Local tax court provides further guidance on income tax treatment of meme coin transactions

In a decision dated 22 January 2025 and published in July 2025, the lower tax court of Nuremberg, Germany published a decision that, for the first time, addresses the taxation of meme coins.

The tax court confirmed a 2023 decision of the federal tax court (see GTLN dated 03/08/23) and the position of the German tax authorities on the broad taxability of cryptocurrency sales transactions. The tax court confirmed that cryptocurrencies, including meme coins, generally must be treated as assets/property for tax purposes and, therefore, that capital gains arising from the sale of these cryptocurrencies may be taxable as “other income” under section 23 (1) no. 2 of the income tax code (ITC). The tax court explained that, based on its view, it should not make a difference whether a transaction involves currency tokens, utility tokens, security tokens, or any other hybrid form of crypto asset. The tax court also confirmed that there is no general lack of enforcement and that the tax authorities have the ability to enforce tax law provisions with respect to cryptocurrency transactions.

Even though the decision of the lower tax court just confirms the long-standing position of German tax courts and that taken by the tax authorities in their 2025 final crypto asset decree (see GTLN dated 03/13/25), it presents a couple of noteworthy points:

• It is the first decision of a German tax court regarding the taxation of meme coins. Meme coins are a type of cryptocurrency that originates from an internet meme or has some other humorous characteristic. They derive their value primarily from social media momentum or celebrity association. The 2023 decision of the federal tax court referred to the taxation of Bitcoin, Ether, and Monero but did not include any comments regarding meme coins.
• The tax court of Nuremberg expressed its doubts about the taxability of capital gains resulting from meme coins in a stay-of-execution order in 2020 and, at that time, sided with the taxpayer. In its final decision, the tax court now has obviously departed from this earlier position.

The decision includes detailed comments regarding various types of meme coins, their specifics, and how a capital gain has to be calculated in each specific case, including an in-depth description of meme coins such as Binance Coin (BNB), Tether (USDT), MobileGo (MGO), Monaco (MCO), Stratis (STRAX), Waves (WAVES), Astronaut Token (ASTRO), Bancor (BNT), Neo (NEO), Gas (GAS), and Xtrabytes (XYB). The court explained that these meme coins are cryptocurrencies that are marketable and that a value can be assessed for each different type. The court also noted that the coins’ intangible nature or lack of status as legal tender is irrelevant since what is decisive is their marketability and transferability, which should be determined by exchanges and peer-to-peer trading activities. From the perspective of the tax court, such cryptocurrencies should be treated in the same way as, for example, vintage cars or tickets to a soccer champions league game.

When calculating the gain arising from meme coin transactions, the tax court followed the approach used by the taxpayer and applied the last-in-first-out method (LIFO method), contrary to the 2025 cryptocurrency guidance from the tax authorities. The tax court stated that, even though the first-in-first-out method (FIFO method) should generally be more appropriate and is described as the preferred method in the decree from the tax authorities, the application of the LIFO method is legitimate and is not prohibited based on the law (for example, section 23 (1) no. 2 sent. 3 ITC explicitly provides for the application of the FIFO method to foreign currency transactions). The tax court therefore accepted the detailed calculations of the taxpayer (prepared using the CoinTracking and BitcoinTax programs).

The decision of the lower tax court of Nuremberg is the first decision addressing the taxation of meme coins and includes an in-depth tax technical analysis of these assets and related transactions. The decision generally confirms the approach of the tax authorities and other tax courts regarding cryptocurrencies in general. The tax court, also for the first time, addressed how cryptocurrencies should be valued and whether the LIFO or FIFO method should be used for this purpose. The tax technical questions that are discussed in the tax court decision are similar to the topics and open questions discussed in other jurisdictions relating to the taxation of cryptocurrency transactions (see, for example, the tax chapter in the Trump administration’s comprehensive report on digital assets (chapter VII)). The lower tax court allowed for an appeal of its decision to the federal tax court for the purpose of further legal development since crypto assets (and in particular meme coins) are a relatively recent phenomenon with little case law to date.