How to report your cryptocurrency transactions to the French tax authorities?
Emeric Fillâtre
12/12/2024, 11:05 AM
Cryptocurrencies are becoming increasingly popular in France. Names like Bitcoin, Ethereum, and other digital assets are becoming less and less foreign to the general public. A growing number of private and professional investors have chosen to explore these new financial opportunities.
However, this rush for "gold 3.0" comes with a major challenge. Indeed, a significant portion of users are unaware of the tax regulations governing their assets. And, whether you are a casual investor or a regular trader, understanding and complying with cryptocurrency tax laws is essential to avoid exposing yourself to the wrath of Bercy.
In France, most transactions can be taxable. The 'taxable event' occurs at the transfer of ownership, encompassing activities such as converting cryptocurrencies into fiat currency (euro, dollar, yen...) or purchasing goods or services using crypto (e.g., real estate purchase, using a crypto debit card...).
On the other hand, crypto/crypto conversions are currently outside the scope of taxation.
This article will guide you through the necessary steps to declare your cryptocurrency accounts, report gains (or losses) you may have observed over the past year, and ensure compliance with tax authorities. Topics such as the Flat Tax (or in France PFU for Prélèvement Forfaitaire Unique) or specific forms like CERFA 2086 form for capital gains or the 3916 bis for accounts held abroad, as well as essential steps to remain compliant will be covered.
Cryptocurrencies tax declaration: a puzzle in France
For many in France, the process of filing a tax declaration is seen as complex. Adding the cryptocurrency layer can quickly turn it into a real challenge. Every year, during the income declaration period, there is a noticeable surge in internet searches for topics like:
- How to declare cryptocurrency investment accounts?
- How to report digital assets?
- How to calculate taxable gains and profits?
- How to calculate taxes on cryptocurrencies?
Many people seek practical solutions to understand and simplify this step in their tax declarations.
Before filing: define your investor status
A critical first step that will guide the declaration process is determining your tax profile or investor status.
Indeed, in France, cryptocurrency taxation varies depending on whether you are a private investor or a professional investor.
Private cryptocurrency investor
For tax authorities, a private investor is an individual who occasionally buys and sells digital assets as part of managing their personal wealth. They are subject to the prélèvement forfaitaire unique (PFU), also nown as the Flat Tax.
The PFU rate is currently 30%. This includes 12.8% income tax and 17.2% social contributions on taxable capital gains.
Note : For modest taxpayers or in cases where tax optimization strategies have been implemented, an option allows gains to be integrated into overall income subject to the progressive tax scale instead of applying the flat tax.
Professional cryptocurrency investor
Conversely, if cryptocurrency trading is regular, organized, and carried out as the primary activity, you are considered by the administration as a professional investor.
Unlike the private investor status, this status is subject to the industrial and commercial profits regime (BIC or Bénéfices Industriels et Commerciaux). This implies taxation at the progressive scale of income tax, as well as stricter accounting obligations. Moreover, such activity is subject to social security contributions with a rate significantly higher than that set for social contributions (from 25 to 35% depending on income levels).
Note : Crypto-crypto exchanges are no longer tax-neutral and are therefore included in the determination of taxable turnover (and social security contributions).
The professional investor status may also apply if the tax authorities determine that cryptocurrency-related income falls under commercial activity, particularly if automated tools (such as trading bots), intensive trading practices, or professional-grade trading tools are used.
This distinction is therefore crucial, as it simultaneously determines the tax rate and the declaration methods and tax obligations.
In this article, we will primarily focus on private investors. Professional investors will be the subject of a dedicated article later on.
Tax filing for cryptocurrencies: what to declare and how?
Filing does not always mean paying taxes
A common misconception is that declaring cryptocurrencies automatically means paying taxes. This is not always the case. If you have not transferred the ownership of your digital assets (conversion to euros or any other fiat currency, purchase of goods or services...), your transactions are not taxable. However, even in such a case, you still have the obligation to declare your accounts if they are held abroad.
When to declare your cryptocurrencies?
