How to Report Airdrop Income in the EU: Your Complete Tax Guide

Understanding Airdrop Taxation in the European Union

Airdrops – free distributions of cryptocurrency tokens – have become popular in the EU’s digital asset landscape. While receiving “free” crypto might seem straightforward, European tax authorities consider most airdrops as taxable income. The EU lacks unified crypto tax laws, meaning reporting requirements vary across its 27 member states. Generally, airdrops are taxed either as:

• Ordinary income at market value when received
• Capital gains when later sold at a profit

Failure to report can trigger audits, penalties (up to 100% of owed tax in Germany), or criminal charges. This guide clarifies the reporting process across key EU jurisdictions.

Step-by-Step Guide to Reporting Airdrop Income

1. Determine Taxable Event Date: Record the exact date you gained control of the airdropped tokens (usually when they appear in your wallet).
2. Calculate Fair Market Value (FMV): Convert token value to EUR using exchange rates at time of receipt. Use reputable sources like the European Central Bank or major exchanges.
3. Classify Income Type: Most EU states (like France and Netherlands) treat airdrops as miscellaneous income. Some (e.g., Portugal) may exempt if held long-term.
4. Document Transactions: Maintain records of:
   • Airdrop announcement details
   • Wallet addresses involved
   • FMV calculations
   • Subsequent disposal dates/prices
5. Report on Tax Return: Declare under:
   • “Other income” sections (Germany’s Anlage SO)
   • Crypto-specific forms (Portugal’s Annex J)
   • Capital gains schedules if selling later

Country-Specific Reporting Requirements

Germany: Airdrops are taxed as “other income” at personal income tax rates (14-45%). Tax-free if held >1 year.
France: Flat 30% tax (12.8% income + 17.2% social charges) applies upon receipt. Professional traders pay up to 45%.
Netherlands: Taxed as miscellaneous income in Box 1 at up to 49.5%. De minimis threshold may apply.
Spain: Treated as capital gains (19-26%) only upon sale. Must be declared via Modelo 720 for overseas holdings.
Post-Brexit UK: Considered miscellaneous income taxed at 20-45%. Report via Self-Assessment tax return.

Essential Record-Keeping Practices

• Retrieve and store airdrop announcement snapshots (project websites/whitepapers)
• Export timestamped transaction histories from wallets/exchanges
• Record EUR conversion rates (use ECB historical data)
• Keep screenshots of token valuations at receipt time
• Maintain records for 6-10 years (varies by country)

Top 5 Airdrop Tax Mistakes to Avoid

• Ignoring small airdrops: Even €0.50 tokens require reporting in strict jurisdictions like Austria
• Using incorrect exchange rates: Always use ECB-approved conversion metrics
• Missing disposal events: Swapping airdropped tokens triggers capital gains
• Overlooking DeFi interactions: Staking/lending airdropped tokens creates additional taxable events
• Assuming uniform EU rules: Malta taxes airdrops at 0% while Denmark imposes 52%

Frequently Asked Questions (FAQ)

Q: Are all crypto airdrops taxable in the EU?
A: Generally yes. Exceptions exist for tokens with zero market value or in specific jurisdictions like Portugal under certain conditions.

Q: How do I value airdropped tokens with no immediate market?
A: Use the first verifiable market price. If unavailable, document valuation methodology and consult a tax advisor.

Q: Do I pay tax twice if I hold and later sell?
A: No. You pay income tax on initial value. When selling, you pay capital gains only on the increase from the taxed basis.

Q: Can exchanges report my airdrops to EU tax authorities?
A: Yes. Under DAC8 regulations (effective 2026), all EU crypto platforms must report user transactions including airdrops.

Q: What if I received airdrops before moving to the EU?
A: Tax liability depends on residency status and local rules. Most countries tax only income earned after becoming resident.

Disclaimer: Crypto tax regulations evolve rapidly. Consult a certified EU tax professional for jurisdiction-specific advice. This guide reflects rules as of 2023.