See here the regime applicable since 1 January 2019
At the outset, it should be noted that, for the time being, there are very few texts to rely on.
The law is likely to evolve, and case law is likely to multiply, given how numerous the tax questions are and how significant the financial stakes.
I offer you a very brief tax study covering four topics, including my clarifications on the risks associated with the basic reflex for avoiding tax: leaving France.
Please note: this is a highly simplified study, for educational purposes only.
Buying and holding cryptocurrencies
Example: today I buy one bitcoin, paid for in euros. I hold on to this bitcoin. Tomorrow, its price doubles. Am I taxable on the unrealised gain?
Tax lawyer: no. As long as the bitcoin is held, the unrealised gain is not taxable.
Buying goods or services with cryptocurrencies
Example: 5 years ago I bought 1 bitcoin for €1. Today I buy a new car for €15,000, paid for in bitcoins. This event triggers taxation of the gain made on the bitcoin: 15,000 – 1 = 14,999. This gain of €14,999 becomes taxable. Since 1 January 2019, gains on disposals made on an occasional basis by an individual fall under the capital gains regime for digital assets (Article 150 VH bis of the French General Tax Code (Code général des impôts, CGI), form 2086, flat tax of 31.4% in 2026); only gains made on a habitual basis fall under non-commercial profits (bénéfices non commerciaux, BNC).
Buying cryptocurrencies with other cryptocurrencies
Since 1 January 2019, for an individual acting on an occasional basis, the exchange of one cryptocurrency for another benefits from a tax deferral (Article 150 VH bis of the CGI): the gain is taxed only upon conversion into euros or upon the purchase of a good or service.
Example: I bought one bitcoin for €1 five years ago. Today, I acquire 5 ETH paid for with my bitcoin. Each ETH is worth €3,000. My gain, taxable under the rules applicable before 2019, is 5*3,000-1=€14,999 (since 1 January 2019, this exchange benefits from the tax deferral for an individual).
Leaving France to sell your cryptos abroad: a good plan?
First of all, it should be noted that the exit tax mechanism could appear to be applicable to cryptocurrencies. Nothing has yet been settled on this legal point, but there is no doubt that the courts will have to rule on it in the future. If the exit tax were to be considered applicable, unrealised gains on cryptocurrencies would be immediately taxable. This would render a departure from France entirely pointless.
Moreover, a departure from France presupposes that the substantive conditions are met in order to achieve the objective, namely the loss of French tax residence. It will then be necessary to refer to the tax treaties, where they exist. And to fully understand that this often implies numerous sacrifices.
In addition, the development of inter-bank cooperation and the automatic exchange of information with more than a hundred States should enable the tax authorities, sooner or later, to obtain information likely to trigger audits and reassessments, where applicable accompanied by heavy penalties.
Conclusion: the question of cryptocurrencies is a young one, still very immature from a legal standpoint. We have very little hindsight from a technical point of view. From a pragmatic point of view, the cooperation of banks with the French tax authorities, which involves institutions in many States, should enable them, sooner or later, to track down many taxpayers who have left France to avoid tax.
PLEASE NOTE, other very important tax questions must be examined: the applicability of VAT, and the tax treatment of companies issuing (or should we rather say, selling) tokens (ICO, initial coin offering). These questions, too technical for a study with a purely educational purpose, have not been addressed.
Our tax law firm can assist you.
Lawyer
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