Note: this is a contribution according to old legal situation! In the meantime, the ten-year speculative period for lending has been lifted (see BMF letter of 10.05.2022 paragraph 63).

Anyone who owns cryptocurrencies uses them in many cases to generate additional revenue. A known possibility for this is so-called lending, in which the virtual currency is temporarily transferred to other people. The consideration consists in a corresponding compensation, which is usually also paid out in coins. Lending usually generates taxable income.

1.Lending – what exactly is it?

When lending, cryptocurrency holders lend their coins to other, usually anonymous, users. For mediation serve corresponding portals such as Binance, to name only once the world's largest trading platform. As a result, it is a form of P2P loan (private loan) with the difference that instead of a so-called fiat currency such as Euro virtual currencies are lent.

The lender of the coins (“Lender”) receives a compensation agreed in advance for the period of the transfer. It is regularly paid out in the corresponding virtual currency and is, for example, 10%. While the other party, the so-called Borrower, can freely dispose of the crypto currency and use it for transactions, among other things, they are no longer available to the lender.

At the end of the agreed lending period, the lender will then receive the lent currency including the agreed interest from the borrower.

Lending is therefore an interesting way for buy-and-hold investors to generate additional revenue with their cryptocurrencies. Because during the time in which the coins would actually only "ly around", they now generate interest. However, this also involves the risk of default. If the Borrower cannot pay the repayment of the currency itself or the interest, the lender’s claims are usually lost.

2nd Tax Treatment of Lending under the EStG

In principle, income from lending is subject to the same standards as for all other activities carried out by taxpayers with a view to making a profit. The Federal Ministry of Finance (BMF) specified the relevant facts in the letter of 10.05.2022. First of all, virtual currencies are also economic goods. Unlike vehicles and real estate, however, they are not subject to wear. Corresponding depreciation (for example according to § 7 EStG) is therefore inadmissible.

Income from lending is also attributable to either an operating or other type of income. The classification is based on the overall character of the taxable person’s activity.

2.1. Lending as a commercial source of income

The legislator fundamentally denies a commercial activity at Lending, as this is – in isolation – “private asset management”. However, mining, i.e. the “production” of coins by calculation processes, can be a commercial activity. This is usually the case when a natural person