Author: Tom Jarvis, Source: TaxDAO
The rapid expansion of blockchain technology and the widespread adoption of crypto-assets around the world has created a series of problems for regulators. Essentially, financial laws in many jurisdictions have developed over decades to provide a specific tax framework for investors, employers, employees and other individuals residing in the country.
However, blockchain technology is cross-border by design, and cryptocurrencies do not fit well into most existing frameworks due to the nature of the assets. Therefore, it is not easy to figure out exactly which tax laws apply in different situations, as each jurisdiction treats cryptocurrency profits slightly differently.
This article will provide an in-depth look at the types of taxes that apply to cryptocurrency investors in Italy, including the factors that trigger a taxable event, the tax rates that may be payable, and when these taxes are due.
So grab a cup of coffee and stay awake, tax season may be one of the driest times of the year, but it’s important for Italian residents to fully understand their tax obligations so they can avoid them over time any legal consequences. Hopefully this article has provided all you need to know about crypto tax in Italy.
Key Points:
Italy introduces a new cryptocurrency tax payment method in early 2023, which means There are currently two main crypto taxes in the country;
Individuals can choose which cryptocurrency tax they pay as they can declare their income in their annual tax return or Declare the value of their cryptocurrency portfolio on January 1st;
The two crypto taxes in Italy are capital gains tax and alternative value tax;
The flat rate for capital gains tax is 26%;
The flat rate for alternative value tax is 14%;
Any transaction involving the transfer of digital assets may trigger a taxable event in Italy;
Any profit exceeding the €2,000 tax threshold during the financial year is considered taxable. tax income; any profits below this threshold are tax-free;
1 Types of cryptoassets recognized in Italy
Italy In 2023, a new set of regulations specifically targeted at taxing cryptocurrencies was introduced. Although the country has provided limited guidance compared to other jurisdictions such as India, Italy now sets various thresholds for capital gains tax rates when dealing with crypto assets.
Nonetheless, the types of crypto-assets recognized in Italy are quite broad, considering that no narrow definition is provided. Essentially, in Italy, any profits made during the ownership of any type of digital asset are considered subject to capital gains tax.
In summary:
Stablecoins, NFTs, governance tokens, utility tokens and any other type in Italy Crypto-assets are considered subject to capital gains tax.
Italy does not provide a tax framework for cryptoassets earned through mining or staking, meaning they may fall into the same category as other cryptoassets and be considered "miscellaneous" income".
2 Types of crypto taxes you need to know
Italian Government Tax Department (Agenzia Entrate) 2023 Budget Announcement China passed a dedicated tax law for cryptocurrencies. All profits made in cryptocurrencies worth more than 2,000 euros are now subject to capital gains tax or income tax, depending on the type of transaction carried out by the owner.
This marks a significant shift from the past, where profits from cryptocurrency ownership were only taxed when the individual portfolio value exceeded €51,645.69. Individuals with profits exceeding €2,000 are now required to declare cryptocurrency income as miscellaneous income on their annual tax return, and the amount is then subject to capital gains tax.
Another change during the 2023 Budget announcement was the introduction of an “alternative value tax”, which incentivizes cryptocurrency owners to declare the value of their portfolios at the beginning of the year. The Alternative Value Tax provides a lower tax rate to all crypto asset owners who declare the value of their portfolio on January 1 of each year.
Therefore, there are two main crypto taxes you need to know about:
Capital Gains Tax
Alternative Value Tax
2.1 Capital Gains Tax (applies when you dispose of cryptoassets)
In Italy, all profits above the €2,000 threshold are subject to capital gains tax. Capital gains are taxed at a flat rate of 26%.
There are no specific regulations on the type of taxation on crypto assets in Italy, which means that all blockchain-based digital assets will be treated equally as long as profits exceed the threshold. Likewise, there is no difference between trading profits, cryptocurrencies earned from mining, or returns from staking. Essentially, any income over €2,000 will be subject to capital gains tax of 26%.
However, a taxable event is only triggered upon disposal of a crypto asset, meaning that unrealized gains are not taxable under Italian law. Gain is defined as the positive difference between the point of sale price and the point of purchase price, so capital gains tax only applies after the crypto asset owned is sold or exchanged.