The tax season in France typically run from April to June. In 2024, here were the main deadlines:
- May 21, 2024: Deadline for paper declarations
- May 23, 2024: Deadline for online declarations (Zone 1: departments 1 to 19 and foreign residents)
- May 30, 2024: Deadline for Zone 2 (departments 20 to 54)
- June 6, 2024: Deadline for Zone 3 (departments 55 to 976)
You can visit the government’s website to check the upcoming fiscal calendar.
What to declare?
Foreign accounts
You must firstly declare all accounts opened on platforms located abroad, even if no taxable operations have been performed.
This obligation includes:
- Active accounts, even if closed during the year or unused (e.g., Kraken, BitPanda)
- Foreign neobanks (e.g., Revolut, N26)
Exemptions:
- Decentralized platforms (e.g., AAVE, Lido)
- Non-custodial wallets (e.g., MetaMask, Ledger)
Taxable operations
Cryptocurrency transactions are taxable when they involve a transfer of ownership (e.g., conversion to euros or any other fiat currency, purchase of goods or services). However, exchanges between cryptocurrencies (e.g., Bitcoin to USDT) are not taxable. For instance:
- Taxable operation: Conversion of Bitcoin to euros
- Taxable operation: Purchase of goods or services using Bitcoin
The 30% taxation (or flat tax) related to these transactions applies to the overall latent capital gain of the portfolio, which means not on what has been sold, but on what could have been sold. This calculation, which will be detailed later in the article, involves determining the portfolio's global capital gain at the time of the operation and applying this rate to the euro amount of the disposal.
Important: You must keep track of the reference and amounts of all incoming transactions (acquisition in fiat currency, crypto payment received for goods or services...) as well as the portfolio's state and value at the time of each disposal to be able to prove them in case of a request from the tax administration.
What are the sanctions for non-declaration?
Failing to declare cryptocurrency accounts can result in significant sanctions, such as fines up to €1,500 per undeclared account. Non-declaration of taxable transactions can lead to additional fines, including up to 80% in cases of proven fraud with abuse of rights.
The consequences of an omission or error can therefore be heavy:
- Undeclared accounts: €750 fine per account, up to €1,500 for accounts with amounts over €50,000
- Errors on taxable operations:
- 10% for insufficiency or declaration default if regularized within 30 days following the administration's formal notice
- 40% in case of deliberate omissions or failure to regularize within 30 days following the administration's formal notice
How to declare your cryptocurrencies?
Declaring foreign accounts
The 3916 bis form must be completed for each account. This form requires information such as the platform name, address, opening/closing date, and account's characteristics (without any mention of balance).
Useful link: download 3916 bis form
Declaring taxable operations
For all taxable transactions, you must complete the 2086 form, which requires precise calculations for each operation, as we will see below. This step can become a real headache, especially if you have carried out numerous transactions.
Useful link: download 2086 form
Calculating capital gains/losses on cryptocurrencies
Here are the key steps to calculate capital gains or losses on cryptocurrency transactions:
In our example, we will focus only on selling a digital asset for fiat currency (euros), but the calculation is the same for purchasing goods or services.
The method to be applied for each taxable operation is the global pro-rata calculation across the entire digital asset portfolio.
Capital gain or loss on a transaction is calculated as follows:
Sale Amount - (Total Net Acquisition Amount × (Sale Amount / Total Portfolio Value))
- Sale Amount: Represents the value in euros of the cryptocurrencies sold at the time of disposal
- Total Net Acquisition Amount: Represents the total acquisition value in euros of the portfolio at the time of the transaction, reduced by prior initial capital fractions (i.e., the sum of all fiat → crypto transactions mnus acquisition amounts used in previous transaction declarations)
- Total Portfolio Value: Represents the total value in euros of the portfolio at the time of the transaction
- Initial Capital Fraction: Represents the sale amount reduced by the transaction's capital gain (to be carried forward for subsequent gain calculations)
- Portfolio: The entirety of all assets held, regardless of platforms (CEX, DEX, self-hosted wallets like Ledger or MetaMask, staking, DeFi, etc.)
Calculation example
In the example below, we imagine you've just sold 0.1 BTC for €8,000 and want to determine the capital gain.
