After challenges by French taxpayers, the French Council of State ruled that cryptocurrencies are “moveable property,” and reduced the applicable tax rate from 45 percent to 19 percent.
The supreme French administrative court, the Council of State (or Conseil d’État), has altered the classification of cryptocurrency capital gains, resulting in a tax rate reduction of more than half for trading the digital assets.
From 2014 until today, cryptocurrency gains have been classed as industrial and commercial profits (French abbreviation BIC) or as non-commercial profits (NBC), resulting in a capital gains tax of 45 percent for high earners in addition to the generalized social contribution (CSG) of 17.2 percent.
A number of French taxpayers challenged the classification by the Council of State and won, resulting in a verdict that significantly reduces tax burdens for most French investors.
The Council of State ruled that cryptocurrency sales are “in principle of the category of capital gains of movable property,” with some exceptions. “Moveable property” in France refers to tangible and intangible assets, including vehicles and jewelery, but also to less physical items, like patents and copyrights.
Cryptocurrency Mining Will Be an Exception To the Rule
In the official communication from the Council of State, it is emphasized that “certain circumstances specific to the transaction may imply that they fall under provisions relating to other categories of income.” (E.g., bitcoin gained by mining will still fall under the existing BIC or NBC classifications.)
If an investment forms part of a commercial or professional activity, rather than a private investment, it will also fall under BIC classification and retain the original higher rate.
In the US, cryptocurrencies are classed as property or capital assets, such as stocks, bonds, real estate, or gold. Short-term capital gains are taxed at the normal income tax rate in the US, with long-term gains taxed at a reduced rate ranging from 15 percent to 23.9 percent. High earners in the US are subject to income tax rates of between 32 and 37 percent.
France is generally supportive of cryptocurrencies, and called for them to be on the agenda at the most recent G20 meeting. French Finance Minister Bruno Le Maire hopes the country will take the lead in regulation and become a “hotbed” for blockchain innovation.
For French cryptocurrency investors and blockchain proponents, this positive news may encourage activity within the sector.