France: Capital Gains from Crypto Sales

France has established a clear regulatory framework for cryptocurrency taxation. Individuals and businesses engaged in crypto transactions are subject to taxation based on their level of activity, with different rules applying to occasional investors and professional traders.

Taxation of Occasional Crypto Investors

For individuals who trade cryptocurrencies occasionally, capital gains from sales are subject to a flat tax of 30% (referred to as the "prélèvement forfaitaire unique" or PFU). This tax comprises:

• 12.8% income tax
• 17.2% social contributions

Only realized capital gains (i.e., profits made when selling crypto for fiat currency) are taxed. Transactions where one cryptocurrency is exchanged for another are not considered taxable events under the current framework.

Taxation of Professional Crypto Traders

If an individual engages in frequent and substantial crypto trading, their activity may be classified as professional trading, leading to taxation under the industrial and commercial profits (BIC) regime rather than the capital gains framework. This can result in higher tax obligations based on the overall business profits.

Corporate Taxation on Crypto Gains

Companies in France dealing with cryptocurrency are subject to standard corporate tax rates. Profits generated from crypto transactions are taxed at 25% (as of 2024), with additional social security contributions applicable depending on the business structure.

Deductibility of Crypto Losses

Capital losses from crypto transactions can be deducted from capital gains within the same tax year. However, if the total result is negative, it cannot be carried forward to offset future gains.

Reporting and Compliance

French taxpayers must report their crypto holdings and transactions annually to the tax authorities. Failure to declare crypto assets held in foreign exchanges may lead to fines and penalties.

Conclusion

France has adopted a structured approach to taxing cryptocurrency, ensuring that both occasional investors and professional traders contribute to the fiscal system. Staying compliant with reporting obligations is crucial to avoid legal issues, and individuals should seek professional tax advice to optimize their tax liability.

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