QUESTIONS & ANSWERS

In general, staking can be defined as part of a process that certain tokens use to verify certain transactions. The mechanism can be described as proof-of-stake. This means that people who already have a stake in a blockchain can add additional transaction blocks to that blockchain. So crypto holders consciously use their existing token to continue the blockchain. The tokens are locked, but not transferred. In the case of proof-of-stake blockchains, the actual process that was previously referred to as “mining” is now referred to as “forging”. So, the idea of proof-of-stake is that the blockers (forgers) use their own tokens as a stake. Participation in such a process takes place via so-called staking pools. The special thing about such pools is that they have a higher probability of being selected as the next forger. In the BMF letter staking is described as the provision of a stake without taking over the block creation.

Staking is about providing a stake without being involved as a forger in the block. At the same time, staking offers the opportunity to receive additional income (rewards) by depositing tokens as a reward for supporting the network.

In general, token-related activities can generate income from all types of income. The actual allocation ultimately depends on the circumstances of the individual case. For companies, income from commercial activities is particularly relevant. The taxation of tokens depends on whether the related activity is commercial or private asset management.If the income from trading in tokens is earned in the course of a commercial activity, the crypto profits must be taxed in the course of the trade. Unlike private investors, commercial persons or companies do not engage in private sales. This means that profits are taxable as operating income in the context of trade. Such income and sales gains in the operating sector are always operating income and have a general effect on income, business and corporation tax. In addition to the income tax consequences, the VAT consequences are crucial for companies. The European Court of Justice (ECJ) has confirmed in the Hedqvist judgment (judgment of 22. 10. 2015, C-264/14) that the commercial conversion of Bitcoin into conventional currencies is not subject to VAT. In the absence of a decision by a German financial court, the ECJ decision is therefore decisive. However, if you would like to check the specific issue of VAT liability, please contact us.