The most common error in crypto accounts is quickly described: the price is looked up on 31 December and the difference is booked. That gets neither the result nor the tax base right — and it does not survive an audit.
The same construction appears in many sets of accounts: the holding is valued at the closing price on 31 December, the difference against the prior year is booked as income or expense, and that is that. It is simple, it is traceable — and it is wrong.
Crypto assets are subject to the principle of individual measurement. Every disposal is its own transaction, matched against its own acquisition cost. Anyone who bought and sold during the year at different prices cannot derive the result from the change in the holding at all: the same quantity at year end may come from entirely different acquisitions.
The difference is not academic. With active trading the two methods regularly diverge by substantial amounts — and in an audit the change-in-holding figure is the first position that stands out.
Coins cannot be individualised. Where matching in fact is impossible, an assumed sequence is needed — and with it the question of which one.
For inventory, German commercial and tax law contain express rules on the disposal sequence. Crypto assets are not inventory, however: they are not consumed, not processed and not as a rule held for sale, but carried as assets of their own kind among the business assets.
Because the special rules for inventory do not apply directly, there is no statutory requirement prescribing any particular sequence for crypto assets held as business assets. FIFO, LIFO and the average method are therefore all available — provided the method chosen is applied consistently and the choice is documented.
The tax authorities take a narrower view. In a case we are conducting, the Berlin-Brandenburg Tax Court ordered suspension of enforcement after the tax office applied FIFO where the taxpayer had calculated on LIFO. Our cases
With rising prices, FIFO produces higher profits, because the oldest and therefore cheapest acquisitions leave first. LIFO shifts the result by consuming the most recent acquisitions first. The average method smooths both. Which is more favourable for your business cannot be said in the abstract — we calculate the variants and then fix the choice.
Consistency matters: once chosen, the method must be retained. Switching from year to year according to the result will not be accepted in an audit.
The point most often overlooked in crypto accounts, and one that bites hard in a falling market.
The value at the balance sheet date must be expected to remain below acquisition cost on a lasting basis. A brief fall is not enough; what counts is a reasoned expectation that the impairment will persist.
The price history, the date of measurement, the price source used and the reasoning on permanence all belong on file. Without those records the write-down will be struck out in an audit.
If the price recovers later, the write-down must be reversed up to acquisition cost. A write-down defers the tax; it does not remove it.
The effect is nonetheless considerable: in a year of falling prices the tax base can be reduced noticeably without selling a single coin. Selling instead, in order to realise the loss, gives up the position — often to be bought back more expensively.
Moving crypto from private into business assets is a decision with substantial consequences — and it turns largely on the legal form.
A corporation is a separate taxable person. The contribution — whether open, against shares in a capital increase in kind, or hidden, without consideration — is a realisation event at shareholder level.
From that follows the decisive question: if the coins had already been held privately for more than a year, the realisation is tax free under current law. At company level, acquisition cost nonetheless arises at the value recognised — and with it a larger volume for depreciation and offset in future.
Where it goes wrong: where the one-year period was not yet met, where the value recognised is not evidenced, or where the steps come in the wrong order.
A partnership is transparent for tax purposes. Where the contribution is made against the grant of partnership rights, there is likewise an exchange-like transaction. Where it is made without consideration, the measurement rules for contributions apply — with an important restriction for assets acquired shortly beforehand.
The outcome therefore differs structurally from the GmbH route: the hoped-for value is not always achieved, and the effect on later taxation is a different one.
Where it goes wrong: where the structure is carried over mentally from the GmbH without checking the differing measurement rules.
Which route holds up in a given case depends on the holding period, the value recognised, the ownership structure and the intended further use. That decision belongs before the transfer — in practice it cannot be undone afterwards. It is one of the focal points of our initial consultation.
The way back out is harder than the way in — and regularly underestimated.
A GmbH has no withdrawal. What in a sole trader or a partnership is a withdrawal taken at market value does not exist for a corporation. Every transfer of crypto assets to the shareholder is either a distribution or a sale.
If the GmbH sells coins to its shareholder, the price must correspond to what an unrelated third party would have paid. What matters is the price at the moment of transfer, a traceable price source, and a written agreement made in advance.
If the price is lower, there is a constructive dividend to the extent of the difference. The consequence hits both levels: the company's income is increased accordingly, and the shareholder has a distribution to tax. With volatile prices this error arises easily, because days pass between the resolution and the transfer.
In an audit the formal requirements often decide faster than the substantive ones. Fail them and you lose the argument about measurement before it has begun.
Every transaction must be traceable from origin through to settlement, recorded completely and in good time, and incapable of later alteration without that being apparent. Exported spreadsheets subsequently reworked by hand do not meet this.
An audit may require direct and indirect access as well as the handover of a machine-readable data set. Your data has to exist in that form already, not be produced once it is requested.
Which exchanges and wallets are used, how the data reaches the books, which price source is used, which disposal sequence was chosen and why? Without this documentation the bookkeeping is open to formal attack — however carefully the figures were calculated.
Most crypto programs are built for private investors. Business assets need more: measurement at the balance sheet date, write-downs, a fixed asset schedule, an exportable data set. We are developing a solution for this together with 3Folio.Finance. The collaboration (in German)
The retention period covers raw data and exports too. Anyone relying on retrieving them from the exchange when needed is in a poor position once the platform shuts down. The Federal Ministry of Finance's current action plan also envisages an extension to fifteen years.