German Tax Rules for Gifting Bitcoin to Children: Understanding Holding Periods and Reporting Duties

Transferring Bitcoin to your children can have tax implications under German law. The value of the gift determines whether any gift tax arises, and the history of the coins decides what happens when they are sold later.

The personal allowance for gifts to children is €400,000 per parent over a 10-year period, but only applies per donating person. The value of the gift is determined by its market price at the time of transfer, not the donor's entry price or an average across the year.

Parents should document the quantity of coins transferred, the date, and the market price on that day, as well as the source of the price. This can help avoid disputes over whether a gift was made or merely custodial arrangements were entered into.

The 'step-in-the-shoes' principle applies to crypto assets in Germany, meaning that the recipient inherits the donor's holding period and acquisition cost. If the child sells the coins later, they will be taxed on any gain above €400,000, but if the holding period is over a year, the gain will be free of income tax.

A reporting duty exists under section 30 of the Inheritance and Gift Tax Act, requiring both sides to report the gift in writing within three months. This applies even if no tax arises, and failure to report can lead to accusations of tax irregularities.