France Crypto Tax

As France works at becoming a European hub for crypto businesses, so its tax system has been designed to be propitious to innovation and investments. Innovation is overtly enjoyed both by the government and the population in current usages of crypto-assets in the economic ecosystem; therefore, ample avenues exist to build and sustain their businesses for crypto-entrepreneurs.

In France, the powerful DGFiP – General Directorate of Public Finances is responsible for conducting the national processes and activities with respect to taxation and public accounting. This agency collects public revenues, issues interpretative instructions for general and special cases of taxation as well as it elaborates and imposes rules and procedures with respect to the control and payment of public expenditure. Besides monitoring the AML/CFT regulations and the rules concerning digital assets taxation, it also maintains records of crypto transactions conducted by private and public persons. The DGFiP treats cryptoassets, including cryptocurrencies, as moveable assets for tax purposes, similar to the treatment accorded securities and bonds.

Tax Reliefs

France signed more than 100 international agreements on the avoidance of double taxation. They encompass corporate and personal income taxes, social security contributions, and any other payroll taxes. Interest and dividends, as well as royalties are taxed according to preferential rates. On the whole, these agreements provide greater security to foreign investors who will get a chance to optimize taxes and consequently get lower burdens of obligation.

Other than that, France also offers competitive taxation for enterprises involved in research and development activities to stimulate innovative startups. The base of the R&D tax credit granted to an eligible business is the amount of R&D expenditure incurred during the calendar year. The available R&D tax credit is 30% of the eligible expenses incurred during the calendar year, which can be up to 100 mill. EUR, and on certain occasions an extra 5% beyond this amount can be given. The tax credit for innovation expenditure is 20% of the eligible expenses, which can be up to 400000 EUR per year.

Normally, all expenses with the registration of patents, depreciation of fixed assets, monitoring of technical developments, and insurance contracts are considered as qualified R&D expenses. The granted tax credit is deducted from the Corporate Tax payable by the eligible business.

New business exemptions will be:

• Totally exempting it from Personal Income Tax or Corporate Tax in respect of the first financial year or the first period whichever is not longer than twelve months that they are taxed on profit and then granting fifty per cent exemption for the next year if the eligible persons post a profit.
• The Local Economic Contribution, CET, and the Property Tax for seven years after a decision by the local authority.

Classification of Traders on Crypto Currencies

As indicated above, in France, there are various classes of crypto traders who are subjected to different kinds of taxes. As such, if you operate such a business venture in France, take the pains to establish within which category your company falls. French tax legislation does not provide an indication of how to determine whether the activity is an occasional or usual activity, and this is done on a case-by-case basis. The authority normally considers factors like the total invested amount, the total trading volume, and the frequency of the transactions.

The DGFiP classifies crypto traders below:

• Occasional traders – a Single Fixed Levy (PFU) or flat tax, at the rate of 30% which comprises 12.8% Personal Income Tax and 17.2% Social Security Contributions, earn high income may be required to pay additional 4%.
• Professional traders – Industrial and Commercial Benefits (BIC) tax at a limit of 0-45% is imposed on capital gains derived from regular crypto trading activity.

Crypto mining is taxed under quite different rules and specifically by Non-Commercial Profits (BNC) tax at the rate of 45%. Crypto miners qualify for the so-called Micro BNC tax when the turnover in the previous year does not exceed 70,000 EUR, taxing only 66% of the income.

The progressive tax rate is available for casual traders under certain conditions. If you want more information about these categories and your case, you can contact our in-house law team here at Regulated United Europe.

Corporate Tax

France has imposed a standard rate for Corporate Tax at 25%. Tax resident companies are taxed on income sourced in the territory of France; generally, income sourced from foreign business activities is excluded from the French tax basis. French Corporate Tax is payable by non-resident companies on income sourced through business activities conducted in France or through a French Permanent Establishment, as well as on income derived from real estate in France. The tax residence is normally determined by identifying whether a company is incorporated under French commercial laws.

As a rule, the SMEs, i.e. those whose turnover does not exceed 7,63 mill. EUR, are entitled to a reduced 15% rate levied on the first 42,500 EUR of profit. The other important condition is that the share capital of the company has got to be fully paid up and at least 75% has got to belong to natural persons.

Capital Gains Taxation

Because the DGFiP considers cryptoassets to be moveable assets, they are liable for Capital Gains Tax. In France, moveable assets are subject to Capital Gains Tax and Social Charges. The Capital Gains Tax applies to residents and non-residents of France, and under certain conditions, it can slice off about 40% of the profit made upon the sale or transfer of cryptoassets. A sale occurs when cryptoassets are transferred for fiat currency.

The regularity of trading determines the rate of Capital Gains Tax that applies to gains derived from crypto. The flat rate for Capital Gains Tax is 19%, while the rate of Social Charges amounts to 17.2% for a total of 36.2%. Fortunately, taxpayers could also avail of various tax allowances and even be tax-exempt, provided that they meet certain requirements.

In terms of the Capital Gains Tax, crypto-to-crypto transactions—whereby a person exchanges one cryptoasset for another form—are not regarded as chargeable events. In other words, for such DeFi transactions as crypto staking, crypto mining, the provision of loans or borrowing, and so on, even liquidity pools create no liability in terms of Capital Gains Tax.

