Taxing Crypto Lending: Your Personal Rate Instead of Withholding Tax, and the Right Federal Fiscal Court Case Number

Anyone who lends out Bitcoin or other crypto assets in return for a fee pays their personal income tax rate on it, not the flat withholding tax, according to the only ruling by a German tax court so far. The Cologne Tax Court decided this on September 10, 2025, under case number 3 K 194/23. The taxpayer has appealed on a point of law, the proceedings are with the Federal Fiscal Court, and until a decision comes down there the question stays open.

For you this has two very practical consequences. The income belongs on a different line of your tax return than many investors assume. And if your tax office assesses it the way the Cologne Tax Court has laid out, you can lodge an objection and have the proceedings suspended until the Federal Fiscal Court has ruled. For that, however, you need the right case number, and this is exactly where it goes wrong: a number is circulating in the professional literature for these appeal proceedings that belongs to a completely different case.

That is why cryptoticker.io counted the Federal Fiscal Court's database of pending proceedings in full on August 31, 2026. The result is set out below and it is unambiguous.

Crypto lending explained: what you are actually doing for tax purposes

Crypto lending means that you hand over crypto assets to someone else for their use for a set period and receive a previously agreed fee for it, usually paid out in the same cryptocurrency. You remain the economic owner but give up control temporarily. It is precisely this construction, the transfer of use for consideration, that decides the tax classification.

In everyday speech the whole thing is often called interest. In tax law that term is the core of the problem, because interest within the meaning of the Income Tax Act presupposes a monetary claim. How such a transfer works economically, and which risks beyond tax hang on it, we have written up in our overview of interest and risks in crypto lending. Here the sole subject is what the tax office does with your income.

Section 20(1)(7) or Section 22(3) of the Income Tax Act: the dispute over the category of income

Two provisions come into consideration, and they lead to very different tax burdens.

Section 20(1)(7) of the Income Tax Act covers income from other monetary claims of any kind. If income falls under it, the separate tax rate for investment income under Section 32d(1) applies, that is the withholding tax of 25 percent plus the solidarity surcharge. On top of that comes the saver's allowance.

Section 22(3) of the Income Tax Act covers income from services, insofar as it cannot be assigned to another category of income, expressly including income from occasional brokerage and from letting movable property. Anyone falling under this pays at their personal income tax rate, which in the upper progression zone lies well above the withholding tax rate.

The difference is no trifle. With identical income, the classification decides whether a flat rate or your individual marginal rate applies. For small amounts, Section 22(3) can even be more favourable, because a separate exemption threshold applies there. For larger amounts and high other income it is the other way round.

Cologne Tax Court 3 K 194/23: what the court decided on September 10, 2025

In the year in dispute, 2020, the claimant had lent out Bitcoin through the platforms Crypto.com, Hodlnaut and LEDN and received fees for it. The amount of the income was not in dispute between him and the tax office. The sole point at issue was which provision it falls under. The claimant wanted the withholding tax; the tax office applied the personal rate.

The 3rd Senate of the Cologne Tax Court dismissed the claim and assigned the income to Section 22(3). The load-bearing reasoning is linguistically unremarkable and far-reaching in substance. A monetary claim within the meaning of Section 20(1)(7) must be directed at a payment of money, that is at legal tender. The judgment puts it in these words: "Bitcoin do not represent claims directed at a payment of money, that is at legal tender within the meaning of domestic or foreign statutory currencies."

The court expressly refused to interpret the concept of money economically. The mere similarity of a transaction to the cases a provision covers is not, on this reading, enough to apply it. Anyone wanting to read the full text will find it in the decisions database of the North Rhine-Westphalian judiciary: judgment of the Cologne Tax Court of September 10, 2025, 3 K 194/23.

Important for the classification: the senate allowed an appeal on a point of law on grounds of fundamental significance under Section 115(2)(1) of the Fiscal Court Code. A court does that when it considers the legal question to need clarification. The judgment is therefore expressly not a full stop.

What the judgment does not address

The judgment says nothing about the exemption threshold in Section 22(3), nothing about deductible expenses, and nothing about the question once debated of whether a transfer of use extends the holding period for private disposal transactions. Anyone drawing conclusions on these points goes beyond what the court decided.

Annex SO instead of Annex KAP: where lending income goes on the tax return

The practical part follows from the assignment to Section 22(3). Income from services belongs in Annex SO, not in Annex KAP, where investment income is declared. Anyone who has so far entered their lending fees under investment income has them, on the Cologne line, in the wrong annex.

In practice that means you need, for each item of income, the date of receipt, the quantity received and the euro price at the time of receipt. Many platforms pay out daily or weekly, so several hundred individual entries quickly add up. A tax and portfolio tool takes this conversion off your hands and delivers a schedule you can put before the tax office. Even if you end up disagreeing with your tax office on the classification, you need this basis.

A remark for completeness, because it often gets lost: the fee is usually paid out in cryptocurrency. This receipt is an acquisition in its own right for the units received. If you sell them later, a separate holding period applies to those units, counted from the day of receipt. How categories of income are delimited from one another in crypto is also shown by our piece on when mining counts as private, commercial or other income.

