Second ruling on income taxation due to liability from the sale of crypto assets

The Cologne Fiscal Court has published the ruling of its 14th Senate dated 25 November 2021 (Case No. 14 K 1178/20). This is the second ruling by a German tax court on the taxation of “cryptocurrencies” or – in the terminology of the German tax authorities – “virtual currencies”. The first ruling came from the Baden-Württemberg Fiscal Court and was already pronounced on 11 June 2021 (Case No. 5 K 1996/19). In substance, both proceedings are comparable, since here as well as there the tax liability of gains is an issue, which the respective plaintiff achieved in 2017 from the sale / exchange of cryptocurrencies held as private assets within the relevant period of one year. Both rulings come to the same legal assessment (for the reasons for the rulings, see below).

However, the significance of the ruling of the Cologne Fiscal Court published today is greater insofar as it opens the way to the BFH via the appeal (Ref. of the BFH: IX R 3/22). Although the appeal was also admitted in the ruling of the Baden-Württemberg Fiscal Court and was also initially filed, it has since been withdrawn.

In the following, we provide you with an overview of the reasons for the decision of the Cologne Fiscal Court with the respective marginal figures. Our comments on these and other points of the ruling will be made elsewhere.


Enforcement deficit, but not an unconstitutional state of affairs

  • “There can be no question of an enforcement deficit, which would lead to taxation contrary to equality or otherwise unlawful, in the case of the taxation of crypto securities pursuant to § 23 para. 1 sentence 1 no. 2 sentence 1 EStG. ” (cf. para. 38)


  • It is true that it is difficult for the tax authorities to obtain knowledge of the tax-relevant facts. However, enforcement deficits caused by this did not lead to an unconstitutional situation, which is why a decision of the Federal Constitutional Court pursuant to Article 100.1 sentence GG on the constitutionality of the taxation of crypto assets pursuant to § 23.1 sentence 1 no. 2 sentence 1 EStG did not have to be obtained. (cf. para. 39 and 40)


  • Moreover, the tax burden on crypto transactions is not based almost solely on the taxpayer’s willingness to declare, as “there are certainly certain possibilities for control”, e.g. with the help of trading platforms, search engines and social networks. Moreover, it is “quite conceivable that the tax authorities will sooner or later take advantage of the resulting possibilities by retrospectively attempting to read out the blockchain and identify the persons behind the transactions.” (see para. 40)


Capital gains as taxable private sales transactions

  • “The crypto assets Bitcoin, Ethereum and Monero traded by the plaintiff constitute economic goods within the meaning of § 23 para. 1 sentence 1 no. 2 sentence 1 EStG. ” (R. 46)


  • The “crypto values consisting as electronic data of electrical voltages” would in any case become independent economic goods if – as in the case in dispute – they were made the subject of an   acquisition transaction. (cf. margin no. 59).


  • Crypto values would also show a structural comparability to foreign currencies (para. 63)


  • Since cryptocurrencies are comparable to foreign currencies, the same principles that apply to foreign currency transactions should also apply to the purchase and sale of cryptocurrencies. (cf. para. 68)


  • The attribution of crypto values according to § 39 AO is a legal consequence of the economic property. (cf. margin no. 61)


  • The purely theoretical possibility of a 51% attack could not be attributed any decisive significance for the attribution under tax law in accordance with § 39 AO. (para. 70)


Civil law

  • From a civil law point of view, there was “broad agreement that these are other objects within the meaning of § 453 para. 1 Alt. 2 BGB. ” Therefore, in the case of cryptocurrencies, the provisions of the law on the sale of goods can be applied via the reference in Section 453 (1) of the German Civil Code, provided that they are acquired with money. (cf. para. 54)


  • Also in the case in dispute, the plaintiff and his trading partners would have created claims and obligations under civil law by concluding purchase agreements pursuant to § 453 of the German Civil Code (via crypto exchanges). (para. 58)


  • Instead of a purchase contract, an exchange contract according to § 480 in connection with § 453 para. 1 alt. § 453 Abs. 1 Alt. 2 BGB, namely if instead of a payment in money other crypto values are granted as consideration or crypto values are used as means of payment for goods or services. (cf. para. 54)


  • In any case, cryptocurrencies are not objects within the meaning of section 90 of the German Civil Code due to their lack of physicality. In addition, the requirements for cash, book money, monetary tokens and electronic money are also not fulfilled. (cf. para. 54)


Declared amount of acquisition costs and selling prices

  • In the case of an exchange of one cryptocurrency for another cryptocurrency, the current value of the cryptocurrency acquired as consideration is to be used as the selling price. (para. 76).


  • The taxpayer would need to know the prices at which the taxpayer acquires and disposes of crypto assets. He would have to be able to hold on to his records. (cf. marginal no. 79).


  • If the taxpayer (plaintiff) were to dispute the facts (values) submitted by himself in this regard in the fiscal court proceedings, this would have to be rejected as a mere unqualified denial. In this respect, it was not a matter of disputing facts in the procedural law sense, but merely of a (differing) legal assessment of the acquisition and sale transactions. (cf. para. 79).


The full ruling of the Cologne Fiscal Court dated 25 November 2021 (Case No. 14 K 1178/20) is available at the following link: