The German Finance Ministry has announced a new set of guidelines targeted at crypto stakers, lenders, and holders. The guidelines were issued on May 10 regarding the payment of income taxes on digital coins like BTC and ether after a period of withholding.
What the New Law Stipulates
Based on reports, the Finance Ministry released a 24-page guideline covering cryptocurrency topics from lending and staking to trading and mining of crypto-assets. The document discloses that digital coin holders can sell their holdings tax-free after a year of withholding.
Traders were particularly excited about this law, considering that Germany lacks laws that support digital currencies. The law encourages traders to imbibe the art of HODling.
State Secretary Katja Hessel BTC and ETH traders can sell their holdings tax-free after a year of purchase. However, the deadline will not be extended to those who sell their tokens after ten years of withholding. Also, the law doesn’t apply to those who lent or staked their BTC and ETH for up to ten years.
New Law Causes Controversy
The news regarding staking and lending is unclear to virtual currency traders, considering it has been a subject of controversy in the past. According to Hessel, staking and lending will only be tax-free if held for more than a year.
Section 23 of the Income Tax Act also supports the new law. It specifies that assets held for more than a year after purchase have tax-free gains.
The law also exempted BTC and ETH lenders from paying taxes on the coins after a ten-year withholding time-frame. However, Hessel clarified that the ten years rule would no longer hold as of this writing.
Furthermore, the new law will not charge income tax on redeemed tokens since such tokens are non-actual sale. The Secretary said the guidelines are a mere draft and will undergo constant review, given that virtual currency is still nascent.
Germany Battles to Become European
Germany has been passing new laws to accommodate virtual currencies use since the appointment of the new Chancellor. With the recent tax law, Germany is ahead of many European nations in a bid to become a blockchain hub.
A couple of months ago, the government included blockchain in its coalition consensus for the upcoming tenure. The contract constitutes a plan to revitalize and shape the German economy.
Germany has pledged to transform its states digitally with improved plans. The government thinks that the digital monetary system can only work in a legally-backed environment.