Airdrops and German income tax
Tokens arrive in the wallet unasked — and a year later the tax office asks about them. Whether tax follows turns on a single question: was the allocation consideration for conduct? We are litigating the point before the Baden-Württemberg Tax Court.
- The test is section 22 no 3 EStG: there has to be a supply for which the allocation is the consideration.
- Three tiers — only the highest is uncontroversially within the scope.
- The threshold is 256 euros a year and covers staking and lending income as well.
- Entering 0 euros is only a non-objection and presupposes documentation.
- Note: allocations outside the scope belong in the return too — with the reasoning disclosed.
The test: what counts as a supply
This is where the real dispute lies — and it is more fundamental than most writing on the subject suggests.
A supply within section 22 no 3 of the Income Tax Act is any act, tolerance or forbearance capable of being the subject of a contract for consideration. The decisive question is not whether there was conduct and an allocation at all, but how closely the two must be linked.
The ministry circular states that a synallagmatic — that is, reciprocal — relationship between supply and consideration is not required. It is enough that the taxpayer accepts as consideration something granted in economic connection with their conduct, thereby allocating that conduct to the commercial sphere. This is founded on the Federal Fiscal Court's judgment of 24 April 2012 (IX R 6/10).
We regard that derivation as too wide. Someone who uses an application out of their own interest and months later receives an unsolicited allocation has not "accepted something as consideration" — they have received something. The difference between conduct for consideration and a mere occasion for it is exactly what paragraph 46 flattens.
Where the circular itself draws the line
- Paragraph 71: the public key suffices for an allocation. Unlike discount schemes or prize draws, which require a postal address, merely giving the address is not a supply.
- Paragraph 71, second limb: as soon as data is added going beyond what the technical allocation requires, the authorities see a supply in that. A KYC procedure already falls within it on that view — we do not follow it.
- Paragraph 72: where chance decides alongside conduct whether anything is received, the attribution is "interrupted or overlaid". This is the most important provision in the whole section.
- Paragraph 29: expressly gives the case where only some of those eligible succeed in a larger airdrop — through a random selection, for instance.
The three tiers
Every allocation belongs to one of these tiers. The assignment has to be reasoned — best of all with the terms as they stood at the time of your conduct.
A random airdrop — outside the scope
The recipient did nothing. The tokens arrive because they happened to hold a particular address on a given date, or used an application in the past without any allocation being in prospect for it. There is no supply for which the allocation would be consideration — and therefore no income.
This tier is in fact recognised in practice. In the proceedings before the Nuremberg Tax Court (judgment of 22 January 2025, 3 K 760/22) the claimant had received allocations without KYC and without any minimum trading volume; the tax office expressly did not tax them and assessed only the income from staking and claiming.
The middle case — in dispute
The recipient did something, but did not know beforehand whether they would receive anything, when, how much, or on what rules. The allocation criteria were fixed only afterwards, often only after the snapshot, and attach to conduct towards a third party.
Someone who used an application because they wanted to use it did not use it for the sake of a consideration that did not then exist. Here the element of chance in paragraph 72 applies — and liability falls away on the wording of the circular itself.
An airdrop for consideration — within the scope
The terms are settled in advance, the recipient knows them, acts deliberately and knows in essence what they will receive. Paragraph 70 gives as examples naming the project on social media and uploading your own images or videos to a platform — the latter even where ownership of them stays with the taxpayer.
That is within the scope of section 22 no 3 EStG, with the market value at the moment control passes as the accrual. There is no argument to be had here.
Between the middle and the upper case there is often only a single fact: when were the allocation terms published — before or after your conduct? Secure that date while it can still be found. Announcements disappear, project blogs are taken down, snapshots are later presented differently.
The ENS case and our claim
A particular airdrop, a particular administrative order — and a contradiction the authorities are having with themselves.
By order of 17 April 2023 (S 2257 – 2022/004) the Hamburg tax authority found, on the 2021 ENS airdrop, that this was an active airdrop and that the allocation was within the scope of section 22 no 3 EStG. For it, the supply consisted in the user having held an ENS domain before 31 October 2021.
We regard that as untenable. Merely holding is not an act, tolerance or forbearance undertaken for a consideration. Someone who registered a domain because they needed it did not do so in order to receive an allocation months later on terms nobody knew at the time.
The same order also deals with the TNS airdrop. There the allocation required at least fifteen transactions through the domain and a minimum stake. Active, purposive conduct is comprehensible in that case.
In the ENS airdrop precisely that element is absent — and the authority treats the two alike. That is the point at which the reasoning breaks. And the order walks straight past paragraph 72, although the element of chance covers this case.
- Snapshot31 October 2021, rules settled later
- OrderHamburg tax authority, 17 April 2023
- Ref.S 2257 – 2022/004
- CaseFG Baden-Württemberg 4 K 2402/25
- Questionis merely holding a supply?