The following transactions may be classified as taxable events in Italy:
Sale of crypto assets for fiat currency
p>Exchange one cryptocurrency for another
Use cryptocurrencies to purchase goods and services
< /li>Receive cryptocurrencies as payment for goods and services
Receive cryptocurrencies as gifts
Use specialized equipment or software to mine cryptocurrency
Receive a salary denominated in cryptocurrency from your employer
By staking crypto Earn income on assets
Receive airdrops denominated in cryptocurrencies
Sell cryptocurrencies generated from investments for profit
p>
Selling cryptocurrencies in exchange for fiat currency in Italy will trigger a taxable event. The tax only applies to profits made during the ownership period, not the total value at the time of sale. When the total annual profit exceeds 2,000 euros, the capital gains tax rate is 26%. This is similar to the UK crypto tax and Germany’s crypto tax, both countries expect crypto asset owners to pay capital gains tax when they sell their assets.
Exchanging cryptocurrencies for cryptocurrencies
In Italy, exchanging one cryptocurrency for another is also a taxable activity. For example, this could apply to exchanging Ethereum (ETH) for Tether (USDT), or purchasing NFTs using Solana (SOL). A capital gains tax of 26% will apply to any profits made during the exchange of ownership of the assets used in the first tranche.
Spending or receiving cryptocurrencies for goods and services
Using cryptoassets to pay for goods and services is classified as a taxable event, subject to capital gains tax The approach is the same as investing. That is, the sales price is subtracted from the purchase price and a 26% tax is levied on the remainder.
Gifting Cryptocurrency
Gifting cryptocurrency to another person means that the tax liability has now been transferred to the recipient. This means that the recipient should record their ownership of the crypto-assets from the time the gift is received, and once the gift is sold or exchanged, any profits made will be subject to capital gains tax in Italy.
2.2 Alternative value tax (can be used to reduce cryptocurrency taxes in Italy)
Generally in Italy, all gains from crypto assets are subject to annual tax Declared in the return form. From this point on, profits above the €2,000 threshold will be subject to capital gains tax at a flat rate of 26%. However, the alternative value tax, introduced in early 2023, aims to incentivize cryptocurrency owners to declare the value of their portfolios by offering lower tax rates.
An alternative value tax works slightly differently than a traditional capital gains tax, but the core principles are the same. Individuals do not need to record all cryptocurrency transactions made during the year and declare them on their income tax returns, but can simply declare the value of their investment portfolio on January 1 of each year.
Alternative value tax is significantly lower, with crypto assets applying a flat rate of 14% instead of 26% on capital gains. As with capital gains, this 14% does not apply to the total value of the portfolio, but to profits earned over all periods. Therefore, if an individual has a portfolio value of €20,000 on January 1 after purchasing €15,000 worth of Bitcoin (BTC) in September, a 14% tax would apply to the €5,000 profit.
3 How to calculate crypto tax in Italy
3.1 Calculate capital gains tax
Use a simple Formula to calculate the amount of capital gains tax payable in Italy. Capital gains are calculated by subtracting the value of a given asset at the time of purchase from its value at the time of sale and deducting a flat rate of 26% from the remaining amount (if there is a positive difference), that is:
Take a single transaction as an example:
One person purchases 100 SOL for 20 euros , then exchanged to USDT when the value is 40 euros
Acquisition cost = 2000 euros
Sold value = 4000 euros< /p>
Capital gains tax = 26% of profits
That is, 26% of 2,000 euros = 520 euros
3.2 Frequently Asked Questions
How to liquidate cryptocurrencies without paying taxes in Italy?
Italy requires all residents to pay tax on their cryptocurrency income. Whether you profit from cryptocurrency trading, receive cryptocurrency mining rewards or generate income through cryptocurrency lending, you will need to pay capital gains tax in Italy. Therefore, there may be some penalties for cashing out cryptocurrencies in Italy without paying taxes. With proper financial planning, it may be possible to reduce the amount of crypto tax owed.
Are you taxed on cryptocurrency gains in Italy?
Yes, in Italy, all crypto asset profits worth more than 2,000 euros are subject to capital gains tax, with a flat tax rate of 26%.
When do I need to pay cryptocurrency tax in Italy?
There are two crypto taxes in Italy, depending on the filing method. Profits earned from crypto assets are subject to capital gains tax if an individual chooses to declare their cryptocurrency income on their annual tax return. Alternatively, if an individual chooses to declare the value of their portfolio on January 1 of each year, then only the alternative value tax is payable.
The deadlines for Italian residents to submit tax returns may vary, with paper documents due by June 30 and digital tax returns due by November 30.
How are cryptocurrencies taxed in Italy?
Italy introduced new cryptocurrency tax regulations in early 2023. As part of the new regulations, cryptocurrencies can be taxed at a lower rate than traditional capital gains if the value of the cryptocurrency portfolio is declared on January 1 of each year. Otherwise, profits earned from cryptocurrencies will be subject to capital gains and should be declared in the annual tax return.
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