B Law & Tax
22 May 2023

Tax advisor: Taxation and control in the investment of cryptoassets

Some 12% of the Spanish population currently holds investments in cryptocurrencies. This growing trend has led the tax authorities to ask companies to declare their clients’ cryptocurrency balances. However, what is the difference between a cryptocurrency and a cryptoasset? When should the corresponding declaration be made for each of them? Several questions arise regarding this issue that need to be resolved.

It is essential to understand the definition of digital assets, which encompasses any item that can be created and traded on a blockchain. Broadly speaking, these assets can be classified into five main categories: cryptocurrencies, stablecoins, NFTs (non-fungible tokens), central bank-issued digital currencies and security tokens.

Control

As of 2021, Spanish citizens are obliged to report the performances generated by their investments in cryptocurrencies in their personal income tax return. However, this obligation applies only when transactions have been made in digital assets that have generated profits in cryptocurrencies, as well as when capital gains or capital yields have been obtained in cryptocurrencies.

In addition, it is common for exchanges or platforms used to buy and sell cryptocurrencies to be subject to KYC regulations and requirements, which means that authorities may request information about users and their transactions. Moreover, anti-fraud law 11/2021 establishes reporting obligations related to economic transactions involving cryptocurrencies. Platforms are required to inform the Tax Agency about the acquisition, exchange, transmission, collections and payments made in virtual currencies. However, in the case of foreign exchanges located outside the European Union, they are not required to report to the Tax Agency. However, users are obliged to declare the profits obtained from their cryptocurrency investments in the Personal Income Tax.

New regulation

The Ministry of Finance in Spain is developing a new regulation in relation to cryptocurrencies that will impose on taxpayers the obligation to declare the cryptocurrencies they hold abroad. It will also require companies offering custody, investment or intermediation services to inform the Tax Agency about their clients’ balances and transactions. This regulation will come into force in 2024 and will cover operations carried out during the current fiscal year of 2023. Spain is ahead of the developments of the modification of the DAC 8 (administrative cooperation directive) in the European Union with this regulation.

B Law & Tax International Tax & Legal Advisors.

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