Cryptocurrency airdrops—free distributions of tokens to wallet holders—are popular in the crypto world. But in the EU, these “free” tokens come with tax obligations. Failing to report airdrop income can lead to penalties, audits, or legal issues. This guide breaks down exactly how to declare airdrops across EU nations, ensuring you stay compliant while navigating complex crypto tax rules.
Understanding Airdrop Income in the EU
In the EU, tax authorities classify airdrops as taxable income, not gifts. When you receive tokens without payment (e.g., for holding a specific cryptocurrency or participating in a promotion), their fair market value at the time of receipt is considered ordinary income. This applies even if you didn’t sell them. Taxation varies by country: Germany treats airdrops as “other income,” France as non-commercial profits, and Spain as capital gains. Always check local guidelines, as rules evolve with crypto regulations like MiCA (Markets in Crypto-Assets).
Step-by-Step Guide to Reporting Airdrop Income
Follow this process to accurately declare airdrops:
- Track Receipt Details: Record the date, token amount, and market value (in EUR) at the exact time of the airdrop. Use reliable exchanges or price trackers for valuation.
- Classify the Income: Determine if it’s ordinary income (most common) or business income (if received via professional crypto activities).
- Convert to Local Currency: Calculate the EUR value using exchange rates on the receipt date. Document your source for audit-proofing.
- Report on Tax Forms: Include the income under “Other Income” or specified crypto sections in your annual tax return (e.g., Germany’s Annex SO or France’s Form 2042 C).
- Document Future Sales: If you sell airdropped tokens later, report capital gains/losses separately using the original receipt value as your cost basis.
- Submit Deadlines: File by national due dates (e.g., May 31 in Spain, July 31 in Germany). Use certified tax software or consult a crypto-savvy accountant.
Tax Implications of Airdrop Income in the EU
Airdrops trigger income tax upon receipt, with rates aligning with your national tax bracket (e.g., 19-45% in Germany, 19-47% in France). Later sales incur capital gains tax—often lower but varying widely. For example:
- Germany: 0% if held >1 year; otherwise, up to 45% including solidarity surcharge.
- Portugal: 0% on gains if held >365 days (for non-professional traders).
- Italy: 26% flat tax on gains regardless of holding period.
Some countries exempt small amounts (e.g., Czech Republic’s €630/year threshold). Always verify current rules with local tax offices.
Common Mistakes to Avoid When Reporting Airdrops
Steer clear of these pitfalls to prevent audits or fines:
- Ignoring Small Airdrops: Even minor token values must be reported—accumulated amounts can breach thresholds.
- Incorrect Valuation: Using exchange rates from the wrong date or platform skews income calculations.
- Mixing Income and Capital Gains: Failing to separate airdrop receipt (income event) from subsequent sales (capital event).
- Overlooking Foreign Airdrops: EU residents must declare global airdrops, not just those from EU-based projects.
- Poor Record-Keeping: Not saving wallet statements, transaction IDs, or valuation proofs for 4-10 years (varies by country).
Frequently Asked Questions (FAQ)
1. Do I pay tax if I haven’t sold my airdropped tokens?
Yes. Tax is due on the EUR value when received, regardless of whether you sell.
2. How do I value airdrops from new tokens with no market price?
If no exchange listing exists, use the token’s predefined value or wait until it trades. Document this approach clearly.
3. Are DeFi airdrops treated differently?
Generally no—standard income rules apply. However, liquidity mining rewards may qualify as business income if frequent.
4. What if I received airdrops before moving to the EU?
Only airdrops received during EU residency are taxable. Declare them in your first tax return after relocating.
5. Can I deduct costs related to claiming airdrops?
Rarely. Unless airdrops are business income (e.g., for crypto influencers), associated fees (gas costs) usually aren’t deductible against ordinary income.
Always consult a tax professional for personalized advice, as EU crypto taxation remains fluid. Proper reporting protects you from penalties while supporting the legitimacy of the crypto ecosystem.
