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Airdrops decrypted: what are we talking about?
Airdrops correspond to free distributions of tokens or cryptocurrencies to a specific category of people. These distributions can be random Or conditioned. For example, holding a minimum amount of specific crypto, registering on a platform or participating in a promotional operation. THE airdrops are a way for project promoters to draw attention to their initiative. Or to retain their community and encourage the adoption of new technologies.
The question of their taxation has become prominent due to the increasing number of airdrops being organized in the ecosystem. Recently, the Arbitrum project, for example, has been talked about a lot. And many projects, like ZkSync or Layer 0, probably plan to do so as well. Despite this excitement around the mechanism, holders, as well as the entrepreneurs and projects that organize them, face tax challenges related to how to report and process these free distributions.
The uncertainty surrounding the taxation of airdrops in France
Unlike France, some countries have already set up specific regimes for the taxation of airdrops. For example, in the United States, airdrops are considered a taxable income. Recipients must declare the market value of the tokens received at the time of allocation. In Germany, airdrops are also subject to income tax. But only when they are transferred (sold), and this, after one year of detention. These regimes offer better visibility and legal certainty both to owners and to project promoters. This allows them to comply with tax requirements without fear.
Unfortunately, France is silent on the subject. The gray areas surrounding the taxation of airdrops in France are linked to the fact that the field is still recent and evolving. Despite advances in French regulations, there is still no tax regime specific to airdrops. This situation can create difficulties for holders of cryptocurrencies seeking to comply with tax laws.
The challenges of the taxation of airdrops are particularly important for the beneficiaries who can sometimes receive substantial amounts. In the absence of regulations, the latter may be confronted with the tax authorities in the event of non-compliance or errors in their declaration.. Indeed, in some cases, the French tax authorities could potentially consider airdrops as taxable income. Thus resulting in tax consequences for holders who do not declare them correctly. It is therefore crucial for the players in the world crypto to have an appropriate fiscal framework.
In the absence of a specific regime, how to declare airdrops?
Crypto holders must navigate an uncertain tax environment to declare income generated by airdrops, in the absence of a specific tax regime in France. The solutions proposed in this article fall under the most likely interpretation, although this remains subjective. It is therefore possible that future legislative developments contradict them.
Several situations can arise for the recipients of airdrops. The tax treatment depends on factors such as the randomness or not of the’airdrop and actions taken to obtain it.
- An airdrop is considered random when the beneficiary has not taken any specific steps to obtain it and it is allocated in an unpredictable manner. When the airdrop is random, it is generally considered that no taxation is due at the time of allocation. However, a tax will be due upon transfer (sale). In this case, the capital gains of individuals will be taxed on the flat tax, at an overall rate of 30% (composed of 12.8% income tax and 17.2% social security contributions). The acquisition value of the tokens, during this transfer, should be the value of the tokens at the time of their allocation.
- THE airdrops are considered non-random when recipients performed specific actions to obtain them. The non-random nature of the airdrop means that the receipt of cryptos is not due to chance, but rather to the performance of specific actions on the part of the recipient. If the execution of a stock guarantees future airdrop award, it could be considered a taxable income. In this case, the applicable taxation could be that of non-commercial profits (BNC). As a reminder, the category of BNC includes not only the benefits of the liberal professions, charges and offices whose holders do not have the status of trader, but also allprofits having the character of income and not subject to tax in another category (art. 92 of the General Tax Code). In other words, the BNC category is a category“tote“. Where does income that cannot be taxed in another tax category come in? Recipients of non-random airdrops will have to declare the amount received in their tax return (with application of the progressive scale).
What future for the taxation of airdrops?
The Association for the Development of Digital Assets (ADAN) in France requested clarification from the government in 2021 on the taxation of airdrops. ADAN proposes to confirm that these attributions ofassets digital do not constitute a chargeable event for tax and that only their transfer for consideration is likely to generate taxable income, in accordance with article 150 VH bis of the General Tax Code. For the time being, no clear position has been adopted. It should be noted that the Market in Crypto-Assets (MiCA) regulation which came into force in April 2023 devotes an article to free distributions of crypto-assets.
The article Taxation of airdrops in 2022 – 2023: Demystifying the airdrop and its tax treatment in France appeared first on Corner Academy
