Germany Banning Derivatives Trading with its New Tax Law Starting 2021

You better make only profitable trades; losses are severely publishable by law.


Germany has made changes to its law that no longer allows the losses from income from forward transactions, crypto derivatives trading to be deductible.

In 2020, regulators around the world tightened their noose on cryptocurrencies, and Europe is making a move against derivatives trading.

The new regulation within the framework of the annual tax law has been approved. Under this new law, the limit of losses from forward transactions that can be offset against profits has been increased to up to EUR 20,000, from the previous EUR 10,000, reported a German publication site.

“If the trader realizes option transactions with a total profit of 1,000,000 euros and transactions with a total loss of 800,000 euros in one year, he will not only have to pay withholding tax on the profit of 200,000 euros but also on 990,000 euros from 2021,” explained the tax advisors.

This is because only 10,000 euros can be offset from the total losses of 800k euros, and 790k euros are carried forward to the following years.

God forbid if someone made more in losses because then it gets even worse. Not only did you lost assets in a trade, but you will also suffer from a significant tax burden. Independent researcher Hasu, noted,

“At the bottom line, this law effectively bans all derivatives trading starting 2021. But it's even worse than that because people are still allowed to trade and generate tax debt far in excess of their profit. I'm in shock about the malice behind this.”

The regulators have already announced that warrants and certificates are not classified as futures and CFDs are forward transactions.

The new regulation that is to be applied from January 1st, 2021, will increase the tax burden of private investors significantly, but the good thing is “the courts have to clarify to what extent this provision is constitutional.”

“As others have pointed out, this law is likely unconstitutional, and it's a huge surprise to see it ratified. Expect a wave of lawsuits against German gov + good chance it will be overturned. But this can take months to years, so be careful in the meantime.”

Hasu Researcher

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