Cryptocurrency Holders Face Tax Conundrums as Exchanges Set Deadlines

Many cryptocurrency holders are facing deadlines to sell or withdraw their assets from various exchanges. Between August 16 and August 31, seven trading platforms have set cut-off dates for closing accounts, with Luno closing its EU accounts on September 1, allowing sales and euro payouts until August 31. Kraken has announced a liquidation window for delisted tokens in September.

If holders miss these deadlines, the exchanges will sell or convert their assets themselves, raising tax implications. The German Federal Ministry of Finance (BMF) circular provides guidance on how to calculate tax liabilities in such cases.

The BMF circular considers a forced sale as a disposal under Section 23 of the Income Tax Act, regardless of who triggered it. This means that even if an exchange sells or converts assets without the holder's consent, the gain will be taxable if no more than one year lies between acquisition and disposal.

The key factor is the timestamp recorded by the trading platform, which determines whether the one-year holding period has been breached. The circular advises taxpayers to obtain a record of this timestamp while the account is still open, either through an account statement or transaction overview showing the date and time of sale.