Taxation in the IRPF of BITCOIN and CRYPTOCURRENCIES.

24/08/2022

If you have received an airdrop, use Defi, Staking, or have exchanged crypto assets, you probably have an obligation with the Treasury. Last year, the Law on Measures to Prevent and Fight Fiscal Fraud included fiscal control over the cryptocurrency market, incorporating new obligations on the possession and operations of virtual currencies. The anti-fraud law included the obligation of those who provide cryptographic key safeguarding and cryptocurrency exchange services - exchanges - to report on the balances and operations of virtual currency holders. Any cryptocurrency exchange is a transfer of a patrimonial element and has a tax consequence. If the cryptocurrencies are in an exchange or if they are stored in virtual wallets outside of Spain, it may be considered that they are abroad, and this Law has established that citizens who hold virtual currency must declare the cryptocurrency balances that they maintain in companies located outside the Spanish borders through model 720.

How and when to declare cryptocurrencies. They are considered by the Treasury as a virtual asset, an intangible asset that is used as a means of payment - not coins -, and that also has a value that can be increasing or decreasing. They can generate profits or losses and that is why we must declare the capital gain to loss that this product causes us, including the exchange between cryptocurrencies. The difference between the transfer and acquisition value must be declared, not only at the time of its sale in exchange for euros, but also the exchange for other goods or services, including different virtual currencies, and the donation to another person. The mere possession of cryptocurrencies, that is, the purchase and maintenance of cryptocurrencies, does not imply the realization of a taxable event in the Income Tax. However, possession can be taxed in the Wealth Tax when, together with the rest of the assets of which the taxpayer is the owner, the exempt minimum is exceeded as of December 31 of each year. Airdrops and rewards must also be reported as non-stream earnings. The Skating accrued and the interest obtained in Defi and Cefi are returns obtained from the taxation of capital in cryptocurrencies, and they must also be declared. The documentation that we must present. We should have proof of all purchases and sales and exchanges between cryptocurrencies, a report obtained with a movement aggregation software such as Cointracking will not suffice, we must obtain better means of proof against the administration. The transaction commissions known as fee, is a necessary payment so that the cryptocurrencies can enter a certain block, which, not being directly related to the purchase and sale, must be considered an expense. The commission applied by the Exchange, which is the profit itself, must be taken into account to subtract them from the sale price, and add them to the purchase price, thus reflecting the net profit received in the account, determining the full amount spent on the purchase.

Declaration of cryptocurrencies by miners. The miners carry out an economic activity that involves the management of material means and human resources in order to intervene in the provision of a service for which they are paid. There is economic activity in both cryptocurrency mining and staking, as well as in any protocol in which a node that someone owns and maintains, has the power to create a block of transactions and enter it into the blockchain, in exchange for a reward. The income of cryptominers is not subject to VAT, since there is no one to bill and there is no direct relationship between the income and the service provided. They are not paid by a natural or legal person, but by a protocol that creates the reward automatically. They do not have the obligation to make the periodic VAT declaration. If they are obliged to make the periodic declaration of Personal Income Tax in the case of a natural person taxpayer, and if it is a legal person, the payment on account of Corporation Tax, if applicable. As in any economic activity, the cryptominer can deduct from the income of the activity all the expenses necessary to obtain them (staking, necessary materials and services, supplies -internet, electricity, etc.-), as long as they are used exclusively for the activity.


THE TAXATION of BITCOIN and CRYPTOCURRENCIES in personal income tax The differences obtained between the acquisition and the transfer must be declared in the capital gains and losses section, integrated into the tax base of savings. They will be added to the rest of the capital gains and losses such as those obtained from the sale of shares, investment funds, etc., applying the FIFO method. If the balance of the transfer is negative, its amount may be offset with the positive balance of another component of the savings tax base, with a limit of 25% of capital gains, and the rest for four years. Personal income tax withholding on earnings. Buying and selling platforms and virtual wallets must apply a 19% withholding tax on profits made from selling cryptocurrencies, although in practice many of them do not. This does not mean that the profits are not subject to taxes, but rather that part of them will not have been advanced to the Treasury. Applicable rate in personal income tax for earnings in cryptocurrencies. 19% for the first €6,000 21% for between €6,001 and €50,000 23% for between €50,001 and €200,000 26% for earnings over €200,000, as the maximum marginal rate, which really doesn't reach up to €1 million in crypto earnings. 

The 720 model to declare cryptocurrencies. The CJEU has not overturned the obligation to use it, only the sanctioning regime. The term for its presentation is from January 1 to March 31 of each fiscal year. Model 720 was imposed as an obligation on all taxpayers residing in Spain who had assets abroad, valued at more than €50,000, in order to prosecute tax evaders. It appeared in 2013 to inform, mainly, three types of assets: real estate, income, securities, life insurance, and bank accounts. Cryptocurrencies must be included in this concept, since most of them are registered outside of Spain, although we still do not know if the limit of €50,000 will also apply to virtual currencies. Sanctions for not presenting the 720 model. For submitting the return incompletely, inaccurately or with false information: €100 for each piece of information (with a minimum of €1,500), if it is presented without a prior request from the Administration. €5,000 per piece of information (with a minimum of €10,000) if there has been a prior requirement from the administration. Attribution of an increase in equity in the adjustable base of the oldest financial year of those not prescribed. This will be done for the value of the goods and rights with respect to which the obligation to present form 720 has been breached. 150% of the imputed unjustified increase in assets, referred to in the previous paragraph. The STJUE considers these sanctions disproportionate and null, and that they threaten the free movement of capital, as well as the non-prescription of unjustified capital gains, both in personal income tax and in Corporate Tax, and the sanctioning regime established by the Court itself. AEAT.