How does chain.report assess liquidity mining for tax purposes?

The Federal Ministry of Finance has not issued a conclusive tax clarification for the taxation of liquidity mining in Germany. At chain.report, we follow tax advisors and the most recent court rulings. The following tax treatments are applied:

1. Contributing coins / tokens to a liquidity pool: Not taxable

2. Liquidity mining income received: Taxable as other income within the meaning of § 22 Nr. 3 EStG at the time of receipt

3. Withdrawing coins / tokens from the liquidity pool: Not directly taxable

4. Gains and losses in connection with impermanent loss: Balancing in the liquidity pools creates a gain and a loss on the other side. At the time of withdrawal, this is assessed like an ordinary exchange between cryptocurrencies

The later disposal of the liquidity mining income received is assessed as taxable within the meaning of § 23 Abs. 1 Nr. 2 EStG.