The 256-euro exemption threshold under Section 22(3): what it means and what it does not

Section 22(3) sentence 2 of the Income Tax Act contains an exemption threshold: income from services is not subject to income tax if it came to less than 256 euros in the calendar year. The word threshold is to be taken literally here and differs from an allowance. If you stay below it, the entire amount is tax-free. If you reach 256 euros or more, the full amount is taxable, and not just the excess.

The threshold applies to all income from services taken together, not separately per platform and not separately per cryptocurrency. Anyone earning 100 euros through each of three providers is at 300 euros and therefore above the threshold. No saver's allowance is available here, because that belongs to investment income.

Offsetting losses against other income: the restriction hardly anyone knows about

Section 22(3) brings with it a restriction that usually gets lost in the debate about the tax rate. Losses from services may not be offset against income from other categories. They can only be set against surpluses of the same kind, and then in the same year, in the previous year or in future years.

For lending income this matters when a platform fails and holdings do not come back. Whether such a failure even leads to a loss within the meaning of this provision is a separate question that the Cologne judgment does not answer. All that is certain is that the offsetting is narrower than for investment income. Anyone selecting offers by their yield should think the default question through as well; a comparison of lending providers shows how differently collateral and terms are structured.

Our own analysis: which crypto proceedings are really pending at the Federal Fiscal Court

cryptoticker.io carried out this analysis itself on August 31, 2026.

Method in one sentence: we retrieved the public database of pending proceedings at the Federal Fiscal Court in full, that is all 308 results pages individually, and searched the entries listed there for proceedings on crypto assets.

Objects examined: 3,077 entries. They are spread across 2,234 proceedings at the Federal Fiscal Court itself and across proceedings at other courts that the Federal Fiscal Court also lists, among them 273 at the Court of Justice of the European Union, 351 at the General Court of the European Union, 214 at the Federal Constitutional Court, plus individual proceedings at the European Court of Human Rights and at the Joint Senate of the Supreme Federal Courts.

Result: exactly two of these entries concern crypto assets.

VIII R 22/25, added to the database on January 20, 2026. The relevant provisions are given as Section 20(1)(7) and Section 22(3) of the Income Tax Act. The legal questions there read: whether income from crypto lending is to be assigned to income under Section 20(1)(7) or to income under Section 22(3), and whether cryptocurrencies such as Bitcoin are comparable to foreign currencies. The judgment of the Cologne Tax Court of September 10, 2025 (3 K 194/23) is named as the lower instance, the appellant is the taxpayer, and the appeal was allowed by the tax court. This is the case in question: entry on VIII R 22/25 in the Federal Fiscal Court's database.

IX R 27/21, added on December 20, 2021. Here the question was whether a cryptocurrency falls under the element of another asset within the meaning of Section 23(1) sentence 1 no. 2 sentence 1 of the Income Tax Act, and whether there is a structural enforcement deficit at platforms abroad. The lower instance was the Baden-Württemberg Tax Court with its judgment of June 11, 2021 (5 K 1996/19). The database entry notes: proceedings concluded by withdrawal of the appeal.

Of the two crypto cases, therefore, only one is still open.

What this analysis cannot do

Three limits belong with it. First, the case descriptions in the results list are shown truncated; a case that mentions crypto assets only in the cut-off part can escape a keyword search. We therefore additionally went through individually all 30 appeal proceedings of the VIII Senate with case numbers from the 2025 and 2026 years, because this senate is responsible for investment income. Second, the database only lists proceedings that the Federal Fiscal Court considers to be of general significance; it is not a complete register of all appeals received. Third, it is a snapshot as at the time of retrieval and is continuously updated.

VIII R 22/25 instead of VIII R 23/25: why the right case number decides the suspension

Here lies the practically most important point of this article. In several professional articles on the Cologne judgment, the appeal proceedings are given the case number VIII R 23/25. That case number exists, but it belongs to a different case.

Under VIII R 23/25 the Federal Fiscal Court is running proceedings that were added to the database on August 20, 2026 and that concern the question of whether contributions to the value credit on a working time account held by a controlling shareholder-managing director are to be assigned to investment income or to income from employment. The provisions given there are Section 20(1)(1) sentence 2 and Section 11(1) sentence 1 of the Income Tax Act, the lower instance is the Saxon Tax Court with its judgment of May 7, 2024 (1 K 1826/15), and the appellant is the administration. This case has nothing to do with crypto assets.

How the mix-up came about cannot be established from outside, and we assert nothing about it. For you, only the consequence counts: anyone applying in an objection for suspension of the proceedings by reference to VIII R 23/25 is naming a case in which their own legal question is not being heard at all. A tax office that reads the application closely can therefore reject it. So take the case number from the source that maintains it, and not from a professional article.

Objection and suspension of proceedings under Section 363(2) sentence 2 of the Fiscal Code: how it works

The sequence is manageable once you know the order.

