Bitcoin Taxes spreading across Europe: France to join Italy

France just announced they will include Bitcoin as a taxable asset under their wealth tax, which means French residents will need to pay taxes on their Bitcoin's unrealized capital gains.

French lawmakers are considering a groundbreaking tax proposal that would fundamentally change how cryptocurrencies are taxed in the country. The new legislation would classify digital assets like Bitcoin as "non-productive property," placing them in the same category as dormant real estate and luxury items for tax purposes.

The most significant change in the proposed legislation is the introduction of taxes on unrealized gains.

Under this system, cryptocurrency holders would be required to pay taxes on the increased value of their digital assets even if they haven't sold them. This marks a substantial departure from the current taxation framework, where profits are only taxed when they are realized through sales or conversions to traditional currency.

Under the existing system, French cryptocurrency investors face taxation only when they convert their digital assets to fiat currency or receive profits from activities such as mining.

Occasional investors currently pay a flat tax rate of 30% on capital gains, while professional traders and miners operate under different tax regimes that can reach rates as high as 45%.

Senator Sylvie Vermeillet, who is sponsoring the proposal for the 2025 budget, argues that this change would create more consistency in France's wealth tax system by treating cryptocurrencies similarly to other wealth categories.

If approved by the French National Assembly, the new "unproductive wealth tax" would apply to cryptocurrency holdings alongside other assets that fall under France's wealth tax regime.

This latest move follows Italy's recent adoption of a similar measure, making it the second major European economy to implement direct taxation on Bitcoin capital gains.

Some weeks before, France also started tinkering with the idea of implementing citizenship-based taxation.

Citizenship-based taxation (CBT) is a tax system where a country taxes its citizens on their worldwide income regardless of where they live or work. This means citizens must file tax returns and potentially pay taxes to their country of citizenship even if they permanently reside abroad and earn all their income in other countries.

The United States is the most notable example, being one of only two countries in the world (along with Eritrea) that practices citizenship-based taxation.