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Taxation of staking: towards legal clarification

Taxation of staking: towards legal clarification

An amendment aimed at harmonising the taxation of staking income with that of mining has been approved by the French government. This income will soon be considered as non-commercial profits (BNC).

After years of vagueness, the tax classification of income from staking could very soon be clarified.

A few days ago, MP Éric Bothorel (Renaissance) tabled an amendment to the 2024 Finance Bill, currently being debated in the National Assembly, which plans to bring the taxation of income from staking into line with that of mining.

The amendment, contested by some players in the ecosystem, has every chance of passing since it has received the backing of the government, and the Prime Minister, Elisabeth Borne, has planned to use Article 49-3 of the Constitution, which provides for dispensing with a vote in Parliament.

If all goes according to plan, from next year (for the 2025 tax return on 2024 income), the taxation of income from staking will therefore be aligned with that from bitcoin mining, and will be classified in the non-commercial profits (BNC) category. A rather logical alignment, as this income is akin to a kind of salary paid by a blockchain protocol in exchange for securing it.

The taxation of each taxpayer will depend on their rate on the progressive income tax scale, with a 34% allowance on gains received if they are less than €77,000. "Until now, we have had a framework that was fuelled by decisions by the Conseil d'État, the idea was to anchor all this in hard law", stresses Éric Bothorel.

Declaration procedures

For taxpayers, the procedure will be as follows: "Income will have to be declared at the time when the taxpayer voluntarily chooses to receive it on his wallet ("claim" in English) or on the account of an exchange platform", explains Pierre Morizot, CEO of Waltio, a service specialising in helping digital assets to be declared for tax purposes.
As long as they are not "claimed", i.e. claimed, there will be no taxation.

👉 Here's a concrete case to make it clear: if you receive 1 ether (ETH) at some point during the year, you will have to declare its amount in euros at the time of receipt and pay the corresponding tax. This is the case even if there is no conversion into euros (or any other legal currency).

For those who receive staking income more frequently (some platforms pay staking income daily), the calculation will have to be made each time.

Faced with this complexity, tools like Waltio could prove useful. It should also be noted that many exchange platforms and wallet providers are developing automated reporting solutions for their users.

"The text is not yet perfect and quite a few things will have to be clarified later, nevertheless we are taking the right path," points out MP Éric Bothorel.

The specific case of liquid staking

There are now quite a few questions surrounding liquid staking systems, such as Lido, which pays out staking income via a digital representation in the form of stETH. Should these stETH be considered as staking income or as simple cryptos?
"The simplest, but crude, solution would be to consider that this is just a crypto-crypto exchange and is therefore not taxable," says Alexandre Lourimi, a partner lawyer for the firm ORWL. "This would be tantamount to dismissing the reality of the operation, but the risk does not seem to me to have been established", he continues, while pointing out that things can change.

"A more compliant solution would be to value the return in euros in the same way as traditional staking and to declare it, whether or not the staked ETH have been recovered", he adds cautiously.

Similar views from Pierre Morizot: "I think we need to look at the spirit of the law. The legislator's intention is to tax a passive gain on a portfolio. The tax authorities don't have the knowledge to differentiate between staking and liquid staking. I therefore believe that gains received should be taxable. If we were to take the opposite position, it would also be defensible, but with greater difficulty..."

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