Germany has long been known for being friendly towards digital currencies. Now the country wants to strengthen its position in this. The German Ministry of Finance (BMF) has released its first new and comprehensive guidelines on the treatment of digital currencies in income tax.

Tax laws are being adjusted

In order to integrate digital currencies within German law, some laws are now being amended and new laws are also being added. Some laws, including the provision that Germany will not levy a capital gains tax on the sale of cryptocurrencies held for a year or more, are enacted. This is emphasized in a statement coming from the German parliamentary secretary of state named Katja Hessel.

Hessel indicated that the last-named law still applies even when the digital assets are being staked to earn rewards. After a year of purchasing cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), these are now tax-free for individuals.

This is a significant change from the previous tax policy, which meant that digital currencies that have been used are tax-free only after ten years of ownership. The remainder of the 24-page document published by the BMF defined and addressed other tax questions about digital currencies and outlined a roadmap for ongoing dialogue.

Supporting the digital currency industry

Germany’s new government has previously made a number of commitments to better support the digital currency industry. They now seem to be continuing with these promises. The new regime’s manifesto states that it aims to return the German economy to pre-pandemic levels through innovative policies, including digitalisation.

The country, which also has the largest economy in Europe, expects a significant influx of investments in digital currencies. As a result, the country recently passed a Fund Location Act, which allows institutional investors to allocate up to 5% of their holdings to Bitcoin or other cryptocurrencies.

According to Germany, the regulation will help build trust in digital currencies and make them more mainstream in international markets. The country’s commitment has received praise from companies and industry observers. According to some, Germany is now friendlier to cryptocurrencies than Singapore. Others don’t think so yet, but it does show that Germany is making great strides to become one.

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