Understanding airdrops - types, benefits and tax aspects

Tax treatment of airdrops in Germany

The tax treatment of airdrops in Germany depends on various factors and can be complex. Here are some basic guidelines:

Income tax

• Taxation upon receipt:
  Airdrops received without consideration and without personal expenditure can be treated as other income according to § 22 No. 3 of the German Income Tax Act (EStG). The value of the tokens received on the day of receipt is taxable.
• Evaluation:
  The value of the airdrop is converted into euros at the time of receipt and recorded as income.
• Duration of stay:
  If a token received in an airdrop is later sold, the holding period (one-year limit) can be relevant. If the tokens are held for longer than one year, the capital gains may be tax-free.

trade tax

• Commercial activity:
  If airdrops are received as part of a commercial activity (e.g., regular trading in cryptocurrencies), the income is subject to trade tax.

VAT

• No sales tax:
  Receiving airdrops is generally not considered a service provided for consideration, therefore no sales tax is charged.

Documentation and proof requirements

In Germany, it is important to accurately document all transactions and the receipt of airdrops. The burden of proof lies with the taxpayer. It is recommended to record the following information:

• Date of receipt
• Value of the token at the time of receipt
• Proof of compliance with conditions (if required)
• Transaction details and wallet addresses

Summary

Airdrops are a popular method for distributing cryptocurrency tokens to a broad user base and raising awareness of a new project. There are different types of airdrops, each with varying requirements and objectives. In Germany, airdrops are generally subject to income tax and must be carefully documented.

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