Spot trading
Spot trading is one of the most basic and widespread methods of trading cryptocurrencies.
Spot trading with cryptocurrencies - What applies to spot trading from a tax perspective
An overview
Spot trading is one of the most fundamental and widespread methods of trading cryptocurrencies. Unlike other forms of trading such as futures and options, spot trading involves buying and selling cryptocurrencies for immediate delivery. Below you will find more information about what spot trading is, how it works, its advantages, and the tax implications in Germany.
What is spot trading?
In spot trading, cryptocurrencies are traded at current market prices, and transactions are settled immediately. This means that buyers and sellers execute trades at the current rates without the need for future contractual agreements as with futures.
Characteristics of spot trading
Immediate processing
Transactions are completed instantly, meaning the buyer receives the purchased cryptocurrency immediately in their wallet.
Market price
Cryptocurrencies are traded at the current market price, which is determined by supply and demand.
liquidity
The spot market offers high liquidity because buyers and sellers are constantly active.
How does spot trading work?
Account opening
Registration and verification on a cryptocurrency exchange
deposit
Depositing fiat currencies or cryptocurrencies into the exchange account.
Deposit order
Placing a buy or sell order for the desired cryptocurrency.
Reconciliation and settlement
The exchange matches the orders, and the transaction is processed immediately. The purchased cryptocurrency is credited to the buyer's wallet on the exchange.
Withdrawal
The user can transfer the purchased cryptocurrency to their personal wallet.
Advantages of spot trading
simplicity
The process is straightforward and easy for beginners to understand.
transparency
Prices are transparent and are determined by supply and demand.
solvency
High liquidity facilitates the buying and selling of cryptocurrencies at fair market prices.
No leverage
In spot trading there is no risk of margin calls, as no leverage is used.
Tax treatment of spot trading in Germany
The tax treatment of profits from spot trading of cryptocurrencies is subject to specific regulations in Germany. Here are some basic guidelines:
Income tax
- Private individuals:
Profits from cryptocurrency trading are considered private sales transactions under Section 23 of the German Income Tax Act (EStG). These are subject to income tax if sold within one year of acquisition. Profits are tax-free up to a limit of €1,000. - Speculation period:
If cryptocurrencies are held for more than one year, profits from their sale are tax-free. - Losses:
Losses from trading can be offset against gains from private sales transactions in the same year.
Commercial activity
- Commercial traders:
If cryptocurrency trading is carried out on a commercial scale, the profits are considered income from a business operation and are subject to trade tax and income tax.
VAT
- No sales tax:
The purchase and sale of cryptocurrencies is considered exempt from sales tax in Germany.
Documentation and proof requirements
It is important to accurately document all trading activities and transactions. The burden of proof lies with the taxpayer. The following information should be recorded:
- Date of purchase and sale
- Amount and type of cryptocurrency
- Buying and selling price in euros
- Profits and losses
- Exchange logs and wallet addresses
Summary
Spot trading is a fundamental and widely used method for instantly buying and selling cryptocurrencies at current market prices. It offers simplicity, transparency, and high liquidity. In Germany, profits from spot trading are subject to income tax if realized within one year and must be carefully documented.
This information serves as general guidance and cannot replace individual tax advice from our experts. Tax treatment may vary depending on your specific situation and current tax regulations. It is strongly recommended that you contact our lawyers to clarify your personal tax situation and ensure compliance with legal requirements.