At what point do you need to declare your cryptocurrencies? Taxation in France

Special case: purchases between cryptos and stablecoin

Under current rules, exchanging one cryptocurrency for another (for example, swapping Ethereum for Bitcoin, or converting tokens to stablecoin like USDT ) is not considered a taxable event in France. You only become liable for tax when you convert to fiat currency or purchase a good or service (which is equivalent to exiting the crypto ecosystem).

However, the details of the final calculation of the overall capital gain may be impacted by this type of transaction, as the overall value of your portfolio fluctuates and must be known at the time of a taxable sale.

At what point should you declare your crypto income: The different categories of income related to cryptocurrencies

For individual investors, this is referred to as capital gains . But some people combine other sources of income related to digital assets:

• Mining or staking : these earnings are treated as "non-commercial profits" (BNC), taxable upon receipt. They are not subject to the same calculation formula as simple capital gains from buying and selling.
• Professional trading : If you trade regularly, the tax authorities may reclassify you as a professional. You will then fall under the BNC (or sometimes BIC before the 2022 Finance Act) tax regime, with stricter accounting rules.
• Play-to-earn or DeFi : each type of income must be analyzed to determine the appropriate tax category. For example, if you receive tokens as a reward from a DeFi protocol , you may be taxed as a non-commercial profit (BNC) upon allocation, or upon resale, depending on the specific circumstances.

What happens in the event of a capital loss

For an individual, capital losses can be offset against capital gains in the current year but cannot be carried forward to subsequent years. In other words, if you end the year with a negative balance, you cannot carry this loss forward to the following year.

It is therefore useful to regularly monitor your calculations so as not to discover too late a deficit that you would have liked to offset against a future gain.

Possible penalties for failure to declare

If you fail to declare your accounts or capital gains, you risk:

• Fines (often in the range of €750 to €1,500 per undeclared account, which can increase in certain circumstances) .
• A reconstruction of your income by the tax authorities, leading to a possible tax adjustment.
• Late payment interest if you have undervalued or omitted gains.

The Treasury has increasingly effective means at its disposal, notably through automatic exchange of information agreements, to detect undeclared accounts.

Do you need to declare if you have not made any gains or if you are keeping your cryptocurrencies?

If you do not make any sales during the year, you do not have any capital gains to report on your tax return. However, if you still hold cryptocurrencies on a foreign platform, form 3916-bis remains mandatory.

The case of long-term “buy and hold”

For investors who simply hold cryptocurrencies without reselling them, there are no gains to declare for income tax purposes. These capital gains are considered "unrealized." However, you are required to declare the ownership of an account if the platform is foreign.

At what point do you need to declare your cryptocurrencies? Key points to remember about crypto declarations

To answer the question " at what point do I need to declare my crypto holdings ?", keep in mind that there is no minimum amount that exempts you from the reporting obligation. The key points are:

• The €305 threshold applies only to income tax. Below this threshold, your earnings are not taxed, but you must declare them on form 2086.
• All foreign accounts must be declared, regardless of your gains or losses (form 3916-bis).
• You can choose between the flat tax (30%) and the progressive scale (if more advantageous) for gains made from 2023 onwards.
• Capital losses can only be offset against losses incurred in the current year. They cannot be carried forward to future years.
• Form 2086 is mandatory to declare your capital gains or losses on disposal.

The various concrete examples

It is sometimes easier to understand the specifics by looking at concrete examples. Here are a few:

• Example A : You buy €200 worth of Bitcoin, then sell it for €250 a few weeks later, making a €50 profit. You are below the €305 threshold. You are not taxed, but you must report this sale.
• Example B : During the year, you make several transactions: a gain of €200, then another of €150. You accumulate €350 in capital gains, thus exceeding the €305 threshold. You become taxable on the entire €350, i.e., €350 × 30% = €105 in tax, unless you opt for the progressive tax scale and it proves more advantageous.
• Example C : You hold a Binance Kraken account , both based abroad. Even if you have only incurred a loss this year, you must declare the existence of these two accounts using form 3916-bis.

At what point do you need to declare your crypto holdings? Opportunities for optimizing crypto taxation

As an investor, you can consider strategies to optimize your tax situation. For example, the law allows for the gifting mechanism : you can give cryptocurrencies to a loved one, and the tax on the crypto will be calculated based on its value at the time of the gift. This technique, governed by inheritance and gift law, can sometimes reduce taxes if the recipient later sells the assets.

However, these strategies require a thorough understanding of the legal rules and allowances applicable to gifts. It is often advisable to seek legal counsel.

Progressive tax or flat tax: how to choose?

Before 2023, capital gains from digital assets were systematically subject to the flat tax. Now, you have the option of choosing the progressive income tax scale.

• If your marginal tax bracket is above 30%, the flat tax is generally more advantageous.
• On the other hand, if you are in a lower tax bracket, the progressive tax scale can reduce the tax burden, especially when your non-crypto income is modest.

It is therefore wise to carry out a quick comparison. If in doubt, a tax simulator or a tax expert can guide you.

At what point should you declare your cryptocurrencies: Final summary

In conclusion, the question, " At what point do I have to declare crypto ?" runs up against French legal reality: you must declare it regardless of the amount . The €305 threshold corresponds to the point at which taxation begins, not to the reporting obligation.

The tax authorities expect two things:

• That you declare your digital asset accounts abroad.
• That you carry forward all of your earnings, even if you are not taxed in the end.

This process is often more complex than it seems, hence the need to be well organized, especially if you are using multiple exchange platforms and trading operations.

Key action points to remember

• Declare foreign accounts via form 3916-bis, making sure not to forget any custodial wallets outside of France.
• Complete form 2086 for capital gains on disposal, even if you remain below the threshold of €305.
• Compare the flat tax and the progressive tax scale to determine the most favorable system for your situation.
• Consider seeking guidance from an expert if you trade or engage in mining or staking regularly, or at the very least use automatic capital gains calculation software.