Bitcoin Taxation, PUBLISHED:
Estimated reading time: 6 minutes
by Jacqueline Facconti
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Despite the changes made by the Legislative Decree 231/2007 of the EU directive, taxation remains a puzzle for cryptocurrencies. The tax regime of cryptocurrencies is still difficult to classify. Those who hold or sell digital currencies are starting to ask themselves two questions regarding the management of tax compliance. The IRS considers holdings in cryptocurrency, Bitcoin and other digital currencies as ‘property’ for tax purposes are taxable like any other asset, such as gold or stocks.
Despite the changes made by the Legislative Decree 231/2007 of the EU directive, for the cryptocurrencies there taxation remains a puzzle. The crypto tax regime it still appears to be difficult to classify. Those who hold or sell digital currencies are starting to ask themselves two questions regarding the management of tax compliance. The IRS considers holdings in cryptocurrency, Bitcoin and other digital currencies as ‘property’ for tax purposes are taxable like any other asset, such as gold or stocks.
Cryptocurrencies, taxation remains a puzzle: the tax regime in Italy
There Bitcoin taxation in Italy it is mandatory. By law, transactions in cryptocurrencies are subject to taxation like transactions involving any other property. When you sell or trade cryptocurrencies for a profit or generate capital gains, you pay taxes (26%). According to the most recent interpretations (Article 67 of Presidential Decree No. 917/86), the value of the cryptocurrencies becomes taxable (subject to taxation), when in the reference year cryptocurrencies for a value in euro of at least 51,645.69 have been held for 7 continuous days. If, on the other hand, you hold cryptocurrencies and make a loss, the loss can be deducted from taxes. The capital gains resulting from cryptocurrency transactions are taxable in the short and long term. The issue of buying and holding cryptocurrencies is different: by buying and owning crypto, you don’t pay taxes even if their value increases. The taxable event is the sale for a profit or capital gain. The only exception is the acquisition of Bitcoin from mining: in this case, it is taxable immediately without the need to sell the digital currency.
How Bitcoin Taxes Are Calculated
To be sure that the calculations of the taxes on cryptocurrencies are correct by respecting the rules, it is essential to carefully track your activities related to transactions with digital currencies.
It will be necessary to know:
- – The fair market value when the Bitcoin was bought or mined;
- – The fair market value of BTC at the time it is used or sold.
These data are essential for the correct and accurate calculation of the Bitcoin taxation after having identified the equivalent value in euros. For the Revenue Agency, cryptocurrencies are similar to investments in foreign currencies with legal tender. Therefore, they must be indicated in the tax return in Part RW (Income PF model) referring to the fiscal monitoring of investments abroad. If you simply hold crypto in a wallet (virtual wallet), the value must be reported in line RW1 (column 3, code 14, “Other foreign financial assets and virtual currencies”) to inform the AdE without paying taxes. Earnings generated by capital gains must, on the other hand, be included in Part RT (section II, Capital gains of a financial nature).
Is crypto taxation in Italy correct for experts?
What idea do tax experts have regarding the approach of the Italian legislation regarding the cryptocurrency taxation? They have a negative idea because the approach does not consider the key characteristics and the very nature of cryptocurrencies. The Italian tax rules applied to fiat currency are not adequate for the volatility of cryptocurrencies, also considering the fact that they are not generally accepted as a payment instrument and that, often, it is difficult to convert them into official currency. It is not easy to convert them into fiat currency because, still today, most financial institutions share the concerns of money laundering. Faced with these problems, tax cryptocurrencies like fiat currency it is wrong, inadequate: it can lead to heavy taxation for cryptocurrencies in terms not so much of cash as of competence. The other distinction to be made between fiat and digital currencies is this: the annual reporting obligation applicable to financial assets held abroad collides with cryptocurrencies which, by their nature, are everywhere and nowhere.
Cryptocurrencies: there is no ad hoc tax regulation
In Italy, the tax authorities for the taxation of cryptocurrencies they apply the regulations in force regarding the declaration and income tax applicable to foreign currencies trying to adapt and find a compromise between the various functions of cryptocurrencies. Unintentionally, this approach may have opened the door to programming possibilities in the context of the “new tax regime for residents” by including BTC taxation. In our country, the authorities currently apply the principles designed for fiat currencies and financial products. In Europe, EU institutions are trying to regulate crypto according to specific criteria also for the Bitcoin taxation. One thing is certain: today, the legal-tax treatment of cryptocurrencies follows different approaches, it is a developing area. Ad hoc regulation is expected, specific to the nature of digital currencies, cryptocurrencies and crypto-assets.
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I graduated in Business Administration from the Department of Economics and Management ofUniversity of Pisa. I collaborate with various newspapers and professional magazines. Cultivator of economics, finance, insurance, technology and commodities, I also have a Master’s Degree in Strategy, Management & Control achieved with a grade of 110 with honors. In my educational school experience, I can also include a Master in Communication, Business, Insurance and Banking. Expert in Quality and Human Resource Management, I am a professional writer.
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