[vc_row][vc_column][vc_column_text]Lately we’ve received a lot of enquiries about tax payments on cryptocurrencies and how much tax an individual has to pay and when. Here’s the lowdown on the current laws on cryptocurrency tax.
Cryptocurrencies are a new payment system and they can have highly volatile values. Over the past few months, the most known cryptocurrencies such as Bitcoin, Litecoin, Ethereum, and Ripple have dropped in value by more than 30%. These rising and falling valuations have been significantly affecting the profit and loss of investors and the amount of tax they may have to pay.
How does the Law address income tax on cryptocurrencies?
So far the law addresses income tax on standard money, or other material goods, but unlike standard goods or currency, cryptocurrencies are intangible and can be created by anyone with enough knowledge on the subject.
However, cryptocurrencies are usually linked to blockchains – and blockchains do represent goods and services that have not yet been cashed out.
So do I have to pay income tax and when?
As mentioned, cryptocurrencies are linked to blockchains that represent goods and services but have not been transformed to real money.
So, an important issue to note is that if you do not cash out the benefits with cryptocurrency coins in real money, you will not have to present the benefits in your income tax return. Even if you do not take the Bitcoins out of your virtual wallet, you will not have to pay tax on them because it is a virtual asset that hasn’t yet acquired a real monetary value that can be taxed.
However, an investor who, through a broker, has been carrying out completed operations with cryptocurrency during the 2017 financial year and has obtained total profits must incorporate them into his or her capital gains from the IRPF savings tax base.
Also, if you sell cryptocurrency you will have to pay tax too. The amount to pay will be the difference between the price you bought the cryptocurrency for and the price you sold it for.
What should I do if I cash out the benefits?
If you decide to cash out the benefits of your cryptocurrencies you will have to declare this in your income tax statement. The tax return has to be declared transparently and the Tax Agency requires the declaration of the origin of cryptocurrencies – especially from the broker – and the amount of benefits or losses.
This prevents you from incurring a finance offence such as money laundering.
We can provide all the necessary information in case the tighter regulation of cryptocurrencies in Spain becomes a reality. And we can help you deal with the Tax Agency in case you have to declare your income on cryptocurrencies.
Or get in touch for a free consultation on this subject below: