France proposing tax on unrealized Bitcoin gains

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As a seasoned crypto investor with a significant portion of my portfolio invested in Bitcoin and other digital assets, the proposed unrealized capital gains tax in France is certainly a cause for concern. With over a decade of experience in this dynamic market, I’ve learned to navigate the complexities of various regulatory landscapes, but the possibility of being taxed on paper gains feels like an unwelcome addition to my already intricate tax obligations.

Lawmakers in France are discussing a new tax on the appreciation of cryptocurrencies that haven’t been sold yet, which could change the way digital assets such as Bitcoin are taxed.

In simpler terms, the suggestion is to group digital currencies like Bitcoin (BTC) with inactive properties and extravagant goods such as yachts, and label them as “unproductive assets.” This new categorization would then subject them to a proposed levy on unproductive wealth, effectively replacing the existing tax on real estate wealth.

In the French Senate’s discussion about the 2025 budget, there’s a proposed idea to impose taxes on the increase in value of cryptocurrencies, regardless if they have been cashed out or not. This is different from the current practice where taxes on cryptocurrencies are applied only when the assets are actually sold.

Bad news for French crypto holders. The government has plans to tax unrealised gains on Bitcoin 🇫🇷

— Coin Bureau (@coinbureau) December 3, 2024

Senator Sylvie Vermeillet, the backer of this proposal, stated that this modification in cryptocurrency taxation aims to make it consistent with other asset classes.

Last month, The Tax Law Council in Denmark recommended proposing a bill to tax unrealized gains and losses on crypto assets under an inventory taxation model. The proposed bill aims to address the unfair taxation of crypto investors and simplify the tax rules for crypto assets.

This tax isn’t law….yet

The Senate debate included a preliminary vote on the proposal. Notably, only supporting senators were present, meaning the vote does not yet reflect a final decision or broader consensus. If the proposal advances, it would need approval from the French National Assembly before becoming law.

If you’re new to this idea, unrealized gains are simply the rise in value of an asset that hasn’t been cashed out yet. To illustrate with Bitcoin as an example, if someone buys Bitcoin and its value goes up afterwards but they don’t sell it, they currently don’t have to pay taxes on that increase. However, a proposed tax would require paying taxes based on the paper gain, regardless of whether the asset has been turned into cash or not.

In my current explorations, I find myself right in the midst of an ongoing discussion about how various governments are attempting to establish regulations and implement taxes on cryptocurrencies, as part of a broader international movement.

In the United States, taxes on cryptocurrency are triggered when an asset is sold. On the other hand, some nations such as Germany and Portugal grant tax exemptions for long-term investments or adopt a less strict approach towards digital assets.

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2024-12-03 20:16