France’s Finance Committee Moves to Tax Crypto Transactions
This week, France’s National Assembly Finance Committee voted on a couple of amendments that could significantly impact crypto holders, specifically regarding swaps into stablecoins and an exit tax for wealthy individuals moving abroad. The first amendment, if it goes through, would treat transactions where crypto is swapped for MiCA-regulated stablecoins as taxable sales beginning January 1, 2027. Additionally, another amendment extends the exit tax to households holding more than €800,000 worth of crypto.
Interestingly, despite these proposed amendments, the committee rejected the revenue section of the budget on October 9, with the vote showing 31 against and just 3 in favor. This means the full Assembly will start discussions based on the government’s original text—without the new amendments.
One amendment allows investors to carry any crypto losses forward for up to 10 years, which seems like a logical step since many stocks already have similar provisions. The Assembly will debate this revenue section starting October 13, followed by a vote scheduled for October 20.
It’s worth noting that the amendments, though passed by the committee, won’t automatically carry over to the full Assembly’s discussions. Supporters will need to reintroduce them when debates commence later this month. However, it’s still not clear if these changes will gain enough traction through the legislative process.
The stablecoin amendment was spearheaded by Nicolas Sansu, alongside 16 co-signers, aiming to address what they see as a “gap” in existing legislation. Currently, in France, swapping Bitcoin for a stablecoin doesn’t trigger a tax because taxable events only occur when profits are converted into regular cash or spent. From 2027, swapping into stablecoins would be considered a sale, meaning gains would be taxed based on the original purchase price.
While the amendment doesn’t specify a tax rate, it implies adherence to France’s flat tax, which recently rose to 31.4% as a result of the social security financing law enacted earlier this year. Supporters of the amendment argue that they are merely applying existing tax laws to cover an area that had previously been overlooked.
The authors of the amendment contend that since stablecoins can be used for everyday transactions or to purchase other tokens, the current exemption for swapping into them is not justified, allowing potential gains to go untaxed.
Another amendment proposed by Sansu seeks to apply the country’s exit tax to crypto assets, meaning that individuals who haven’t realized their crypto gains would still face a tax obligation if they relocate abroad. This amendment is designed to ensure that high-value crypto holders aren’t benefiting from a loophole that allows them to evade taxes that would apply to regular financial assets.
Details within the proposed exit tax indicate that it would apply to taxpayers whose combined crypto assets exceed €800,000, assuming they have been French tax residents for at least six out of the past ten years. Interestingly, the asset threshold aligns with that used for traditional shares. It appears the payment deferral rules for cryptocurrencies would resemble those already in place for stocks.
However, swaps between cryptocurrencies—without any cash component—would not be subject to the exit tax. Taxpayers would need to provide a comprehensive report of all crypto assets they hold on the date of their move, including those in self-custody.
Supporters of the exit tax amendment argue that there is currently an inconsistency; directly held crypto is escaping taxation while shares are not, and they emphasize how simple it can be to transfer digital assets across borders.
A separate measure was introduced by Daniel Labaronne, which would allow individuals to carry forward crypto losses to offset future gains, mimicking the provision already available for stocks. This measure has also gained committee approval, although details remain murky.
The Assembly previously adopted a different crypto tax framework that establishes a 1% annual levy on “unproductive” wealth over €2 million, categorizing digital assets alongside other luxury items like gold and yachts. Some experts feel this could be economically unjust for early token holders.
Additionally, Coinbase announced plans to delist certain stablecoins not complying with MiCA regulations by the end of 2024, steering European customers towards compliant options.
The discussions surrounding the budget’s revenue section begin on October 13, with a vote planned for October 20. If the proposed amendments resurface and are successfully passed, the new rules regarding stablecoin transactions and exit taxes could take effect on January 1, 2027.
