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Should you tell Spanish Tax Authorities about your Crypto trading ?

Cryptocurrencies, Cryptowallets and Your Taxes in Spain
Cryptocurrencies, Crypto wallets and Your Taxes in Spain

Tax doesn’t have to be taxing but efforts to tax cryptocurrencies are on the horizon. Pedro Sanchez, the Spanish Prime Minister, plans to introduce more legislation aimed at crypto, gaining momentum for the Spanish government’s efforts to regulate and tax cryptocurrencies.

Spain and its crypto tax explained:

The new regulation will attempt to force crypto trading platforms to share the balance of virtual currencies held by their customers as well as any related data.

This includes:

  • collections
  • payments
  • transfers
  • acquisitions
  • exchanges and transmissions

The proposed law also captures those platforms that launch their own Initial Coin Offerings.

This is the second piece of legislation this year to ensure that Cryptocurrency transactions are subject to legal and financial scrutiny in Spain.

These new rules are likely to only impact Spanish companies or those permanent and established operations within the country. Some companies will be free of the new requirements, like China’s Binance and U.S.-based Coinbase. However, smaller operations including Bit2;e and 2together will face tougher requirements.

The taxes owed in Spain for crypto taxes

The Spanish government is planning to introduce these changes by April 6th 2022, when new tax reporting requirements on crypto and personal income tax are being enforced. This is important to follow if you are interested in Spain and crypto taxes.

At present, Spanish tax residents must declare cryptocurrencies in their annual Personal Income Tax returns (known locally as IRPF). It essentially brings cryptocurrencies in line with the existing obligations for stocks and shares.

The following rates will tax cryptocurrencies.

  • 19% up to €6,000
  • 21% from €6,001 to €50,000
  • 23% from €50,001 to €199,999
  • 25% from €200,000 and above

Any capital losses that exceed gains can offset in the following four years of tax returns under the new proposals.

While non-Spanish platforms won’t be required to report data and balances to the Tax Agency, their users and clients in Spain have accurately declared any capital gains or losses on their annual Personal Incomes Tax returns. However, it’s too complicated for investors to present this information clearly in many cases.

Spain and the crypto tax challenge

What makes cryptocurrencies so unique, and therefore challenging from a tax point of view, is their volatility. The capital gains can be enormous, while the lows can be sudden and severe. The price of Bitcoin, for example, has risen from around $800 at the end of 2016 to more than $38,000 in January 2022. And that’s not even the peak, which was $68,000 in November. 

The capital gain that would have been taxed in the five years since December 2016 would be 5,800%.

The Spanish government is working out the final details of reporting requirements for platforms. But for individuals, the rules and their intentions are clear.

Spanish Tax Residents must accurately declare their cryptocurrency assets (as well as their traditional assets, like shares) in their annual Personal Income Tax return.

We understand that taxes are complicated at the best of times. So if you hold cryptocurrency and reside in Spain, it’s important that you speak with an expert and get the right advice as soon as possible. Lexidy can help in Spain with crypto taxes.

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