First the deadline. You can lodge an objection against a tax assessment within one month of notification. Notification is not the day you open the letter, but the point in time laid down by law after posting. Once the deadline has passed, the assessment becomes final, and a later ruling by the Federal Fiscal Court will no longer help you for that year.

Then the suspension. Under Section 363(2) sentence 2 of the Fiscal Code, objection proceedings are suspended by operation of law insofar as proceedings on the constitutionality of a legal provision or on a legal question are pending at the Court of Justice of the European Union, at the Federal Constitutional Court or at a supreme federal court, and the objection is based on them. The Federal Fiscal Court is a supreme federal court, and VIII R 22/25 is such pending proceedings.

In practice that means the objection has to name the legal question and the case on which it relies. Your assessment then stays open until the Federal Fiscal Court has ruled. If the decision goes in your favour, it takes effect on your open case. One point that should not be suppressed: suspension does not mean a stay of enforcement. The tax assessed initially remains due unless you additionally apply for a stay of enforcement, and that application has requirements of its own.

Because deadlines and wording come together here, this is the point at which tax advice usually pays for itself. This article does not replace it.

What is settled and what remains open in crypto lending

What is settled is the state of the case law: a tax court has decided that income from crypto lending falls under Section 22(3), and has allowed an appeal. It is also settled that this appeal is being heard at the Federal Fiscal Court under VIII R 22/25, with the Cologne decision as the lower instance.

What is open is how the Federal Fiscal Court will decide. Open with it is the second question raised there, whether cryptocurrencies are comparable to foreign currencies; answering it reaches beyond lending. No date for the oral hearing is noted in the database as at the time of retrieval, and how long appeal proceedings take cannot be predicted seriously.

Also open is how the tax administration handles the question. The Federal Ministry of Finance's circular on the income tax treatment of crypto assets of March 6, 2025 is the basis the offices go by. Whether and how it will be adjusted after a decision by the Federal Fiscal Court is currently not foreseeable. Anyone wanting to see how uncertain such classification questions are with new products will find a related example in our piece on tokenised stocks and their taxation in Germany.

What you should not derive from all this: that waiting pays. The assessment for a year becomes final regardless of how a case on the same question later turns out.

Staking, airdrops and mining: why the answer there can be a different one

The Cologne decision concerns the transfer of use for consideration. It cannot be transferred without more to every other form of income, even where platforms group them under a common name such as Earn.

With staking you lock your units in the protocol in order to support the security of a network; in the basic case there is no contracting party to whom you hand them over for use. With delegated staking through a provider, the contractual arrangement can move closer to a transfer again. With mining the classification hangs on the scale and organisation of the operation and reaches as far as commercial activity. For your own return that means: check for each product what you are actually doing contractually, instead of relying on the name the platform gives it. Which providers offer which form of income is shown by an overview of staking platforms.

The question of whether a transfer of use extends the holding period for private disposal transactions to ten years has been defused in practice since the Federal Ministry of Finance's circular of March 6, 2025. It still crops up in older guides, and anyone reading it there should check the date of the text.

DAC8 and data matching: why the question becomes practical from 2026

Until recently the classification of lending income was a theoretical question for many, because the tax administration often simply did not learn of the income. That is changing. Since January 1, 2026, the reporting obligation for crypto-asset service providers has applied in the European Union, based on the DAC8 directive and implemented in Germany through the Crypto Asset Tax Transparency Act. Regulated providers report customer data and transactions to the tax authorities, who can match them against tax returns.

For you that shifts the order of the questions. What counts first now is whether a declared item is classified correctly. Whether it comes to light at all has become the weaker question. A position sitting in the wrong annex is more likely to stand out in a data match than one that sits correctly and whose classification you are keeping open by objection.

Taxing crypto lending: what to take away

Three steps, in this order.

1. Draw up your income in full. For every year affected, pull the lending receipts with the date, quantity and euro price at the time of receipt. If you stay below 256 euros in the calendar year, the exemption threshold in Section 22(3) sentence 2 applies and the question of the tax rate settles itself for that year. If you are above it, you need the schedule anyway. A crypto tax and portfolio tool takes on the conversion and delivers a schedule that will withstand a query.
2. Declare it in the right annex. According to the only tax court decision so far, the income belongs in Annex SO as income from services and not with investment income in Annex KAP. Bear in mind that the units received are acquired at the same time and that a separate holding period begins for them. Which providers still offer lending to private customers at all, and on what terms, is shown by our comparison of lending providers.
3. Check the assessment and keep an eye on the deadline. If the tax office applies your personal rate and you want to keep that open, lodge an objection within one month of notification and apply for suspension under Section 363(2) sentence 2 of the Fiscal Code by reference to the case pending at the Federal Fiscal Court, VIII R 22/25. Not VIII R 23/25, which is a different case. If you also do not want to pay for the time being, you additionally need an application for a stay of enforcement. Whether your income even comes from lending or from staking is something you clarify beforehand from your contractual terms; an overview of staking providers helps with the distinction.

(As of August 31, 2026. This article is not investment advice and not tax advice. Prices and fee structures change; check the terms with the provider before you buy.)