Cryptocurrencies are a type of asset that aims to serve as a means of payment, it is used as currency. However, a cryptoasset is a more general category, since it groups together different projects whose basis is cryptographic technology through blockchains that allows operations such as storage, exchange of communications, etc. to be recorded. and that generate their own units of value from that project like the shares of a company.
How can you get cryptocurrencies?
There are two methods to obtain cryptocurrencies, which influences their consideration before the Treasury:
Cryptocurrency mining
Miners are those in charge of the integrity and security of accounts in cryptocurrency networks. They are people who, using their specific computers and software, validate and date transactions, including them in a collective database. For this task they receive remuneration in cryptocurrencies according to fixed rates.
Cryptocurrency trading
Trading consists of buying and selling cryptocurrencies, the objective of this is usually to buy at a lower price and sell at a higher price to obtain a profit. If the sale price is lower than the purchase price, a loss will be suffered (as in the stock market).
When to declare cryptocurrencies in the Treasury?
The Treasury does not like cryptocurrencies because they are decentralized, opaque and difficult to trace. Above all, if we consider that the majority are in wallets outside the country, often in countries considered tax havens.
The obligation to declare the tax event to the Spanish Tax Agency occurs in the case of mining when you obtain payment for mining, while, in the case of trading, when you change from one asset to another, either to another crypto asset or other legal tender (euros, dollars, etc.)
There is no doubt that this movement is very difficult to control because the value of the cryptocurrency has not been transferred to physical money (euros), but from one cryptocurrency to another, but legally it must be declared to the Treasury.
From what amount do you have to declare cryptocurrencies?
Since the entry into force on July 9, 2021, of the new Anti-Fraud Law, the obligation to report on the possession and operations with virtual currencies to Spanish taxpayers, including their beneficiaries, authorized persons and anyone who can dispose of them, was incorporated.
The communication must be made before March 30, through Form 721 of Declarations of assets and rights abroad, detailing the balances and owners of the cryptocurrencies, and all the operations that have been carried out with them abroad, to amounts greater than 50,000 euros. The new Treasury Model 721 has the same function as 720, but is exclusive for cryptocurrencies, so these assets should no longer be included in this model.
How are cryptocurrencies taxed in Spain?
Cryptocurrencies are taxed depending on the way you obtain them:
- Cryptocurrencies obtained by Mining
Cryptocurrency mining is another business activity, so you must register with the Treasury through form 036 or 037, although there is still no law that regulates it, as shown by binding principles in this regard and some binding hearings in the General Directorate of Taxes (DGT).
Therefore, the income derived from mining will be reduced by the expenses necessary to carry it out and the result will be the profit attributable to the activity.
As a self-employed person, you will be required to register for that activity and present the corresponding quarterly Forms 130 for installment payment of personal income tax and the annual declaration or Form 100 of personal income tax, like any other business activity.
- Cryptocurrencies obtained by Trading
Cryptocurrency is considered another asset, like stocks, so the profit or loss generated with each operation goes to the savings tax base in the Income Tax Return, being taxed with the same rules as a capital gain or loss.
The capital gain is calculated by subtracting the purchase value and the expenses incurred by the exchange operation from the sale value. The corresponding tax rate will be applied to this gain, being in Spain for 2023:
- From 0 to 6.000 euros of capital gain: 19%.
- From 6.000 to 50.000 euros: 21%.
- More than 50.000 euros: 23%.
- More than 200.000 euros: 27%.
- From 300.000 euros onwards: 28%.
If many operations are carried out with different cryptocurrencies, the same criteria will be applied as with other financial assets.
What taxes do cryptocurrencies pay?
We have previously seen how income generated by cryptocurrencies in Spain is taxed in personal income tax, but owning or trading in cryptocurrencies also
affects other taxes:
Value Added Tax
For VAT purposes, when cryptocurrencies are considered a means of payment, they are exempt, as would be operations carried out in the foreign exchange market, such as buying and selling dollars.
Based on this basis, input VAT cannot be deducted in the case of business activity such as, for example, if you do mining. Therefore, the VAT accrued with the expenses of the activity would be considered a higher expense for personal income tax or corporate tax purposes.
Wealth Tax
Cryptocurrencies are assets that are part of our assets just like a home or shares. Therefore, they are one more asset that must be included and valued in the tax.
Inheritance and Donation Tax
As with the Wealth Tax, the transfer of cryptocurrencies through a donation or inheritance will have to be taxed on this tax in accordance with the current laws on this matter.
Fines for not declaring cryptocurrencies at the AEAT
The penalties for not declaring cryptocurrencies, even in case of error, are very high and do not expire until after 4 years.
- For each data or set of data of each virtual currency that has not been included in the declaration or has been included in an incomplete, inaccurate, or false manner: 5,000 euros, with a minimum of 10,000 euros.
- Voluntary declaration after the deadline: in case of forgetfulness, a lesser amount will be sanctioned. It will be 100 euros for each data or set of data referring to each virtual currency, with a minimum of 1,500 euros.
The Law prohibits the approval of tax amnesties, so cryptocurrency investors who have not declared them until now could be harmed by possible Treasury reviews of the four previous fiscal years in which there was a legal vacuum.
How does the Treasury know if I have cryptocurrencies?
The Treasury will know if you have cryptocurrencies depending on where and how you bought them:
- Spanish exchange: if you have purchased your cryptocurrencies on a Spanish exchange, these entities are obliged to provide information to the Treasury about their users and, therefore, they do know.
- Foreign exchange: if you have purchased on a foreign exchange (for example: Coinbase and Binance), they would not be required to provide information to the Treasury, although they usually provide it.
Tax recommendation on cryptocurrencies.
The taxation of cryptocurrencies still has many loopholes. However, their significant rise will mean that they will have to be legislated in a short time.
Cryptocurrencies inherently have a high variability since, like any asset, their price is determined by the intersection of supply and demand. But they are assets that from one day to the next can gain or lose more than 20% of their value.
It may also lose all its value or cease to belong to you due to fraudulent or hacking practices.
