Bitcoin
German Tax Treatment of Bitcoin Collateral and Loan Liquidations
Pledging Bitcoin as loan collateral does not trigger a taxable disposal under German law unless the lender liquidates the assets.
Pledging Bitcoin as collateral for a loan is not classified as a taxable disposal under German tax law. Because the borrower receives a repayable loan rather than consideration for an asset transfer, economic ownership is retained under Section 39 of the Fiscal Code, and the standard one-year holding period continues to run.
Under Section 23 of the Income Tax Act, crypto assets are categorized as other assets, meaning gains are taxable only if a disposal occurs within twelve months of acquisition. A standard collateral arrangement does not generate a taxable gain or loss upon inception.
Tax liabilities arise if the lender executes a forced liquidation of the collateral. In that scenario, the liquidation is treated as a disposal, and any gains are subject to taxation if the event occurs before the underlying assets have been held for more than one year.
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