B Law & Tax
17 October 2023

Tax advisor: The General Directorate of Taxes comments on the obligation to report virtual currencies

In the most recent binding consultation, issued on August 1st, 2023, the General Directorate of Taxes has responded to a question regarding the obligation to declare ownership of cryptocurrencies using Form 721.

In this context, it indicates that if the total balances referred to in section 3.c) of article 42 quater of the RGAT, which includes the balances of each type of cryptocurrency as of December 31 expressed in cryptocurrency units and their value in euros according to the valuation criteria established, do not exceed 50,000 euros, in accordance with section.5.d) of the mentioned regulation.

The General Taxation Directorate reminds that the eighteenth additional provision of Law 58/2003, of December 17, General Taxation Law (LGT) establishes:

“Taxpayers are required to provide the tax administration with information about cryptocurrencies located abroad of which they are holders, beneficiaries, or have some power of disposal. This includes those held by entities that offer services for the safekeeping and transfer of cryptocurrencies on behalf of third parties. These obligations apply to those considered as ultimate beneficial owners as established in the Anti-Money Laundering and Terrorism Financing Law.”

On the other hand, Order HFP/886/2023, dated July 26, which approves Form 721 “Report on Foreign Cryptocurrencies” and establishes the conditions and process for its submission, states that those responsible for submitting Form 721 are those defined in section 1 of article 42 quater.1 of the General Regulation of activities and procedures for tax management and inspection and the development of common rules for tax enforcement procedures, approved by Royal Decree 1065/2007, dated July 27 (RGAT). In this regard, article 42 quater.1 states:

“Individuals and legal entities residing in Spanish territory, permanent establishments in this territory of non-resident individuals or entities, and entities referred to in article 35.4 of Law 58/2003, of December 17, General Taxation, shall be required to submit an annual informative declaration regarding all virtual currencies located abroad of which they are owners, beneficiaries, authorized parties, or in any way hold the power of disposition or are considered real owners, as indicated in the last paragraph of this section, held by individuals or entities that provide services for safeguarding private cryptographic keys on behalf of third parties, to maintain, store, and transfer virtual currencies, as of December 31 of each year.

This obligation also extends to those who have been owners, authorized parties, or beneficiaries of the mentioned virtual currencies, or have had the power of disposition over them, or have been real owners at any time during the year to which the declaration refers and have lost that condition by December 31 of that year. In these cases, the information to be provided shall correspond to the date on which that termination occurred.

For these purposes, a real owner shall be understood to be someone who qualifies as such in accordance with the provisions of section 2 of article 4 of Law 10/2010, of April 28, on the prevention of money laundering and terrorist financing, with regard to virtual currencies in the name of individuals or instruments referred to in the aforementioned section 2 when they have their residence or are incorporated abroad.”

Regarding the reporting obligation, as established by the DGT, article 42 quater.5.d of the RGAT exempts the obligation to report any cryptocurrency when, as of December 31, the balances expressed in cryptocurrency units and their valuation in euros do not collectively exceed 50,000 euros. For valuation, the quotation provided by the main trading platforms or price tracking websites on December 31 will be used. In the absence of such data, a reasonable estimate of the market value of the cryptocurrency in euros shall be provided.

If this collective limit is exceeded, reporting on all cryptocurrencies will be required.Similarly, it will not be mandatory to file Form 721 for the following cryptocurrencies:

  • Those owned by the institutions mentioned in Article 9.1 of Law 27/2014, of November 27, regarding Corporate Income Tax.
  • Those owned by legal entities and other organizations resident in Spain, including branches of non-resident entities that have individualized accounting records, identified by their name, value, custodian entity, and the country or territory where they are located.
  • Cryptocurrencies owned by individual residents in Spain engaged in economic activities, who maintain accounting records in accordance with the provisions of the Commercial Code. These cryptocurrencies must be individually registered in the accounting documentation, identified by their name, value, custodian entity, and the country or territory in which they are located.

Form 721 must be submitted between January 1 and March 31 of the year following the one to which the information refers.

The obligation to submit the declaration in subsequent years will only apply if the total balance has increased by more than 20,000 euros compared to the balance that triggered the submission of the last declaration. However, in any case, a declaration will be required for individuals who are owners, beneficiaries, authorized persons, have disposal powers, or are real owners and cease to have this status. In this case, they must indicate the balances of the cryptocurrencies on the date when they ceased to have this status.


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