Value-Added Tax

The standard VAT rate in France is 20%, compliant with EU directives, and the tax is charged on the sale of goods and services within France. Of course, not all crypto activities bear taxation, but most French companies are required to register as a VAT payer if the value of the goods supplied exceeds 34,600 EUR or the value of the services supplied surpasses 86,900 EUR.

Conclusive in this respect is the ruling of the Court of Justice of the European Union: crypto exchange services, including exchange for traditional currencies, are not subject to VAT because such activities constitute financial services for VAT purposes.

Mining as such is also not burdened with VAT, as there is no kind of contractual relationship between the supplier and the customer. At the same time, in cases of mining activity conducted by a VAT payer, an allowance for any expenses with respect thereto—like technical equipment or electricity consumed in connection with mining activity—is not qualified for a VAT deduction.

European and Global Tax Regulations

France is a member of various European and global organisations which set the standards on grounds of taxation that normally replace national rules, therefore enhancing efficiency, consistency, and transparency. It is accordingly advisable that French crypto businesses show a close look at European and global regulations with a view to fulfilling their obligations in taxation properly.

The EU’s DAC should ensure that fair and efficient taxation in member countries is a reality. It is supposed to extend to reporting and exchanging information between the EU tax administrations related to income or revenue resulting from cryptoassets by residents in the EU. It is complementary to the MiCA Regulation, and it builds on the authorization requirements introduced by MiCA. This means that cryptoasset service providers are not faced with additional administrative requirements.

Apart from that, the DAC8 is also in line with the Crypto-Asset Reporting Framework—or CARF for short—that has recently obtained the green light from the Organisation for Economic Cooperation and Development and that also amended its Common Reporting Standard. The aim of this framework is to bring higher crypto-taxation standards and better ways of tax reporting through the inclusion of automatic tax reporting and information sharing by international authorities meant for taxpayers. These CARF standards will concern both natural and legal persons providing the services of crypto exchange issuance, including fiat money, and crypto transfers.

How will I pay my taxes on crypto in France in 2024?

The procedure for paying taxes on cryptocurrency income in France is still in 2024 a certain object of special attention both on the part of taxpayers and tax authorities. Like many other countries, France tries to establish a comprehensible and transparent system of cryptocurrencies taxation, fully aimed at ensuring fairness and efficiency in levying taxes. The following is a detailed guide to paying tax on cryptocurrency income for French residents for 2024.

Understanding the Status of Cryptocurrencies for Taxation Purposes

The first thing that taxpayers should do is understand the classification of cryptocurrency as far as the French tax authorities are concerned. On the latest updates, however, the income of cryptocurrency can be regarded as the result of capital gains or losses and is taxed accordingly. This has a wider application in such matters whereby the taxpayer exchanges their cryptocurrency for fiat money or when it is used in acquiring something. A critical determination was on the value constituting taxable income.

In this regard, the determination of taxable income should include consideration of all those transactions that may have taken place during the period of the taxation year. This correctly calculates the gain or profit and loss from each transaction, where consideration will be made of the initial acquisition cost of the cryptocurrency and the cost of its sale or disposal. French taxpayers must keep complete details of all the cryptocurrency transactions they have undertaken, and this would make for correct calculation of tax.

Tax rates

The tax rate in France for cryptocurrency capital gains is 30% in 2024. This comprises income tax and social contributions. Please note that the tax rates are subject to change, and one ought to follow up on any recent updates from the tax authorities.

Declaration of Income

To report income from cryptocurrency, it is necessary to file a special declaration that the tax service has developed. In the declaration, a taxpayer must specify all income earned within a year and the calculated amount of the tax. It is prescribed that the declaration should be filed not later than the legally prescribed date, usually in mid-May of the following year after the reporting year.

Retention of documents

All underlying documents related to cryptocurrency transactions are to be preserved. The documents regarding proof of purchase and sale, exchanges receipts and any other supportive documents. The documentation may be required from the tax authorities for verification against the declared income and settlements.

Exemptions and exclusions possible

Some may be exempted from taxes due to certain circumstances regarding cryptocurrency transactions, or one may qualify for tax incentives. For example, you will qualify for a lesser tax rate if you held the cryptocurrency for a long period of time. This could be advised by a tax advisor who can suggest possible benefits and optimizations of the tax burden.

Conclusion

Taxation of cryptocurrency gains in France for 2024 will be a challenge to be performed with due care and diligence. In order to avoid all the possible penalties for omission, understatement, or incorrect statement of information related to this type of transaction, consultation of the ITA requirements is highly recommended. Many taxes are imposed under the French tax system, inter alia: personal income tax, capital gains tax, VAT, and many others.

Main tax rates in France 2024

If you are about to create a sustainable crypto business in France, our dedicated and quality-focused team of legal advisors here at Regulated United Europe (RUE) will be glad to offer you personalized value-added services with respect to structuring your taxes in accordance with local and international rules. We also provide French crypto company formation, crypto licensing, and financial accounting services. Please do not hesitate to contact us now for booking your personal consultation.

Apart from this, lawyers from Regulated United Europe support crypto projects with legal issues and help to adapt them to MICA regulations.