Anyone who has traded Bitcoin, Ethereum or other cryptocurrencies in recent years without reporting the resulting gains to the German tax authority is exposed to serious legal risk. Gains from cryptocurrency trading are taxable in Germany, and the tax authorities are enforcing this with increasing consistency. There is, however, a way out: German tax law offers those affected the possibility of a voluntary self-disclosure (Selbstanzeige) that can eliminate criminal liability — provided certain conditions are met. Those who fully correct incomplete or omitted declarations and pay the outstanding tax can still avoid criminal prosecution, as long as the disclosure is made in time and is complete in every respect. Given the growing capacity of the tax authorities to trace crypto transactions, those affected should not hesitate to seek legal advice.
Schlun & Elseven Rechtsanwälte advises and represents clients at every stage — from preparing a voluntary self-disclosure and pursuing recourse claims against a negligent tax advisor, to active criminal defense in ongoing investigation proceedings. Our tax criminal law lawyers are experienced in the procedures of the tax investigation unit (Steuerfahndung), the penalties and criminal matters office (Bußgeld- und Strafsachenstelle, BuStra), and the public prosecutor’s office — as well as in the specific technical and legal challenges of the crypto market. We represent our clients with discretion, competence, and purpose, so that a tax oversight does not lead to criminal consequences.
Tax Liability for Bitcoin and Other Cryptocurrency Gains
Cryptocurrencies such as Bitcoin and Ether are classified under German tax law as other economic assets (sonstige Wirtschaftsgüter). Because this classification does not follow directly from the wording of Section 23 of the German Income Tax Act (Einkommensteuergesetz, EStG), it was the landmark ruling of the Federal Fiscal Court (Bundesfinanzhof, BFH) — specifically its judgment of February 14, 2023 (IX R 3/22) — that finally clarified the legal position. Gains from the sale or exchange of cryptocurrencies are subject to income tax as private disposal transactions under Sections 22 No. 2 and 23(1) sentence 1 No. 2 EStG — but only where fewer than twelve months have elapsed between acquisition and disposal. This holding period is therefore a decisive factor: those who hold their crypto assets for more than one year will generally sell them free of tax.
The Crypto Trap: Why the Tax Authority Already Knows About Your Bitcoin Gains
Those who believe that crypto transactions are anonymous and invisible to the tax authority are mistaken. Anyone who moves cryptocurrency through regulated trading exchanges leaves a traceable trail. The tax authorities make use of bulk data requests (Sammelauskunftsersuchen), based on Sections 93, 97 and 208 of the German Fiscal Code (Abgabenordnung, AO), to obtain comprehensive transaction data from major exchanges such as Kraken, Coinbase, Bitpanda and Binance. The exchanges are legally required to hand over this data — and they do.
Beyond that, the blockchain itself is a publicly accessible and immutable ledger. Every transaction is permanently recorded and can be analyzed directly by the tax authorities, without any request to an exchange. International regulatory frameworks such as the Crypto-Asset Reporting Framework (CARF) and the EU Directive on Administrative Cooperation (DAC8) are further tightening reporting requirements for crypto service providers, making cross-border transactions increasingly transparent.
Those who wait in this situation risk a tax investigation being opened before they have taken any initiative themselves. At that point, the path to a voluntary self-disclosure is closed.
Immunity Through Voluntary Disclosure: The Last Chance to Correct the Record
The voluntary self-disclosure under Section 371 of the German Fiscal Code (strafbefreiende Selbstanzeige) is the only legal mechanism that can restore compliance and eliminate criminal liability — provided the conduct has not yet been detected. This so-called “golden gate” closes irrevocably the moment the tax investigation unit begins concrete investigations or a notice of audit has been served.
A voluntary disclosure is not, however, a simple letter to the tax office. It must be complete and accurate — with no gaps across all tax years and all crypto-related activities. That encompasses not only the purchase and sale of established coins such as Bitcoin and Ethereum, but also:
- Gains from the exchange of altcoins
- Income from staking, lending or liquidity mining
- Returns from DeFi protocols and yield farming
- Receipts from NFT sales, airdrops or hard forks
An incomplete voluntary disclosure is not a partial solution — it is void. A defective or incomplete declaration leads directly into criminal proceedings and can significantly worsen the starting position. The completeness of all information is therefore not a formality but the decisive condition for the disclosure to have its criminal-liability-eliminating effect. Our firm prepares your voluntary disclosure with the care and technical precision required for it to withstand scrutiny by the tax authorities.
When the Tax Advisor Gets It Wrong: Liability for Incorrect Crypto Declarations
Not everyone who failed to declare crypto gains correctly acted with intent. In some cases, clients provided their tax advisor with all the relevant data — and the advisor may have recorded it incorrectly, disregarded it, or simply not understood it. The tax complexity of crypto transactions continues to exceed the expertise of many traditional tax advisors.
This does not, however, initially change the position in criminal law: under German tax criminal law, it is generally the taxpayer who bears responsibility for the accuracy of their own declarations. But that need not be the end of the matter. Where it can be demonstrated that an advisor acted in breach of their professional duties, the resulting losses — including back taxes, interest, fines and legal costs — can be recovered from the advisor by way of a civil law damages claim.
Our firm examines both the criminal defense strategy and any civil law claims against the advisor in such cases. Those who placed good-faith reliance on professional advice should not be left to bear sole responsibility for the mistakes of others.
Criminal Defense: Avoiding a Conviction and House Searches
Where the tax investigation unit is already investigating, a search warrant has been executed or correspondence has been received from the penalties and criminal matters office, swift and measured action is essential. From that moment, a voluntary self-disclosure is no longer available — which makes effective criminal defense all the more important.
The central objective of our defense is always to have the proceedings discontinued or, where that is not possible, to prevent a criminal conviction. A range of defense strategies are available. Those who, for example, were unaware of any tax liability due to incorrect advice from a tax professional, or because of the genuine complexity of crypto accounting, did not act intentionally. Tax evasion requires intent — and it is that intent which must be challenged in the proceedings.
Our tax criminal law team accompanies clients from the first search through all communications with the tax investigation unit to the conclusion of the proceedings. Do not make any statements in investigation proceedings without legal representation — every word can be decisive.
The FIFO Method and Documentation: The Foundation of Your Defense
A successful defense in tax criminal proceedings depends critically on the quality of the documentation. What is standard practice in conventional accounting presents crypto investors with considerable practical challenges: hundreds or thousands of transactions over multiple years, across different exchanges, wallets and currencies, must be reconstructed without gaps and in a coherent and verifiable form.
For the purpose of calculating taxable gains on cryptocurrency in Germany, the FIFO method (First In, First Out) is applied as standard. Under this method, the coins acquired first are treated as disposed of first — a principle that, in complex transaction histories involving exchanges, wallet transfers and automated trading bots, is virtually impossible to apply manually without specialized software.
Schlun & Elseven uses professional crypto tax software to reconstruct transaction histories and works closely with specialized tax experts. The result is a legally robust body of documentation that we deploy in proceedings to present the client’s tax position transparently and coherently. Only on this solid foundation is a defensible legal position achievable — and only in this way can unjustifiably high tax assessments be effectively challenged.
If you have questions about your personal situation or want to know whether a voluntary disclosure is still available to you, the tax criminal law lawyers at Schlun & Elseven are available for a confidential initial consultation.
Practice Group: German Criminal Tax Law
Practice Group:
German Criminal Tax Law Cases
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