Cryptocurrency Regulations in France

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France is renowned for its intricate tax laws, which also extend to the virtual asset market. Let’s explore the complex crypto tax policy of this country.

Who Regulates Digital Assets in France?

In France, digital asset regulation does not fall under a single authority.

The primary regulatory body is the Financial Markets Authority (AMF), an independent entity overseeing all of France’s financial markets.
The Ministry of Economy, Finance, and Digital Sovereignty (MINEFI) is tasked with crafting and implementing the rules, while the Ministry of Justice enforces them.

As of the date of this article, these institutions rely on the following legislative acts:

  1. The PACTE Law of 2019: Legalized cryptocurrencies as financial assets and defined the status of Digital Asset Service Providers (PSAN).
  2. The AMF Decree of 2020: Set out the registration and operational requirements for PSANs.
  3. MiCA (Markets in Crypto-Assets Regulation): Starting from late 2024, this law will regulate cryptocurrencies across all EU countries, including France.
  4. 2023 Recommendations from the Financial Sector Advisory Council (CCSF): Emphasize the importance of fully informing cryptocurrency holders about potential risks.

Registration of PSANs is mandatory for all companies involved with cryptocurrencies in France. For legal entities generating income from operations with digital assets, the following requirements apply:

  1. AML/KYC: PSANs are required to implement anti-money laundering and anti-terrorism financing measures and verify their clients' identities.
  2. Investor Protection: The Financial Markets Authority can restrict or prohibit crypto asset advertising or projects it considers risky.
  3. Taxes: Revenue from the sale of cryptocurrencies is subject to capital gains tax.

Furthermore, all providers of digital assets and cryptocurrency services must register a legal entity in France and demonstrate sufficient capital to cover insurance costs in the event of hacks or bankruptcy.

What Taxes Do Crypto Companies Pay in France?

As of January 1, 2023, all corporate cryptocurrency revenues are subject to capital gains tax, classified as non-commercial profits (BNC). 

For legal entities whose annual turnover, excluding taxes, is below €77,700, a special micro-BNC regime applies, setting the tax rate at 2.2% of the turnover.
For turnovers exceeding this threshold, a controlled declaration regime is used, and companies are required to pay 21.2% of their revenue to the state.

Income derived from mining activities, including cloud mining, by corporations is taxed as corporate income. The tax rate is set at 25% for companies with an annual turnover of up to €10 million, and 30% for those exceeding this amount.

Additionally, profits from the sale of cryptocurrencies held for less than a year are subject to a 25% corporate tax rate. Notably, tax authorities do not differentiate between revenues from the sale of cryptocurrencies by mining centers and those obtained by companies through the conversion of cryptocurrencies received in exchange for goods or services.

The issuance of tokens in an initial coin offering (ICO) is also subject to value-added tax if the tokens are later used by the holders to receive specific goods or services from the issuing company. However, if the tokens only provide the holder with rights to future dividends and/or voting rights within the issuing company, they are classified as shares and assessed under Corporate Law standards, where VAT does not apply. 

The legal framework regarding non-fungible tokens (NFTs) remains somewhat unclear.

Some tax officials classify these assets under the category of "other digital assets," which are liable to a flat 30% tax. However, others argue that transactions involving NFTs should be taxed similarly to artworks, where the tax rate depends on their sale price.

What Taxes Do Small Crypto Investors Pay in France?

While the taxation system for private companies might give accountants pause, the rules for individual cryptocurrency investors in France are relatively straightforward. 

Since 2022, specific regulations have governed the taxation of cryptocurrencies for individuals. Taxable events are triggered when digital assets are converted into fiat currencies or used to purchase goods and services. However, exchanges like BTC for USDT do not attract tax inspector interest.

Key points:

  1. Trading: If the annual income from selling cryptocurrencies—calculated as the difference between purchase and sale prices—exceeds €305, a flat tax rate of 30% applies. This rate is comprised of 12.8% income tax and 17.2% social security contributions.
  2. Mining: Profits from cryptocurrency mining are deemed commercial income and are subject to a 45% tax rate, which includes social contributions.
  3. Staking: Income received from staking is subject to the flat tax if the assets are converted to fiat.
  4. Gifts: Cryptocurrency gifts valued under €3244, or €6604 from parents, are not taxable. Gifts exceeding these amounts are taxed progressively, ranging from 5% to 45%, depending on the gift's value.
  5. Inheritance: Cryptocurrencies received as an inheritance are not taxed directly but may be factored into other tax calculations, such as capital gains tax.

Residents of France must declare all cryptocurrency-related incomes, regardless of where they are earned, and report all cryptocurrency accounts, even those held outside France.

As the European Union is set to implement a system for sharing data between tax authorities soon, trying to conceal income in another jurisdiction could result in significant penalties—including fines up to €3 million and potential imprisonment.