- Para. 72element of chance, not addressed in the order
Anyone who held an ENS domain in 2021 and received the allocation should not let the assessment become final. Appeals and litigation
Valuation and timing
Once liability is settled, the second argument begins: at what amount.
| Question | The rule | What to watch |
|---|---|---|
| Which value? | Market price at the time of acquisition, paragraph 73 | Not the price at the listing high, and not the price on a later claim where control existed earlier |
| No price establishable? | Entering €0 will not be challenged, paragraph 73 | A non-objection, not a legal consequence. The state of the market at that date belongs on file — thin trading on a single decentralised exchange is not yet a market price |
| Which price source? | A trading platform or a web-based list, paragraph 43 | Choose one source and hold to it. Paragraph 91 requires consistent valuation |
| Daily price instead of the moment? | Permitted "until further notice", paragraph 91 | An average, fixed-time or closing price. The reservation is in the wording — the authorities can withdraw it |
| Threshold | €256 in the calendar year, section 22 no 3 sentence 2 EStG | A threshold, not an allowance. All supplies of the year count together, including staking and lending |
A token is allocated, listed shortly afterwards, the price climbs steeply — and then falls to a fraction. What is taxed is the value on allocation. Someone who did not sell pays tax on a value they never realised. And if the later sale falls outside the one-year period, the loss cannot be used for income tax purposes either.
That is why the question of the right moment of accrual is not a formality. Control exists only once you can actually dispose of the tokens — not already when a claim to them exists.
The later sale
The allocation is only half the transaction. The second half comes on the sale.
Where the allocation is made for a supply, paragraph 75 provides that there is at the same time an acquisition. The acquisition cost corresponds to the value of the data given up or the act performed; it is rebuttably presumed that this value equals the market price of the consideration. A separate one-year period under section 23 EStG therefore starts for the tokens allocated.
Where the allocation was entered at 0 euros for want of an establishable price, the acquisition cost is zero as well. A sale within the one-year period then brings the entire proceeds into charge as gain. The zero entry therefore only defers the tax; it does not remove it — and it can increase it if the price has risen in the meantime.
Conversely: someone who taxed the value on allocation has that amount as acquisition cost. Full double counting is therefore not a risk, so long as the figures are carried consistently.
Where the allocation was outside the scope
Where there is no supply, on the structure of the circular there is no acquisition either. That raises its own questions for a later disposal, which the circular does not expressly answer. Anyone treating an allocation as outside the scope should therefore also hold a reasoned position for the sale and disclose it — otherwise the impression arises that both are meant to apply at once.
Added to that is the gift tax level from paragraph 74. Our article on inheritance and gifts (in German)
What belongs in the return
Allocations within the scope belong in the Anlage SO form. Those outside it belong there too — as a disclosed transaction.
Document each allocation
Project, date the terms were published, date of your own conduct, snapshot date, date control passed, quantity and price.
Name the tier and give reasons
An assignment without reasons is worthless in an audit. Two sentences suffice if they refer to the terms and to their date.
Test the threshold across all supplies
Add airdrops, staking, lending and other supplies together. At 256 euros everything is taxable, not merely the excess.
Disclose any departure
Where you do not follow the administrative view, that belongs expressly in the return. It is the most effective protection against an allegation of intent.
Carry the acquisition data forward
The value on allocation is also the acquisition value for the later sale. Anyone who does not record it loses it.
Keep the assessment open
For tiers 1 and 2, appeal and refer to the pending cases. The model notice of appeal (in German)
How the amounts are entered on the Anlage SO form is set out in a separate article. Anlage SO explained
Questions and answers
Are airdrops taxable?
What is the threshold for airdrops?
At what value is an airdrop recognised?
What happens on a later sale?
Can an airdrop trigger gift tax?
Do I have to declare an airdrop I consider outside the scope?
Legal position: 25 August 2026. Sources: Federal Ministry of Finance circular of 6 March 2025 (ref. IV C 1 - S 2256/00042/064/043), paragraphs 29, 43, 46, 70 – 75 and 91; Hamburg tax authority, order of 17 April 2023 (S 2257 – 2022/004); section 22 no 3 EStG; section 23(1) sentence 1 no 2 EStG; Federal Fiscal Court, 24 April 2012, IX R 6/10.
Cases: FG Baden-Württemberg 4 K 2402/25 (ENS airdrop); on the recognition of allocations made without conditions see also Nuremberg Tax Court, judgment of 22 January 2025 (3 K 760/22), final.
The three tiers and the criticism of paragraph 46 reflect our own legal view; it departs from the view of the tax authorities. This article is not advice on an individual case. Where this English text and the German version differ, the German version governs.