The taxation of cryptocurrencies in France is often perceived as complex and strict. Since the 2019 Finance Act, gains made on the sale of digital assets are subject to a flat rate of 30%, known as the ‘flat tax’ or Prélèvement Forfaitaire Unique (PFU).
However, an exemption threshold allows investors and occasional users to benefit from an exemption if the total amount of annual sales does not exceed 305€. This measure, although often overlooked, is attracting growing interest from holders of Bitcoin, Ethereum and other cryptocurrencies. This article explores the legal framework, conditions of application and implications of this exemption.
Key points to remember
- Cryptocurrency gains are subject to a flat tax of 30% in France.
- An exemption is possible for total transfers of less than 305€ a year.
- Exchanges between cryptocurrencies are not subject to tax.
- Reporting obligations exist even in the case of exemption.
Legal framework and origin of the exemption
The taxation of cryptocurrencies was clarified in 2019 by the Finance Act. Since then, gains from the sale of digital assets have been subject to the PFU, consisting of 12.8% income tax and 17.2% social security contributions. The exemption below 305€ applies exclusively to sales in fiat currency, such as the euro. In other words, selling bitcoins to convert them into euros can benefit from this exemption if the total amount of annual sales remains below this threshold.
Specific conditions of application
The exemption is based on the total amount of sales, not on the capital gain realised. For example, an investor who sells 250€ worth of cryptocurrencies over the year will not be taxed, even if the capital gain generated by these sales is significant. However, once the 305€ threshold is exceeded, all sales for the year become taxable and must be declared. It is important to note that conversions between cryptocurrencies, such as Bitcoin to Ethereum, do not count towards this calculation and are not subject to tax.
What happens above the threshold
When the 305€ threshold is exceeded, all sales made during the year become taxable under the PFU regime. For example, if an investor makes sales totalling 500€, the capital gains generated by this 500€ will be subjected to taxation. This system is relatively simple to apply, but it may surprise novice investors, who do not realise that one-off sales can tip them into the tax bracket.
Reporting obligations and penalties
Even when the exemption applies, certain obligations must be met. For example, it is mandatory to declare accounts held on foreign exchange platforms using form 3916-bis. Failure to comply with this obligation may result in significant fines or even prosecution for tax fraud in serious cases. The tax authorities have agreements with many exchange platforms to obtain information on French users, thereby strengthening the monitoring of transactions.
International comparison of tax regimes
Compared to other European countries, France applies relatively heavy taxation to cryptocurrencies.
International differences
- Germany: German taxation is more favourable, with total exemption from capital gains tax if cryptocurrencies are held for more than 12 months.
- Portugal: Portugal, long a tax haven for cryptocurrency investors, no longer taxes gains realised after one year of ownership. However, short-term capital gains are now subject to a 28% tax.
- Cayman Islands: No tax on cryptocurrency capital gains. A true tax haven for investors.
- United Arab Emirates (Dubai and Abu Dhabi): No taxation on cryptocurrency gains, attracting more and more investors.
- El Salvador: No tax on Bitcoin gains, a unique model after making Bitcoin legal tender.
Outlook and debates
The 305€ exemption threshold simplifies taxation for small investors, but it remains limited, especially given the volatility of the cryptocurrency markets. Some are calling for an upward revision of this threshold to better reflect inflation and cryptocurrency fluctuations. Others believe that this threshold already allows the tax authorities to focus on larger transactions.
Conclusion
The tax regime for cryptocurrencies in France strikes a balance between control and flexibility. While the 30% flat tax may seem high, the exemption for amounts under 305€ is a notable exemption that facilitates small-scale transactions.
For investors, knowing this threshold and its terms and conditions is essential for optimising the management of their digital assets and avoiding tax surprises. In an environment where international regulations are becoming stricter, this provision offers rare flexibility in the generally rigid French tax system.
In addition, discover the situation in Algeria, where cryptocurrencies are completely banned, with severe criminal penalties. This radical approach raises questions about the impact of such bans on innovation and the country’s attractiveness to talent in the digital sector.
