FG Nürnberg Confirms Taxability Despite Virtual Execution: In its judgment of January 22, 2025 (Case No. 3 K 760/22), the Fiscal Court (Finanzgericht, FG) of Nuremberg issued a landmark ruling on the taxation of gains from cryptocurrency transactions. The court not only confirmed the general tax liability of such private sales under § 23(1) sentence 1 no. 2 of the German Income Tax Act (EStG), but also addressed in detail a range of arguments raised by the taxpayer—concerning the lack of economic substance of tokens, the purely virtual nature of transactions, and alleged enforcement deficiencies by tax authorities.
Facts of the Case
The plaintiff had generated over €100,000 in gains in 2017 through trading various cryptocurrencies (including Bitcoin, Ethereum, and Monero). All transactions took place in the form of crypto-to-crypto exchanges—no conversion to fiat currency occurred. The tax office considered these as taxable private sales and imposed income tax. The plaintiff objected, arguing that the tokens were not taxable assets, that the transactions occurred in a purely virtual space, and that the German tax framework lacked a constitutional basis for enforcement.
Legal Analysis
Cryptocurrencies Are Taxable Assets
The FG Nuremberg confirmed the prevailing legal opinion: Currency tokens such as Bitcoin and Ether qualify as “other assets” within the meaning of § 23(1) no. 2 EStG. Their immaterial nature or lack of status as legal tender does not matter. What counts is marketability and transferability, both of which are present via exchanges and peer-to-peer trades.
No Structural Enforcement Deficiency
A frequent argument is that the taxation of crypto gains is practically unenforceable due to anonymity, decentralized exchanges, and technical complexity. The court rejected this: tax law applies equally to cryptocurrency and traditional income sources. Taxpayers remain subject to general documentation and cooperation obligations under § 90 of the Fiscal Code (AO), and the authorities have effective tools at their disposal (e.g., international data exchanges, blockchain tracing).
Constitutionality and Equal Treatment
The court also held that the taxation of crypto profits is constitutional. Neither the principle of ability-to-pay (Art. 3(1) GG) nor the rule of law (Art. 20(3) GG) is violated. A taxable realization can occur even without conversion to fiat currency—for example, when trading one token for another of higher value. Such a transaction increases economic capacity and justifies taxation.
Practical Guidance – What Affected Taxpayers Should Do
Especially in cases where crypto-related tax procedures risk triggering back taxes or legal uncertainty, taxpayers should consider the following:
- Thorough Documentation: Keep detailed records of purchase and sale dates, acquisition costs, fees, and exchange rates—ideally supported by tools like CoinTracking or Accointing.
- Specialist Tax Advice: For complex income types (e.g., airdrops, staking, lending), seek advice from a crypto-savvy tax advisor.
- Cooperate Early: If you detect inconsistencies or errors, proactively explain your transactions to the tax office—this strengthens legal standing and reduces sanction risks.
- Strategic Case Closure: If a case is discontinued (e.g., via agreement or § 153a StPO), clarify potential tax implications and consider a voluntary correction or self-disclosure.
- Substance Check for Each Token: Ensure that each token is examined under the criteria for economic assets—as set out in the German Ministry of Finance’s circular from May 10, 2022.
Conclusion
The FG Nuremberg follows the line set by the FG Cologne and others: cryptocurrencies are taxable—regardless of their immaterial or decentralized nature. Technical complexity, anonymity, or volatility do not exempt a taxpayer from obligations under German income tax law.
The key takeaway from the ruling: Profits from crypto trading are taxable—even if the profits were only realized virtually. Taxpayers must engage proactively, maintain records, and comply with reporting obligations. Complexity is no shield against taxation—nor against legal consequences.
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