{"id":1988,"date":"2026-05-07T10:17:33","date_gmt":"2026-05-07T08:17:33","guid":{"rendered":"https:\/\/finanz-forensik.de\/?p=1988"},"modified":"2026-05-07T10:20:36","modified_gmt":"2026-05-07T08:20:36","slug":"crypto-losses-in-cases-of-fraud-federal-fiscal-court-bfh-case-law-as-a-basis-for-argumentation","status":"publish","type":"post","link":"https:\/\/finanz-forensik.de\/en\/kryptoverluste-bei-betrug-bfh-rechtsprechung-als-argumentationsgrundlage\/","title":{"rendered":"Cryptocurrency losses in cases of fraud: Federal Fiscal Court (BFH) case law as a basis for argumentation"},"content":{"rendered":"
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Arguments in favor of the taxpayer from the highest court rulings<\/h2>\n

Clients who have suffered cryptocurrency losses due to fraud regularly find themselves in a difficult tax situation: The tax authorities often reject the deductibility of these losses, arguing that no tax-relevant sale has occurred. However, the case law of the Federal Fiscal Court provides robust avenues for successfully challenging this position in suitable cases. This article summarizes the key arguments for tax advisors, lawyers, and compliance officers. A supplementary practical overview on the issue of, <\/span>when losses from crypto fraud are tax deductible<\/span><\/a>, you can find more information in our related feature article.<\/span><\/p>\n

Tax classification of cryptocurrencies according to \u00a7 23 EStG<\/h2>\n

By judgment of 14.02.2023 (Ref. IX R 3\/22)<\/a> The Federal Fiscal Court has confirmed that cryptocurrencies are assets within the meaning of Section 23 of the German Income Tax Act (EStG). Profits and losses from the sale or exchange of cryptocurrencies can therefore constitute private sales transactions, provided the holding period for speculative transactions is observed. This ruling definitively clarifies the question of the fundamental taxability of crypto assets at the highest court level.<\/span><\/p>\n

This classification is central to the further argumentation. <\/span>Anyone who classifies cryptocurrencies as economic assets for tax purposes must consistently accept that their ultimate loss can also have tax consequences \u2013 provided the economic conditions for this are met.<\/b> This is precisely where the lines of argument in favor of the taxpayer begin.<\/span><\/p>\n

It is important to note that, according to Section 23 Paragraph 3 Sentence 7 of the German Income Tax Act (EStG), the offsetting of losses from private sales transactions is limited to similar types of income. Therefore, losses from crypto transactions can generally only be offset against gains from other private sales transactions. For clients who already realize ongoing crypto gains or have carried-forward gains from previous assessment periods, the recognition of a loss due to fraud has immediate tax implications. This situation must be examined in the initial engagement because it determines the economic relevance of the loss recognition in the specific case.<\/span><\/p>\n

Economic perspective as the central argument<\/h2>\n

The Federal Fiscal Court consistently assesses tax matters according to their economic substance, not their purely civil-law form. This principle also underlies Section 39 of the German Fiscal Code (AO) on beneficial ownership, as well as Section 41 Paragraph 1 AO, according to which ineffective legal transactions can nevertheless be relevant for tax purposes insofar as the parties involved allow their economic outcome to occur.<\/span><\/p>\n

Applied to crypto fraud cases, this means that anyone who transfers coins to a fake broker, a manipulated platform, or a phishing attacker and permanently loses their economic control has, economically speaking, carried out a transaction that is at least comparable to a sale. The fact that there is no legally valid purchase agreement does not preclude this economic assessment; rather, it is its typical application.<\/span><\/p>\n

In disputes with the tax authorities, the economic perspective rarely proves to be a sure thing. It must be presented convincingly, linked to the specific facts of the case, and supported by solid evidence. Simply invoking the principle is insufficient; what matters is demonstrating which economic effects actually occurred, when they materialized, and why recovering the coins is impossible. This connection between legal theory and factual evidence is the real key to a successful argument.<\/span><\/p>\n

Have this classification explicitly examined as a separate line of argument in every mandate \u2013 it is often overlooked by tax offices in practice.<\/b><\/p>\n

Federal Fiscal Court ruling on final asset losses and bad debts<\/h2>\n

A second line of argument arises from the case law of the Federal Fiscal Court (BFH) regarding definitive losses of assets in capital investments. In several rulings, the BFH has recognized that even the definitive default on a capital claim or the devaluation of shares can be significant for tax purposes, despite the absence of a classic sale.<\/span><\/p>\n

From this line of reasoning, it can be argued that the irreversible loss of cryptocurrencies due to fraud should also be treated as a final loss of assets from an economic perspective. However, this is contingent on the finality being demonstrably verifiable: as long as there are realistic chances of recovery, the tax authorities will reject recognition of the loss, citing the lack of finality.<\/span><\/p>\n

Methodologically, it must be considered that the case law on definitive losses was primarily developed in the area of Section 20 of the German Income Tax Act (EStG) (income from capital assets), while cryptocurrencies, according to the Federal Fiscal Court's (BFH) case law, fall under Section 23 of the EStG. The transfer therefore does not occur through direct application, but rather as an argument based on analogy and valuation: If the legislator and the courts recognize definitive asset losses in the case of capital investments because they are economically equivalent to a sale, the same valuation standard can be applied to assets within the meaning of Section 23 of the EStG. This argument based on analogy must be thoroughly developed in the client engagement and secured against potential objections from the tax authorities.<\/span><\/p>\n

Ability-to-pay principle and objective net principle<\/h2>\n

A third line of argument \u2013 one with constitutional implications \u2013 is based on the ability-to-pay principle and the objective net principle. The Federal Fiscal Court (BFH) consistently emphasizes that, for tax purposes, not only profits but also economically corresponding losses must be taken into account, insofar as they are attributable to the business sphere.<\/span><\/p>\n

If profits from cryptocurrency transactions are fully taxed, it is objectively unconvincing to systematically exclude corresponding final losses. This asymmetry can also be challenged on constitutional grounds, particularly under the principle of equal treatment enshrined in Article 3, Paragraph 1 of the German Basic Law.<\/span><\/p>\n

In arguments before the tax office and the tax court, it should be emphasized that denying the loss deduction effectively burdens the client solely with the profits from their crypto activities. Such a one-sided burden contradicts the fundamental principle of fair taxation. It cannot be justified by standardized considerations or practicalities, because modern blockchain forensics provides a reliable and verifiable account of the facts. The previously perhaps plausible assumption that crypto-related matters are structurally difficult to investigate and therefore justify blanket denials is no longer valid.<\/span><\/p>\n

Have this constitutional classification specifically examined in complex cases \u2013 it can be a key argument in objection or legal proceedings, especially in cases involving higher amounts in dispute.<\/span><\/p>\n

Overview of arguments in favor of the taxpayer<\/h2>\n

The individual lines of argument can be summarized in a streamlined sequence of examinations. The following should be regularly reviewed during the mandate:<\/span><\/p>\n