Crypto Taxes in Spain

You have probably heard about cryptocurrencies and bitcoins and how they are increasingly used to pay not only in small purchases but in large investments. However, you may doubt crypto taxes and do not know what taxes to pay and how. We tell you the essentials on the subject.

What is a cryptocurrency, and what advantages does it have?

To start from the beginning, the first thing you should know is what cryptocurrency is. A cryptocurrency is a virtual currency that can be exchanged for other traditional currencies and used as a means of payment or investment. The best-known cryptocurrency is Bitcoin, born in 2009, but later, others such as Litecoin, Ethereum, Ripple and Bitcoin Cash, among others, have appeared.

The characteristics of cryptocurrencies are the following:

• They can be used as a payment system or as an investment.
• They are not subject to the control of a government or a financial institution.
• They work through the technology called Blockchain or chains of blocks, designed to avoid modifications.
• The security and integrity, and balance of your account statements are guaranteed.

Why use cryptocurrencies?

The use of Cryptocurrencies has several advantages, such as the following:

• The costs of each transaction are reduced since there are no intermediaries.
• Online payments are faster since when paying with a Cryptocurrency, the payment is received by the seller in a few minutes.
• There is no need for financial agents or third parties to carry out the operation.

Therefore, with cryptocurrencies, we can obtain a profit whether they pay us with them or buy them as investors, and that benefit will have to be taxed.

Crypto taxes in the Income Tax Return (IRPF)

If you sell or buy bitcoins or other cryptocurrencies and make a profit or suffer a loss, it is considered a capital gain or loss for the personal income tax declaration. You will have to add it to the rest of the capital gains and losses you have, for example, self-employment or pensions, among others.

The profit will be obtained by calculating the difference between the price you have paid for the cryptocurrencies and the price you sell them. You will have to add that amount to the rest of the earnings and apply the corresponding percentage according to the personal income tax tables.

In the case where, for example, you have bought Bitcoins as an investment and have lost money, you can subtract the loss from other gains you have had.

Form 720 Spain: assets and rights abroad and cryptocurrencies

In relation to Form 720 Spain, it is important to note that the obligation to declare cryptocurrencies will arise whenever their valuation is greater than 50,000 euros. The penalties for non-presentation of the Model or filing after the deadline can be high since they can reach 10,000 euros, which should be added to the penalty in personal income tax that can reach 150% of the undeclared amount. In this sense, we must remember that this sanctioning regime is being the subject of a judicial dispute before the Court of Justice of the European Union.

Notwithstanding the foregoing, in the declaration of Form 720 Spain for 2020 (whose term will end on 03/31/2021), the cryptocurrencies should not be reported.

Gift and Inheritance Tax

If, for example, you receive a donation in bitcoins or someone dies, and you inherit bitcoins, you will have to declare in the Inheritance and Donations Tax, taking into account the exemptions and bonuses that are regulated in each Autonomous Community.