I need to send some Euros(€) as gift to a friend living in Germany.

If I send the the same worth of crypto(Bitcoin) as gift, will my friend be taxed in Germany?

  • 2
    CAUTION: This has many red flags indicating a scam - scammers like receiving crypto because of lack of payment cancellation. Do you actually know this person, or are they an online 'friend'? Nov 25 at 17:09
  • I know this person for years now. Basically I want to support him for the studies. So, rather than sending it through bank and paying about 3% as commission, I find it as a more economical route to send money. Nevertheless, I would like to have my "homework" done understanding the legal obligations end-to-end. I would 'not' like my friend lose money in taxes, while saving just 3% of commission on forex. :-)
    – user407710
    Nov 25 at 17:26
  • 2
    Have you actually checked the transaction costs in both your country and the recipient's? It seems pretty likely they exceed 3% when added together, unless you're sending in excess of like 100k. Nov 25 at 17:28
  • 1
    So you are willing to pay 3-5% in transaction fees... in order to save 3% in fees? Do you understand why crypto solves none of the problems it claims to solve? Nov 26 at 15:02
  • 5
    I’m voting to close this question because further discussion by the asker reveals intent to evade legal means of reporting transfers. Fraud is not supported by this site. Nov 26 at 15:16

German tax law currently treats cryptocurrency tokens as ordinary property. No tax is typically due when receiving such property. But the income from selling the property is taxable within the first year. This is complicated when a gift is involved.

  • The profit from the sale is the difference between the price achieved by the sale and the price to which the property was acquired. You acquired the property, so your costs would be the basis. If you have bought Bitcoins multiple times, it is unclear which price should be used. The general practice is FIFO accounting where the price of the oldest Bitcoins you acquired is used.
  • The one year duration during which the sale is taxable starts with the acquisition, not with the gifting. So the date on which you bought the Bitcoins would be relevant. But the duration is extended to ten years if the cryptocurrency was used for commercial purposes, e.g. lending or staking.

This means that the tax due depends on when to acquired the bitcoins for which price, and on the date on which the recipient of the gift sells the Bitcoins. If you cannot provide suitable documentation that allow the cost basis + date of acquisition to be determined in a manner that is acceptable to German tax authorities, the safest method for the recipient would be to assume that the Bitcoins were acquired on the day of the gift for no cost, i.e. that the entire value would be taxable if sold within a year.

The tax rate to be applied would be the recipient's personal tax rate which could be zero for a typical student. Also, taxes are not due if the income from such sales is less than EUR 600 in that year.

This means that selling the gifted property will be tax-free in any of the following scenarios:

  • the property was sold at cost or at a loss
  • the property was acquired more than one year ago and not used for commercial purposes and you can document the acquisition date
  • the recipient has sold property for less than EUR 600 profit in that year
  • the recipient's total income in that year is below the income tax limit of about EUR 9000

Since all of this is complicated and can require additional documentation, accepting a few % transaction costs for sending normal currency is probably a better idea. Depending on the currencies and the amounts involved, SWIFT, Paypal, and Wise can all be reasonable services. Within Europe, SEPA is hard to beat. Sending and selling Bitcoin isn't free either.

  • 1
    @user407710 I'm afraid I don't have any experience with money laundering. I doubt using multiple wallets would be useful because the relevant aspect is not the gift or the ”location“ of a wallet, but the cost basis and holding duration. As explained in my answer, the one year period doesn't start with the gifting but with the acquisition by the sender. Note that all Bitcoin transfers are public, and that exchanges have KYC requirements. If a tax authority were motivated to look into this matter, they would have the means to figure out if the recipient's claims are plausible.
    – amon
    Nov 26 at 15:11
  • Honestly, just use Wise. Even if no taxes would be due in Germany, the Bitcoin transfer + exchange fees are likely to be similar and save a potential tax headache.
    – amon
    Nov 26 at 15:25
  • Ok, overall Wise appears to be the best and peaceful way. :-) Thanks
    – user407710
    Nov 27 at 6:54

Not the answer you're looking for? Browse other questions tagged or ask your own question.