Learn about new requirements and taxation for cryptoassets in 2021
Cryptocurrencies are undoubtedly the most important financial development of the last century, which explains why they are so popular at the moment. Both companies and individuals have embraced the use of cryptoassets for their potential to store and transmit value. Thus, in the process of adopting this technology, many aspects of life in society have changed or adapted to its presence.
This is the case of the tax system. Given that the modification of laws is a slow process compared to the speed at which the crypto world is advancing, until now the State has limited itself to including cryptocurrencies within existing regulations. We know that, being considered an intangible asset with the characteristics of a means of payment, we must include them in the Income Tax (IRPF) and Wealth Tax (IP), where applicable.
However, this year there have been new developments. The new reform of the Law against Tax Fraud has been published in the BOE, in which new requirements have been added for those who hold cryptocurrencies or cryptoassets. It is important to note that, so far, all these approved requirements are of an informative nature.
Law 11/2021, of 9 July, on the prevention and fight against tax fraud, specifies two new obligations for taxpayers . Both involve companies and individuals established in Spain, and also permanent establishments in Spanish territory of persons or companies resident abroad. The first obligation is presented as follows:
"Persons and entities resident in Spain and permanent establishments in Spanish territory of persons or entities resident abroad that provide services for safeguarding private cryptographic keys on behalf of third parties, for maintaining, storing and transferring virtual currencies, whether this service is provided principally or in connection with another activity, shall be obliged to provide the Tax Administration, under the terms established by regulations, with information on all the virtual currencies they hold in custody. This supply shall include information on balances in each different virtual currency and, where appropriate, in legal tender, as well as the identification of the holders, authorised persons or beneficiaries of these balances".
Paragraph 6 of the thirteenth additional provision of Law 11/2021 of 9 July 21 on measures to prevent and combat tax fraud
This means that those who provide custodian wallet services, i.e. who store the private keys of their users and, consequently, the funds in cryptocurrencies, must provide the Tax Administration with all the personal information of their users, together with the balances and transactions they carry out.
The second obligation is similar to the first one, but it also includes transactions between cryptocurrencies, as well as between cryptos and fiat money. So this requirement is aimed at exchanges, which will now also be obliged to provide all the information related to both their customers and the transactions carried out.
"Persons and entities resident in Spain and permanent establishments in Spanish territory of persons or entities resident abroad that provide exchange services between virtual currencies and legal tender or between different virtual currencies, or intermediate in any way in the performance of such operations, or provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies, shall be obliged, under the terms established in the regulations, to notify the tax authorities of the acquisition, transmission, exchange and transfer operations relating to virtual currencies, as well as of collections and payments made in virtual currencies, shall be obliged, under the terms established by regulation, to notify the Tax Administration of transactions involving the acquisition, transmission, exchange and transfer of virtual currencies, as well as collections and payments made in these currencies, in which they intervene or mediate, submitting a list of the parties involved, indicating their address and tax identification number, the type and number of virtual currencies, as well as the price and date of the transaction".
Paragraph 7 of the thirteenth additional provision of Law 11/2021 of 9 July 21 on measures to prevent and combat tax fraud
All these laws seek greater transparency of cryptocurrency transactions and their users in Spain.
In addition to the new information requirements presented in the BOE, there are also new features for the IRPF for the year 2021, in which we know that cryptoassets are included. There will now be a new bracket in the savings base corresponding to 26%. Thus, the brackets will be as follows:
- 19% for the first €6,000
- 21% for the next €44,000 (the bracket between €6,000 and €50,000)
- 23% for the next €150.000 (the bracket between €50.000 and €200.000)
- 26% for each euro above €200,000
Finally, for the 2021 tax return, users who own more than 50,000 euros in assets abroad, including cryptocurrencies stored in foreign custody services (such as exchange houses located outside Spanish territory), must compulsorily file form 720 with the tax authorities. In this form, both individuals and legal entities must declare these cryptocurrencies as assets abroad. This is established in the BOE (Official State Gazette):
"Information on virtual currencies located abroad owned, held, beneficially owned, authorised or otherwise disposed of by persons or entities providing services to safeguard private cryptographic keys on behalf of third parties, to hold, store and transfer virtual currencies".
Paragraph 1(d) of the eighteenth additional provision of Law 11/2021 of 9 July on measures to prevent and combat tax fraud
Finally, as is to be expected, failure to comply with these requirements will lead to penalties. The aforementioned Law on Measures to Prevent and Combat Tax Fraud indicates the following:
- Penalty of €5,000 for persons who fail to comply with the obligation to include cryptocurrencies in the declaration of assets abroad (Form 720).
- Penalty of €100 for each set of data for each virtual currency when the return has been filed after the deadline without prior request from the Tax Administration.
How do we avoid falling prey to sanctions?
The only answer is to keep the accounting of cryptocurrency transactions up to date. In order to face any request from the tax authorities, we must have the necessary evidence that the amounts reflected in the declaration correspond to those actually traded.
Blockpit, Europe's leading cryptocurrency tax compliance software company, simplifies the task of collecting and processing trade data for all types of cryptoasset transactions. It is now also supported by Vicox, a firm of Spanish legal advisors specialising in cryptocurrency taxation.
The users of both companies, both individuals and companies, now have the possibility to count on the most comprehensive tool and the most complete advice to meet the requirements of the Treasury, keeping the accounts of their cryptocurrency operations in a fair way.
Authors: Oriana Álvarez Ramos, Claudia Marchionni Díaz.
Date: 24/9/2021
