Cryptocurrency Taxation in Italy is regulated by the "Budget Law 2023."
According to the legislation, transactions involving bitcoin and cryptocurrencies are treated as financial exchanges.
Crypto assets (and activities related to the world of cryptocurrencies) are defined as digital representations of value, determined through electronic procedures and specific technologies. Taxation applies to the actual gain, which effectively constitutes income.
Previously, the Revenue Agency had attempted to regulate their tax treatment through tax rulings, particularly with Circular 72/E 2016 and response no. 788/2021, concerning the "holding of virtual currencies in digital wallets with possession of private keys – monitoring obligations."
However, the situation remained unclear, and it is the law that is now helping to clarify it. "No income, no taxation" was the precept of the Revenue Agency, which has continuity in the specific law.
Despite Italy having already taken steps regarding cryptocurrencies and crypto activities, some uncertainties remain pending the new provision from the European Union on crypto assets (MiCA).
What is Cryptocurrency Taxation?
Taxation on cryptocurrencies corresponds to the payment of taxes on gains related to activities involving cryptocurrencies such as Bitcoin, Ethereum, and other altcoins.
According to the Budget Law 2023, cryptocurrencies fall under those financial instruments that produce different incomes.
Consequently, a substitute tax will be applied, but only if a gain (capital gain) has been generated.
It is not possession that determines taxation, but rather financially relevant operations, specifically:
- Sale (conversion of cryptocurrencies into FIAT currency);
- Purchase of goods or services using cryptocurrencies;
- Purchase of NFTs (non-fungible tokens or digital objects) using cryptocurrencies.
When should crypto taxes be paid?
The taxation on crypto assets, which should have already resulted in the payment of specific taxes starting from June 2023, has been postponed to September.
Thanks to this extension, the first deadline for taxpayers will be September 30, 2023.
From that date, it will be possible, but also mandatory, to pay taxes on gains derived from cryptocurrencies.
The extra three months, compared to the previous deadline of June 30, are to allow the exact implementation details of the law to be disclosed, to better understand who should pay, how to do it, and how much to pay.
In general, taxes must be paid in the tax period in which a taxable event occurs, such as selling cryptocurrencies or earning gains from mining activities.
It is essential to keep track of transactions and realized gains to ensure compliance with all tax obligations.
How to pay taxes on cryptocurrencies?
Different incomes must be indicated in the "Quadro RT" of the "Modello Redditi PF" (Income Tax Return for individuals) and included in the "Quadro RW" for fiscal monitoring and the payment of "IVAFE" (a wealth tax).
The taxable amount is the value of the cryptocurrency calculated at the time of exchange into euros.
The "Quadro RW" is filled out only if the cryptocurrencies are located in a digital wallet abroad or stored on USB drives or PCs.
How much tax is paid on cryptocurrencies?
Taxes on cryptocurrencies are calculated based on a single substitute tax rate of 26%.
Since crypto assets are considered equivalent to financial assets, they are taxed accordingly.
To be taxable, cryptocurrencies must have generated capital gains exceeding €2,000.
The amount of taxes to be paid on cryptocurrencies depends on various factors, such as the type of activity conducted (trading, long-term investments, mining) and whether it is carried out by individuals or companies.
In Italy, crypto assets are subject to various taxes, including income tax (IRPEF) and capital gains tax.
Regarding income tax, gains from cryptocurrencies can be considered self-employment income or different income, depending on the activity carried out.
The tax rate for self-employment income ranges from 24% to 43%, depending on the total income.
For capital gains, which occur when selling cryptocurrencies at a price higher than the purchase price, the capital gains tax rate is 26%. However, it is important to note that there are specific tax rules and benefits for cryptocurrencies, so it is advisable to consult a tax expert for personalized advice.
Is it possible to avoid paying taxes on cryptocurrencies?
With the new Budget Law 2023, it will be possible not to pay taxes on cryptocurrencies with capital gains below €2,000.
The exemption threshold of €2,000 for the reference tax year creates an exception compared to Article 67(1) of the TUIR (Italian Tax Consolidation Act).
The principle is not to subject non-relevant income to the tax rate. However, be aware that not declaring cryptocurrency gains can lead to penalties ranging from 3% to 15% of the undeclared amount.
Amnesty for past years
The Budget Law 2023 has provided an amnesty for those who have not previously declared cryptocurrency gains. You can regularize your situation by paying minimal fines through the "istanza di emersione" (request for regularization) covering all cryptocurrency-related activities carried out by December 31, 2021.
Taxation of cryptocurrencies for companies
Cryptocurrencies are considered intangible assets and are therefore included in a company's financial statements under intangible fixed assets. They generate business income for IRES (corporate income tax) or IRAP (regional business tax) purposes only if subject to:
- Sale for FIAT currency
- Conversion into other assets
- Purchase of NFTs
- Use in staking (locking a certain quantity of a cryptocurrency to receive rewards).
Otherwise, the presence of cryptocurrencies in a company's balance sheet will not be aggregated with business income, and no tax rate will be applied.
Beware of tax scams related to cryptocurrencies
The cryptocurrency tax scam takes various forms, depending on the imagination of the perpetrators.
In fact, verifying the contract will reveal if and how your investments will be taxed. To pay taxes on gains, you must take a personal and voluntary action by filling out the appropriate tax return forms.
Hypothetical taxes on your gains must be paid duly and correctly. There are no taxes for withdrawing your money.
The taxation of cryptocurrencies in Italy is a complex and evolving subject, as details are still being defined.
Understanding how cryptocurrency taxes work and how much you need to pay will help you avoid problems with the tax authorities and recognize potential scammers.
Our advice is to keep track of all transactions and pay attention to all the news in this area.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.