## Understanding DeFi Taxation in France
Decentralized Finance (DeFi) has revolutionized how users earn yield through lending, staking, and liquidity pools. However, in France, these earnings are subject to strict tax rules. The French Tax Administration (DGFiP) treats cryptocurrencies as **movable property**, meaning DeFi activities may trigger capital gains tax, income tax, or social charges.
## How France Taxes DeFi Yield
### 1. Capital Gains Tax (Plus-Value)
– Applies when selling crypto acquired via DeFi yield for fiat or other cryptocurrencies.
– Taxed at a **30% flat rate (PFU)**: 12.8% income tax + 17.2% social charges.
– Calculated as `Sale Price – Acquisition Cost`.
### 2. Income Tax (Revenu)
– DeFi yield (e.g., staking rewards, liquidity pool fees) may be classified as **non-commercial profits (BNC)**.
– Taxed at progressive rates up to **45%** + 17.2% social charges.
– Example: Earning €1,000 from yield farming could incur €450 income tax + €172 social charges.
### 3. Exceptions
– Occasional traders (fewer than 10 transactions/year) may qualify for PFU.
– Professional crypto traders pay taxes under industrial/commercial profits (BIC).
## Reporting DeFi Yield: Step-by-Step
1. **Form 2086**: Declare capital gains/losses.
2. **Form 3916**: Disclose foreign crypto accounts (e.g., Binance, MetaMask).
3. **Record-Keeping**: Track dates, amounts, wallet addresses, and transaction IDs.
4. **Deadline**: File by May 31, 2024, for 2023 earnings.
## Penalties for Non-Compliance
– **40% fine** on undeclared income.
– Criminal charges for tax evasion (up to €500,000 fines + 5 years imprisonment).
– Increased audit risk for crypto holders.
## Tax Optimization Strategies
– **Offset Losses**: Deduct capital losses from gains (e.g., -€2,000 loss reduces taxable gains by €2,000).
– **Hold Long-Term**: No reduced rates, but losses can be carried forward 10 years.
– **Use PFU**: If eligible, opt for the 30% flat tax instead of progressive rates.
## Frequently Asked Questions (FAQ)
### 1. Is DeFi yield taxed if I reinvest it?
Yes. Tax applies when you earn yield, even if reinvested.
### 2. How is staking taxed in France?
Staking rewards are taxed as income (BNC) at progressive rates + social charges.
### 3. Do I report transactions on foreign DeFi platforms?
Yes. Declare all global earnings via Form 3916.
### 4. Can I deduct gas fees?
Yes. Transaction fees reduce taxable gains.
### 5. What if I use privacy tools like Tornado Cash?
Full disclosure is still required. Opaque transactions may trigger audits.
### 6. Are stablecoins taxed differently?
No. All crypto assets follow the same tax rules.
## Conclusion
French taxpayers must report DeFi yield accurately to avoid penalties. Consult a crypto-savvy tax advisor for complex cases. Keep detailed records and file forms 2086/3916 by the deadline.
