Now all trading platforms offer a range of crypto cards: Visa or Mastercard bank cards. Usable like any bank card, they are linked to your crypto or euro accounts. Do you know that they can generate taxes?
Crypto cards that can be used as bank cards
All trading platforms, such as Binance, Coinbase or Crypto.com, offer cards associated with your account. Most are Visa cards, they are often free of charge and sometimes offer cashback. They can be used like “normal” bank cards and they seem so practical. However, they have a major drawback in France: they can be tax generatorsafter really very complicated calculations for the user.
Funds in euros or funds in cryptos?
In the first case, if you use your euros, those that you sent to the exchange and those that you are going to spend, there will be no taxable event. Neither does crypto cashback (for now). Many users use their card this way and earn a bit of crypto each time they make a payment (often based on the number of platform-native tokens they hold).
In contrast, if you use your funds in cryptos, it’s not the same story: there is a crypto/fiat conversion. And the conversion generates a tax, since there has been a capital gain. This is called the flat tax. This flat tax is quite complicated to calculate in this case: if in absolute terms the flat tax is based on the capital gain (30%), here it will be calculated as follows:
For each transaction, you must note the total value of your cryptos, the acquisition price concerned by the conversion and the sale price of the assets at the time of the transaction.. All these elements make it possible to fill in the form 2042-C.
If you’ve made a small (or big) gain on your bitcoins (BTC) and want to use it for shopping, it’s desirable that you’re very good at math.
The added value calculation puzzle
For the moment there is an exemption threshold: 305 euros. 305 euros without having a headache. Beyond this threshold, it thickens seriously. With a 30% tax on each crypto/fiat conversion, France has the heaviest tax in the world. Germany, for example, exempts its taxpayers on capital gains if taxpayers have held their cryptos for a minimum of one year.
In short, if you want to use your crypto card to make everyday purchases with your bitcoin (BTC) funds, you will need to use very well configured software or call on a specialized company as the calculations are complicated. The French cryptosphere looks enviously at dynamic countries like Switzerland: some cantons accept the payment of taxes in bitcoins and Bitcoin Suisse facilitates the payment of everyday purchases. The irony of the story being that Wordline, which partnered with Bitcoin Suisse, is a French company…
Nexo card: an alternative to use with moderation
Nexo offers an alternative that has not yet been considered by the French tax authorities. Nexo offers a Mastercard to spend euros by putting your cryptos as collateral (as a pledge if you prefer). You will be able to use up to 80% of the value of your pledged cryptos with a borrowing rate ranging from 0 to 13.9% APR. Since there is no Crypto/Fiat conversion, there is no taxation.
But there is a but necessarily. Nexo offers great returns, cashback, and loans that sound great, but it’s not a charity. In the event of a fall in the value of your collateral, your loan will be liquidated (your cryptos resold). In bearmarket, not only will you have lost your cryptos, but you may also have a taxable capital gain. Some even say that Nexo would trade against its clients to liquidate their loans…Crypto lending can prove to be a dangerous game, clients of Celsius will confirm it to you. Never forget that on a centralized exchange, you entrust your private keys! In the event of bankruptcy or exit scamyou will have little chance of recovering your funds.
While many websites describe all the advantages of crypto cards and their ease of use, few explain that payment with crypto funds generates taxes. The French taxpayer is thus potentially liable for a tax without knowing it. Because of very complicated capital gains calculations, he will be tempted not to declare anything (at his own risk) or to abandon this payment system. It is a shame not to have more flexible tax legislation: the reinjection of cryptos into the “real economy” can only be beneficial. Two years of health crisis and an inflation that is beginning to frighten will not have made the government give in to reduce taxation in this area. Some MEPs, however, including Pierre Person, had tabled an amendment to obtain a reduction of 3000 € on purchases made in cryptos, it was rejected (in a half-empty hemicycle…)
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