Germany Taxes Crypto Mining as Business Activity

Crypto mining in Germany is subject to taxation, and the tax office considers it taxable income from the first reward. The only question is whether the mining activity falls under section 15 of the Income Tax Act (EStG), classifying it as income from a trade or business, or under section 22 no. 3 EStG, categorizing it as other income from services.

The Federal Ministry of Finance's circular on individual questions of the income tax treatment of crypto-assets recast the earlier circular and deals with block creation in margin numbers 35 to 47. The governing text states that block creation does not constitute private asset management for tax purposes, but rather a service provided by rendering computing power.

The Ministry works through three criteria to determine whether mining activity is commercial: sustained activity, intention to make a profit, and participation in general economic activity. If all three criteria are met, the income falls under section 15 EStG; otherwise, it's classified under section 22 no. 3 EStG.

Registration of a business is required if the activity meets the commercial classification criteria, but not for mining that falls under section 22 no. 3 EStG. An exemption limit applies to income from services, with an annual limit of 256 euros. If the income exceeds this limit, it's subject to personal income tax.

Electricity costs and hardware depreciation can be deducted as income-related expenses, but shares attributable to private use of the computer are not deductible. Commercial mining also involves trade tax, calculated under section 11 of the Trade Tax Act (GewStG).