Clarifications on how gains from bitcoin transfers by individuals are taxed. A case-by-case analysis should be adopted.

Decisions discussed: CE April 26 2018, n° 417809, 418031, 418032, 418033

In this decision, the French “Conseil d’Etat” recognizes that gains from bitcoin transfers may be taxed as capital gains on movable assets.

This decision is groundbreaking in that it recognizes bitcoins as movable assets, and thus provides some answers to bitcoin holders whose gains had up to now been taxed as noncommercial gains or as industrial and commercial gains, depending on the frequency of these operations.

Even though this decision seems to bring clarification to the situation, it appears that its application remains complex. The “Conseil d’Etat” specifies that “certain circumstances unique to the contemplated transfer” could imply that the gains issued may fall under other taxation provisions categories.

In practice, gains from such transactions would be taxed as non-commercial gains if regarded as counterpart for the taxpayer’s contribution to the creation or operation of the bitcoin system.

Moreover, if bitcoins were bought in the perspective of being resold, even if the transfer took the form of an exchange for another movable asset, the conditions for carrying on a commercial activity would be met and the gains would be taxed as industrial and commercial gains.

Thus, this “Conseil d’Etat”’s decision opens a new taxation category possibility for gains from bitcoin transfers, but does not replace the two existent ones i.e. taxed as noncommercial gains or taxed as industrial and commercial gains.

The scope of this decision must therefore be tempered as it does not secure the tax treatment of gains from bitcoin transfers and leaves an important role to circumstances.