Taxes: Treasury and Bitcoin, what to declare in Spain for having cryptocurrencies?

In Spain, Bitcoin does not have a clearly established legal status, but despite this it is not illegal to use it and the authorities are clear about what taxes you must pay for cryptocurrencies under certain conditions. In this article we will explain these conditions and what we must take into account so as not to violate the Law in any case.

Une of the main concerns of cryptocurrency users is the payment of taxes. And in Spain, this is a reality that is also present.

Despite the fact that, at the moment, there is no clear law on the use of cryptocurrencies in our country, the Spanish Treasury is very clear that users of cryptocurrencies such as Bitcoin must pay taxes in certain situations.

In collaboration with expert cryptocurrency tax advisor Jesus Lorente, Seico Advisors, we wanted to bring you a more detailed analysis of the taxes that may affect when buying bitcoins or other cryptocurrencies. To do this, a series of inquiries about cryptocurrencies that the Tax Agency has answered and some court rulings regarding taxes and cryptocurrencies have been analysed. For this reason, the following article will seek to explain in a simple way the simplest taxation in each of the Taxes.

In Spain, the main taxes that citizens pay are the following:

• Income Tax (IRPF).
• Value Added Tax (VAT).
• Wealth Tax (IP).

In addition, there are other taxes, both at the state, provincial or local level. Some could also influence crypto investors. For example, him Corporation Tax (IS), Economic Activities Tax (IAE), or Successions and Donations (ISD).

However, since there is no clear regulation at the moment, crypto investors must determine how much taxes they must pay following general legislation. It is important to know the data on cryptocurrency taxation in Spain in order to operate safely and efficiently without any type of risk.

Cryptocurrencies and Income Tax (IRPF) in Spain

One of the most frequently asked questions by crypto investors is the following: If I exchange one cryptocurrency for another and do not switch to fiat (for example I exchange BTC for ETH) do I have to pay in the Income statement?

Well, in the inquiries made to the Tax Agency, on V0999/2018, they clearly determine that you have to pay when there is a change, even if you have not switched to fiat. If you bought a Bitcoin for 10.000 euros and after a few weeks exchanged it entirely for 100 ETH, and at that moment the Bitcoin is no longer worth 10.000 euros, but 11.000 euros, then we have earned 1.000 euros and We must pay in the Rent for said change.

If I do not make any movement of my cryptocurrencies, I do not pay tribute, since there is no profit, even if they rise or fall in value. With the same previous example, if I store the BTC and at the end of the year it is worth 15.000 euros, I do not have to declare any profit in Income. This is because I have not made any transactions.

One point that the Treasury has made clear is that mining cryptocurrency is considered an economic activity, with the tax and social security obligations that this implies.

On the other hand, aspects such as cloud mining, el lending, airdrops, etc… have not been treated. Even if it is via consultation by the Treasury, we will have to analyze case by case and try to associate them with already existing products or services and whose taxation has been made clear by the Treasury to know how we should operate with crypto taxes in Spain.

VAT and cryptocurrencies in Spain

An important point is the payment of Value Added Taxes (VAT) in Spain. Here we will not enter to analyze the Judgments of the Court of Justice of the European Union (EU), nor the inquiries of the Treasury. This is because it has become clear that the purchase-sale or the transmission of cryptos do not accrue VAT. Therefore, if you buy or sell cryptocurrencies you will not have to add 21% VAT to it.

Another thing is that you buy something and pay with cryptocurrencies. Well, in this case, the good / service you buy carries the corresponding VAT, whether you pay it in euros or pay it in cryptocurrencies. For example, if you buy a house for 200.000 euros, you will have to pay VAT of 20.000 euros (10%), so you will have to pay the developer 220.000 euros. Either in euro bills, in bitcoins or in another cryptocurrency, whose equivalent value on that date is 220.000 euros.

If you are a miner, the Treasury has also clarified that you do not have to invoice with VAT, since the rewards obtained by mining the block do not have a defined client. The problem with not invoicing VAT is that you cannot deduct the VAT on the mining equipment, the rental of the ship, etc.

Wealth tax and cryptocurrencies in Spain

Income tax and VAT require you to pay taxes on what you earn or what you consume. However, the Wealth Tax forces you to pay taxes on the assets you have.

Each Autonomous Community determines a minimum exemption so that only those with high net worth have to pay said tax. The standard minimum is 700.000 euros, although there are autonomous communities such as Aragon, which reduce this minimum to 400.000 euros.

In this sense, when calculating the total assets that we have at the end of the year, it will be necessary to value the cryptocurrencies that we have with the value of December 31 and add said value to the rest of the assets that we have (shares, real estate, checking accounts, land, funds,...), to see if we have to file the Wealth Tax and pay for it.

And in case of loss?

After understanding what taxes must be paid when you have a benefit, it remains to explain what happens when you lose. Whether you like it or not, if you speculate with cryptocurrencies there is a constant risk of losing part of your money. If so, it is very important that you know the following.

Possible offset losses in cryptocurrencies with capital gains. I mean, you have the possibility of offsetting savings income or investment and, more specifically, capital gains and losses, being able to pay taxes on the real benefits that you have had for all your investments. This means that the money you have lost with a cryptocurrency investment will be subtracted from what you have gained in other types of investments, and you will only pay for the difference between the two.

The general rule is that you can compensate losses and gains for each investment product and, in case of losses, with other products of the same category.

The Treasury divides savings income between income from movable capital and capital gains and losses. The former are made up of dividends, rights over shares, current account interest, life insurance, retirement or disability benefits and life annuities due to capital taxation. The capital gains and losses they are much more spacious and they include practically all investments, from stock market to cryptocurrencies, gold, investment funds, ETFs… Sales of second-hand objects and even the sale of the house also fall into this bag.

The Treasury allows to first offset capital gains and losses up to a maximum of 20%. Thus, if after carrying out the operation there are still losses, these can be compensated with up to 20% of the returns on real estate capital. So that you understand it better, in case you have lost with stocks, funds, ETFs... in the next statement you can use that handicap to subtract it from the money you have earned in cryptocurrencies, or vice versa.

Have the best by your side

Tax return is a very important topic, both doing it and doing it well. As we have seen, although there is no express tax legislation for the crypto sector, the Tax Agency wants its share of the pie, and therefore, if you want to avoid future problems, it is best to do things right.

If you want to buy cryptocurrencies, always use platforms that provide you with the maximum data, and even have a contact telephone number to talk to them, as is the case with Bit2Me. We make it as easy as possible for you to buy cryptocurrencies, we give you all the necessary data of the operations so that you can make your declarations extremely easily.

What taxes do you have to pay for cryptocurrencies in 2023

Currently, cryptocurrencies must be declared in the Wealth Tax if they exceed the value of 2 million euros. Similarly, the transmission of cryptocurrencies must be included in personal income tax and gift and inheritance tax. Cryptocurrencies must also be included in the income for the earnings, transmission and generation of returns obtained during each year with cryptocurrencies. Likewise, receiving cryptocurrencies as a gift or as an inheritance is taxed in accordance with the legislation on regional and state inheritance.

In this way, you are surely wondering if you should declare the cryptos if you buy them and do not sell them. In the IRPF, only the profits must be declared by reporting yields, transmissions and sales of cryptocurrencies.  In addition, since 2021, within the section Capital gains and losses derived from the transfer of other capital elements, the denomination of "virtual currency" has been included.

In addition, the possession of cryptocurrencies must also be declared among taxpayers who must file the wealth tax and when the cryptocurrencies are abroad and exceed the value of 50000 euros.