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28% of investors in cryptocurrencies do not know that they have to include them in personal income tax

The Russian invasion of the Ukraine has once again brought news to the forefront of the cryptocurrencies. And it is that the Russian oligarchs have found an evasion in these digital currencies to be able to carry out international transactions and not lose purchasing power. Given its limited regulation and its difficulty in tracking, the country’s great fortunes could be transforming rubles into bitcoins, and thus elude the international fence.

The regulation of cryptocurrencies and NFTs worldwide has a long way to go, since it must be remembered that these currencies are a recent phenomenon. In the Spanish case, according to the TaxDown tax experts, there is no specific regulation that directly regulates virtual currencies, but rather they are governed by the normal treatment of capital gains and losses. In this regard, the income campaign will kick off on next april 6 and one of the great novelties that this year will have is that for the first time many of the four million peoplewho invest or have invested in cryptocurrencies in our country, You must include them in your personal income tax return..

Only those who have sold any of these currenciesregardless of whether profits or losses have been made in the process. Otherwise, according to the Annual Tax and Customs Control Plan for the year 2021, the penalty for the tax debt can reach up to 150%. For example, if a person has earned €3,000 in cryptocurrencies and does not declare them, the penalty could reach €900 depending on his personal circumstances.

Despite this, as can be deduced from Asufin’s ‘III Report on fintech knowledge and habits’, there is today a great lack of knowledge about the tax burden of cryptocurrencies. In fact, 41.4% of these investors maintain that they will not have to pay any type of tax on what they earn with their crypto assets, while another 28.4% do not know whether or not they should include it in their income statement. This document incorporates for the first time a section dedicated to investment in cryptos in which it is detailed that 70.6% have invested more than 1,000 euros and more than a quarter of those who invest have exceeded 6,000 euros of investment.

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How are cryptocurrencies declared in Spain?

The way that the Spanish have to present the cryptocurrencies in the income statement is through the FIFO method, which is a way of accounting for the profit derived from the sale of shares when said assets have been purchased at different times, as explained by TaxDown. Following this system, the first investments you buy are the first ones you have to consider when selling crypto.

The capital gain is calculated by subtracting the acquisition value and the expenses inherent to the operation from the transmission value. It is a complex process in which the user will have to carry out a series of operations and take into account certain variables. For this reason, TaxDown has written a guide explaining step by step how to declare these digital currencies.

On the other hand, some of the issues that have generated some controversy due to their lack of regulation are cryptocurrency mining and the buying and selling of NFTs. In the case of mining, the tax experts at TaxDown maintain that should be considered as an economic activity, therefore, the amounts received would have to be declared as income derived from said activity. In this way, it would be possible to deduct the expenses derived from this activity. With regard to non-fungible tokens (NFT), gradual progress is being made with their regulation and it is contemplated that the companies that manage these crypto assets must report it to the authorities.

“The current geopolitical situation has prompted many governments and institutions to accelerate the regulations of cryptocurrencies”says Álvaro Falcones, co-founder of TaxDown. “In Spain, this year’s income campaign will have as a great novelty that Spaniards must declare for the first time the sale of their cryptocurrencies, through a somewhat arduous process. For all of them, TaxDown will launch a specific function this year to declare these digital currencies, facilitating the process enormously”, Falcones judgment.

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