France is discussing a tax on unrealized gains from cryptocurrencies, including Bitcoin.
The proposal was presented to the French Parliament during the November 26, 2024 deliberations on the 2025 budgetCryptocurrencies were placed in the “non-producing assets” basket alongside properties such as unused luxury yachts, private jets and undeveloped land.
Just like I just said – #France Discussing the taxation of unrealized cryptocurrency gains.
French lawmakers are discussing a tax on unrealized capital gains for cryptocurrencies, which could change how assets like Bitcoin are taxed.
The proposal would classify cryptocurrencies like Bitcoin as…
– Marty Party (@martypartymusic) December 3, 2024
The tax policy, if implemented, would represent a major shift from the more traditional practice in France where taxes on gains made from cryptocurrencies only become applicable once assets are liquidated.
At the same time, critics have warned that such a trend will stifle growth in the cryptocurrency space and at the same time have greater pressure on the investor class of the economy.
Concerns about the impact on innovation in France
Currently in France, the tax system for cryptocurrencies is governed by Article 150 VH bis of the General Tax Code.
Those residents who earn more than €305 from selling cryptocurrencies during the year must pay taxes, and for other income earners, there is no payment. However, all activities must be declared regardless of the tax status associated with that particular activity.
In this system, the first €500 of total cryptocurrency profits earned will be taxed at a flat rate of 30%, which consists of 12.8% tax on income and 17.2% tax on social sector contributions.
The recent amendments included the increased benefit of reducing the maximum tax by 28.2% for those earning less than €27,478 with the introduction of the recently introduced progressive tax measure.
During Senate debate on the measure, only senators supporting the measure were present, indicating that this may not yet be final legislation and will be subject to a vote.
However, if it goes ahead as proposed, along with approval by the French National Assembly, it could be turned into law.
Meanwhile, critics were quick to point out that such a tax would discourage innovation and investor migration from France to other areas of the cryptocurrency market.
Analysts have argued that holding assets for the long term, which discourages their use and creates asymmetric liquidity, raises concerns about the attractiveness of investing in digital assets.
In its report, Cryptopolitan described the assets as falling into categories of so-called “unproductive wealth,” which are unpalatable to investors and industry leaders.
“Taxing Bitcoin is counterproductive because investors will avoid purchasing assets on which they will have to pay additional taxes,” one market expert noted.
explores: Denmark proposes to impose a tax on unrealized cryptocurrency gains starting in 2026
Comparison of global methods for taxing cryptocurrencies
France has a proposed tax on unrealized Bitcoin gains, which may be different from tax laws in many other countries.
Countries like Germany have long-term investors who buy and sell cryptocurrencies with a low tax regime. Bitcoin and Ethereum owned for more than one year are fully exempt from taxes.
Similarly, in Australia, investors can benefit from a scheme where they deduct capital gains by 50 per cent for assets that have been held for more than one year.
On the other hand, India imposes a 30% tax on cryptocurrency profits, which is among the highest in the world. Although this policy has been strongly criticized due to its high costs to investors, it has gained support from some because it provides a greater degree of consensus in a rapidly progressing context.
In the USA, profit earned from selling cryptocurrency is treated as a capital gain, and is taxed at a rate ranging from 10% to 37% depending on the investor’s earnings and period of holding.
Meanwhile, the Japanese government taxes profits made from investing in cryptocurrencies as other income and the tax rate ranges from 5 to 45% which depends on the total profits.
Also, since many jurisdictions such as Belarus, El Salvador, Singapore and Portugal already provide tax-free cryptocurrency holding jurisdictions.
explores: Donald Trump pushes a plan to end the US income tax and introduce a new tariff system
Implications for investors and the cryptocurrency ecosystem
The new tax regime could be very daunting for French cryptocurrency owners, as the market value of digital assets will be assessed once every twelve months, and taxes will apply even if the assets in question are not disposed of.
This may be seen as an abrupt shift from the current tax system, which applies taxes only to realized gains.
France’s General Directorate of Public Finance has the power to audit the records of any French entity for a period of 3 years, or up to 10 years if fraud is suspected.
Furthermore, failure to declare crypto assets or crypto profits can result in severe fines if the amounts are higher than $3,000, subject to penalties of up to 10%-80% of that amount. Those involved in illegal concealment should expect the chance of a fine of 3 million euros and imprisonment for 7 years.
The cryptocurrency space has raised concerns that such actions could undermine investor confidence. OneSafe, a leading blockchain financial company, stated that it may be worrying that France considers Bitcoin a non-productive asset.
The post France Discusses Tax on Unrealized Cryptocurrency Gains, Lists Bitcoin as a ‘Non-Producing Asset’ appeared first on 99Bitcoins.