Cryptocurrency tax and taxation

Avoid risks with your cryptocurrencies

A cryptocurrency is a virtual unit or digital medium of exchange based on blockchain technology that can be exchanged for other traditional currencies and used as a means of payment or investment. In Spain, virtual currencies such as Bitcoin and Ethereum have been recognised since March 2015 as means of payment in some transactions.

Cryptocurrencies have ceased to be mainly an investment item and have become an alternative means of payment to those regulated by financial institutions. In recent years, the Tax Agency has turned its attention to these transactions to prevent tax evasion and money laundering, having included them in its 2018 Annual Tax and Customs Control Plan.

Once again, cryptocurrencies have gained prominence, regardless of their growing use, as from 2021 it will be compulsory to inform the Tax Agency about their possession (in the FORM 720 – the content of which will be extended to include this new category), establishing a significant penalty regime in the event of failure to do so. This is a reporting obligation, which does not entail the payment of any tax.

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Cryptocurrency regulation

The tax obligations associated with cryptocurrency transactions depend on the use of cryptocurrencies. We recommend that you pay attention to the latest developments regarding the regulation of cryptocurrencies and their taxation and, if you have any doubts, it is best to seek professional advice.

At present, earnings from transactions with cryptocurrencies are taxed, depending on the nature of their owner, either in personal income tax, corporate income tax or non-resident income tax. The new measures also impose heavy fines for tax fraud committed by using “dual-use material”, or failure to comply with the obligation to notify the Tax Agency.

The end of the year is a perfect time to plan the taxation of the year, whether in financial, real estate or other transactions, including cryptocurrencies.

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