With the explosive growth of decentralized finance (DeFi), French investors are increasingly earning yield through staking, liquidity mining, and lending protocols. However, navigating the tax implications can be daunting. This comprehensive guide explains exactly how to report DeFi yield in France while complying with French tax regulations.
## Understanding French Tax Treatment of DeFi Yield
In France, DeFi earnings are classified as **”revenus de capitaux mobiliers”** (movable capital income) under Article 92 of the General Tax Code. Since 2019, these gains fall under the **Prélèvement Forfaitaire Unique (PFU)** – a flat tax rate of 30% that combines:
* 12.8% income tax
* 17.2% social contributions (CSG/CRDS)
This applies to all yield generated from:
– Liquidity pool rewards
– Staking returns
– Lending interest
– Governance token distributions
– Yield farming incentives
Exception: If your total investment income (including traditional assets) is below €2,000 annually, you may opt for the progressive income tax scale instead of PFU.
## Step-by-Step Guide to Reporting DeFi Yield
Follow this process to accurately declare your DeFi earnings:
1. **Track All Transactions**: Use crypto tax software (Koinly, CoinTracking) or spreadsheets to record:
* Date and time of yield receipt
* Amount received in cryptocurrency
* EUR value at receipt (using official exchange rates)
* Source protocol (e.g., Uniswap, Aave, Compound)
2. **Convert to Euros**: Calculate the euro value of each yield event using:
* Daily exchange rates from the Banque de France
* Or platform-specific rates documented in your transaction history
3. **Annual Summation**: Total all DeFi yield values in euros for the tax year (January 1 – December 31).
4. **Complete Tax Form 2042**:
* Box 2TR: Enter total DeFi yield under “Autres revenus distribués”
* Box 2CG: Report capital gains from crypto sales separately
5. **Pay PFU Tax**: The 30% flat tax will be automatically calculated based on your declaration. Payment deadlines follow standard income tax schedules.
## Critical Mistakes to Avoid
Steer clear of these common reporting errors:
* **Omitting small yields**: All earnings must be declared regardless of amount
* **Using incorrect exchange rates**: Always use historical rates at time of receipt
* **Mixing yield with capital gains**: These require separate reporting categories
* **Forgetting airdrops/hard forks**: These are taxable as income at fair market value
* **Delaying record-keeping**: Real-time tracking prevents year-end headaches
## DeFi Tax Reporting FAQ
### Q1: Is staking income taxable in France?
A: Yes. All rewards from staking cryptocurrencies are considered taxable income at the moment they’re received, subject to the 30% PFU.
### Q2: How do I report yield from foreign DeFi platforms?
A: The reporting process is identical to French-based platforms. Declare all earnings regardless of the protocol’s jurisdiction using Form 2042.
### Q3: Can I deduct DeFi transaction fees?
A: No. Unlike traditional investments, gas fees and protocol costs aren’t currently deductible against DeFi yield income in France.
### Q4: What if I hold yield in stablecoins?
A: Stablecoin rewards are still taxable. Convert the stablecoin amount to euros using the exchange rate at receipt (1 USDC = €0.94, etc.).
### Q5: Are there penalties for undeclared DeFi income?
A: Yes. The French tax authority (DGFiP) can impose:
– 10-40% fines on unpaid taxes
– Interest on overdue amounts (0.2% monthly)
– Criminal charges for severe cases
Always maintain detailed records for at least six years. Tax regulations evolve rapidly – consult a crypto-savvy French tax advisor for personalized guidance. By accurately reporting your DeFi yield, you avoid penalties while contributing to the legitimacy of cryptocurrency in France’s financial ecosystem.