Calculating total portfolio value
At this stage, we sum up the value of all cryptocurrencies held on the transaction date, in euros. Example:
- You owned 0.5 BTC, 1 ETH, and 100 USDT
- If at the time of sale: 1 BTC = €80,000, 1 ETH = €2,000, and 1 USDT = €1, then the total portfolio value is: (0.5 × 80,000) + (1 × 2,000) + (1 × 100) = €42,100
Calculating total net acquisition amount
Here, we add the euro value of all fiat currencies (euro, dollar, yen...) used to invest in the cryptocurrency portfolio up to the transaction date. For example, you had purchased:
- 0.5 BTC at €10,000
- 1 ETH at $1,425 (or €1,500 at the time of purchase)
- 100 USDT for €100
- Total Purchase Cost: (0.5 × 10,000) + 1 × 1,500 + 100 = €6,600
Calculating capital gain or loss
Finally, we determine the taxable capital gain by subtracting from the sale amount (€8,000) its share of the total acquisition cost of digital asset portfolio (calculated by multiplying the acquisition amount by the ratio between the sale amount and the total portfolio value).
The capital gain is then: 8,000 - (6,600 × 8,000 / 42,100) = €6,745, and the initial capital fraction to use in subsequent transactions is 8,000 - 6,745 = €1,255.
New transaction
Let's now imagine that new transactions take place:
- Purchase of 0.5 BTC at €20,000
- Conversion of 0.25 BTC into 2 ETH
- Sale of 0.2 BTC at €15,000, which represents a total amount of €3,000
This new sale is a transaction to be declared, and therefore we must reiterate the above process.
- Calculation of total portfolio value
- You owned 0.5 - 0.1 + 0.5 - 0.25 = 0.65 BTC, 1 + 2 = 3 ETH, and 100 USDT
- If at the time of disposal: 1 BTC = €15,000, 1 ETH = €2,500, and 1 USDT = €1, then the new total portfolio value is (0.65 × 15,000) + (3 × 2,500) + (100 × 1) = €17,350
- Calculation of total net acquisition amount
- Previous total acquisition amount + amount of new acquisitions - sum of initial capital fractions used in previous transactions
- 6,600 + (0.5 × 20,000) - 1,255 = €15,345
- Calculation of capital gain or loss
- 3,000 - 15,345 × 3,000 / 17,350 = 346.685878962… or €347
- The new total initial capital fraction will be 1,255 + (3,000 - 347) = €3,908
Declaring tax amount
- A line must be entered for each transaction triggering taxation
- The total declared capital gain is the sum of capital gains/losses from all declared transactions
- If this is positive, it will be taxed at the flat tax rate (30%)
- If this is negative, there is no carry-over to the following year
- In our example, the taxes to be declared would be: (6,745 + 347) × 30% = €2,128
Need Assistance? As we've just seen, cryptocurrency tax declarations can quickly become complicated. If you think you need support, we can connect you with our partner tax lawyers who specialize in this area. 👇
Tools to simplify tax declarations
Today, several tools can assist you in this declaration task. These tools typically connect to various platforms via their API, automating the declaration process—a significant help, especially if you’ve conducted a high volume of transactions.
These tools allow you to:
- Centralize all your transactions, whether on centralized platforms (e.g., Binance, Coinbase...) or decentralized platforms or non-custodial wallets (e.g., MetaMask, Ledger...)
- Calculate your gains and losses to determine taxable amounts
- Generate the necessary documents for your tax declarations, such as the 2086 form
Among these tools, we can mention Waltio, Koinly, Blockbit, and Binance Tax which are currently available for French tax residents.
They usually offer several plans, some of which including free options for investors with few annual transactions.
However, we draw your attention to the fact that the automatic processing of this data is not foolproof. Consequently, it is important not to use these tools as a substitute, but rather as a complement to your declarative obligations. Some professionals (tax lawyers, accountants, etc.) also offer this type of service.
Conclusion
Declaring cryptocurrencies to the tax authorities is an essential step for every investor, whether individual or professional. Although this obligation may seem complex, it is crucial to avoid heavy penalties and remain compliant with the law. With a clear understanding of tax rules, appropriate tools, and thorough preparation, you can simplify your procedures and focus on your investments with peace of mind.
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