2019 must be declared in 2020; the filing formalities can be handled by our tax law firm.
The latest BOI (Bulletin officiel des finances publiques-impôts, the official tax guidelines) devoted to the taxation rules and filing obligations essentially restates the provisions of the aforementioned decree of 27 June 2019. The tax authorities provide no particularly notable additional clarification. Our tax law firm has sought to describe the regime in simple terms.
Taxable persons
In accordance with Article 150 VH bis of the CGI, the tax regime for gains on the occasional disposal of digital assets applies to capital gains realised by individuals, either directly or through an intermediary person.
The tax authorities specify that tax is assessed at the level of the tax household. All disposals made by the taxpayer him- or herself, by his or her spouse or PACS partner, and by the children and other persons considered dependants for tax purposes must therefore be taken into account.
This rule of taxation by household applies in particular to the assessment of the annual exemption threshold of €305, which therefore considerably limits its scope.
It is also at the level of the tax household that the overall value of the portfolio is determined and that capital gains and losses are offset.
The tax authorities also define an intermediary person as a company or group with its registered office in France that is not subject to corporate income tax and that carries on a non-professional activity.
Companies or groups carrying on a civil activity, such as the acquisition and management of a portfolio of digital assets and related rights, which are subject to the tax regime for partnerships and which determine the amount of gains on disposal of digital assets, are thus regarded as intermediary persons. The taxpayer's functions and interest in the company or group are irrelevant.
The tax authorities specify, however, that the regime does not apply to partnerships with an industrial, commercial, craft, agricultural or non-commercial purpose. Capital gains realised by such companies fall under the business capital gains regime, whether the asset disposals are made on a habitual or occasional basis.
This definition of an intermediary person is very close to that adopted in the administrative guidelines on capital gains on securities and company shares.
Digital assets concerned
In this area, the tax authorities merely restate the legal definition set out in Article L 54-10-1 of the Monetary and Financial Code (Code monétaire et financier) and reproduced in Article 150 VH bis, VI of the CGI.
They thus point out that digital assets include tokens, with the exception of those having the characteristics of financial instruments and cash vouchers (bons de caisse) subject to another tax regime (that of Article 200 A of the CGI). Thus, pursuant to Article L 552-2 of the Monetary and Financial Code, a token is any intangible asset representing, in digital form, one or more rights.
Taxable transactions
The tax regime provided for in Article 150 VH bis of the CGI applies to disposals for consideration of digital assets or related rights, it being specified that exchange transactions without a cash balance benefit from a tax deferral; consult a tax lawyer for further details on this point.
The payment of transaction fees by means of digital assets delivered to an exchange platform or to members of a network (the "miners") in return for validating the transaction also constitutes a taxable transaction within the meaning of Article 150 VH bis, I of the CGI.
The tax authorities specify that, as a simplification measure, it is accepted that the disposal and the services related to these fees be treated overall as one and the same taxable transaction, for which the taxpayer must determine a single capital gain or loss.
Applied to exchanges without a cash balance benefiting from the tax deferral, this solution is of particular interest. The tax authorities indeed accept, as a relaxation measure, that payments relating to transaction fees collected by the exchange platform, as well as those paid to miners in return for validating the transaction, also benefit in this case from the tax deferral.
In addition, in this case, the taxpayer is exempt from any filing obligation, since transactions benefiting from the tax deferral do not have to be declared.
The tax authorities also point out that the activity of buying and reselling digital assets carried on habitually fell within industrial and commercial profits (BIC), thus restating the previous administrative guidelines (since 1 January 2023, such profits fall within non-commercial profits (BNC) pursuant to the Finance Law for 2022), without further clarification on the distinction between an occasional investor and a habitual trader.
One can only regret the lack of adaptation of the administrative commentary in this area. The question of the boundary between the specific tax regime provided for in Article 150 VH bis of the CGI and the business profits regime therefore remains unresolved.
The only elements of response provided by the tax authorities appear in the news page introducing their new commentary.
