Emily Walker
The French government has put forward a plan to replace the existing real estate wealth tax with a new “unproductive wealth tax” aimed at assets that are not actively generating income. This includes cryptocurrencies, luxury items, and unused properties. Senator Sylvie Vermeillet highlighted that Bitcoin will be deemed a non-productive asset in the upcoming national budget. This taxation approach mirrors that of luxury goods and idle real estate.
Currently, French tax laws impose a flat rate of 30% on profits from cryptocurrency when they exceed €305. However, the proposed tax framework for 2025 aims to tax even unrealized profits from cryptocurrencies. According to Vermeillet’s outline, any assets exceeding €800,000 will be taxable.
Individuals who fail to declare foreign accounts face a penalty of €1,500 per account, though trades involving cryptocurrencies are currently not taxed. While the new tax proposal has successfully cleared an initial senate vote, it still awaits final approval.
JUST IN: France to tax #Bitcoin unrealized capital gains. pic.twitter.com/8zsehL05f4
— Bitcoin Archive (@BTC_Archive) December 3, 2024
French Government Aims for Fair Taxation
On December 3, Senator Sylvie Vermeillet put forth a proposal to categorize Bitcoin and cryptocurrencies as non-productive assets in next year’s budget. This means that, similar to luxury goods and unused property, these digital assets will now incur taxation. Finance Minister Laurent Saint-Martin has shown support for this proposal, arguing that it is inequitable to exempt leading digital assets from taxes while collecting on other forms of economic wealth.
This initiative seeks to create equity in taxing both digital and physical assets, ultimately establishing a “balanced taxation system.” Should this legislation pass, cryptocurrency holders will need to reassess their assets and consider future investments. Some critics, however, express concerns that this could dampen market interest and heighten price fluctuations.
No Tax on Crypto-to-Crypto Trades
French law currently taxes profits gained from spending Bitcoin or other digital currencies and from converting them to euros. The new proposal stipulates that trades between cryptocurrencies will not be taxed, allowing investors to effortlessly broaden their investment strategies. Proponents argue that this tax structure will enhance crypto trading and broaden market activity.
The amendment submitted on November 18 outlines the tax obligations for next year’s budget, indicating that individuals with assets over €800,000 will be responsible for taxes. Though the new regulations may appear straightforward, the reporting requirements could prove challenging, as cryptocurrency holders are required to track various transactions, including lending, staking, and participation in liquidity pools.
Report or Risk Fines for Crypto Holders
The amendment also mandates that French taxpayers disclose any cryptocurrency accounts held outside the country. A failure to report will incur a €750 penalty, which escalates to €1,500 if the account contains more than €50,000. Additionally, the proposal necessitates that holders submit the Cerfa 3916-bis form each year for tax compliance. Taxpayers must file their annual returns, even if no transactions have occurred. Tax authorities reserve the right to scrutinize individual records in cases of suspected fraud.
Featured image from Alexander Spatari via Getty Images, chart from TradingView