There they state that the new regime takes into account the frequency of exchanges likely to occur between digital assets, whereas the previously applicable regime for capital gains on movable property was particularly ill-suited, given the size, number and complexity of the transactions likely to occur within a short period of time.
Finally, the tax authorities confirm that the BNC regime applies (our tax law firm can handle the filing formalities), by way of exception, where the gains realised by the taxpayer do not constitute a capital gain resulting from an investment transaction, but are consideration for his or her participation in the creation or operation of the virtual unit of account system ("mining" activity).
Exempt transactions
In accordance with Article 150 VH bis, II-B of the CGI, taxpayers are exempt from tax where the total disposal prices (excluding exchange transactions under tax deferral) do not exceed €305 during the tax year.
The €305 threshold is assessed taking into account all taxable disposals, whatever the consideration (money, goods, services), made by the tax household during the tax year, directly or through an intermediary person. In the case of a disposal made through an intermediary person, the disposal price is taken into account in proportion to the partner's share in the company.
When the threshold is exceeded, the taxpayer is taxed on all disposals made during the tax year, including those whose price does not exceed the €305 threshold, and filing formalities, which our tax law firm can carry out, must be completed.
Calculation of the capital gain
In accordance with Article 150 VH bis, III of the CGI, the gross capital gain or loss is equal to the difference between, on the one hand, the disposal price and, on the other hand, the product of the total acquisition price of the entire digital asset portfolio multiplied by the quotient of the disposal price over the overall value of that portfolio.
It is therefore obtained using the following formula:
Gross capital gain or loss = disposal price - [total acquisition price × disposal price / overall value of the portfolio.
The amount of the capital gain or loss on the disposal of digital assets must be determined by its value in euros.
Thus, the elements used to determine the capital gain (disposal price, acquisition price or value, initial capital, overall value of the portfolio) denominated in a currency other than the euro must be converted into euros by applying the exchange rate on the date of each transaction.
Similarly, in the case of a disposal of digital assets in return for goods or services, or of an acquisition by delivery of goods or services, the market value, in euros, of the goods or services on the date of the disposal or acquisition, respectively, must be used.
Disposal price
The tax authorities specify that the disposal price may in particular be reduced by transaction fees.
Acquisition price of the portfolio
The tax authorities provide some answers on how to determine the acquisition price of the portfolio in the case of disposals prior to 1 January 2019, the date on which the new regime came into force.
They thus consider that the acquisition prices of assets disposed of before 1 January 2019 must be excluded from the total acquisition price of the portfolio declared on the occasion of the first disposal occurring from 2019 onwards that is subject to the new tax regime.
The deduction is thus refused both for disposals declared under the regime for capital gains on movable property or not declared by reason of the exemption applicable where the disposal price was less than €5,000, and for disposals not declared in breach of the law in force before 2019.
Our tax law firm is able to regularise transactions prior to 2019.
In the latter case, the taxpayer then runs the risk of being taxed twice in the event of an adjustment made on disposals prior to 2019. The tax authorities also point out that any capital gains realised before 2019 fall within the authorities' right of reassessment.
The tax authorities further specify that, where the taxpayer is unable to produce supporting documents for the acquisition price or value of the digital assets disposed of, those assets are deemed to have been acquired for a nil value.
Overall value of the portfolio
The tax authorities specify that the concept of a digital asset portfolio means all the digital assets held or previously held by the transferor (tax household), a single transferor being able to have only one portfolio within the meaning of Article 150 VH bis of the CGI.
The overall value of the portfolio must therefore take into account the overall value of all the digital assets and related rights held by the various members of the tax household.
All storage media are covered, whether exchange platforms, including foreign ones, personal servers, offline storage devices ("cold storage"), etc.
This definition of the portfolio therefore includes in particular hardware wallets (Ledger Nano, CoolWallet, Trezor, KeepKey, etc.) used to store the private keys giving access to crypto-asset accounts (and not the crypto-assets themselves).
Finally, the tax authorities accept that, in order to determine the overall value of the portfolio, the taxpayer may use commonly used valuation tools, such as websites providing historical average daily prices on the main exchange platforms.
Our tax law firm can assist you.
