Binance is the world’s largest and most widely recognised cryptocurrency exchange platform. It is an ideal place to start venturing into the crypto world, even for beginners.
Both the activities with cryptocurrencies carried out within Binance, and other platforms raise doubts in its users regarding taxation.
Tax returns are a significant issue for all taxpayers. Failure to do so or to do so will result in an offence and a consequent fine.
Regarding cryptocurrencies, Spain does not have clear legislation. However, the Tax Agency has already said several things about it and has established some regulations.
This article tells you everything you need to know about Binance and how your profits there or on other cryptocurrency platforms can impact your taxes.
Binance: a brief guide to understanding the most important points
What is Binance?
Binance is the world’s largest trading cryptocurrency exchange platform, and it is also the one with the most registered users. Today, there are 90 million users across the globe using Binance services.
It was launched in 2017; it has not stopped growing and gaining worldwide fame.
What operations can be done on Binance?
Binance offers many services and products, and the best known are those for trading, buying, and selling cryptocurrencies.
Other services offered are:
- Virtual Academy: This is an entire blog with a wide variety of crypto content, accessible to beginners and people with extensive experience.
- VISA card: this allows you to get up to 8% cash back in BNB every time a purchase is made.
- NFTs: Recently, Binance has added the option to buy NFTs through its platform.
- Binance Pay: is a global, secure, contactless cryptocurrency payment technology specially designed by Binance. Through it, you can send, make and receive payments with cryptocurrencies without commissions from anywhere.
What variety of cryptocurrencies are there on Binance?
On Binance, there are more than 600 cryptocurrencies available to trade.
Some of the cryptocurrencies that we can find on the site to buy and sell are: Binance Coin (BNB), Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Cardano (ADA), Dogecoin (DOGE), Polkadot (DOT ), Tron (TRX), Litecoin (LTC), ChainLink (LINK), and the list goes on.
What is needed to start trading on Binance?
Trading on Binance is easy. First, you have to register and create an account. Once this is done, Binance opens a digital wallet to the new user that they can use to buy and sell cryptocurrencies.
The next step is to fund the account to trade. These funds can be added through different payment methods.
Then an identity verification process must be done. This procedure is much more straightforward than it sounds. In general, a photo of the passport or identity document is requested, and a selfie of the person. They may ask for a few more things, but they are not more complicated than what we just mentioned.
Once the account has been verified, you can start buying and selling cryptocurrencies from Binance.
How to get tax returns on Binance?
The tax declaration allows for tracking the activity with cryptocurrencies of a person to ensure that they are complying with the declaration requirements established by the Tax Agency.
Binance offers its users a Tax Tool, which allows you to track and account for all your transactions automatically.
From Binance they explain how to access transaction records with more than one fiscal year in a simple way.
Cryptocurrency taxation: clearing up the main doubts
The Tax Agency considers that cryptocurrencies can generate profits or losses, for which they have a tangible impact on the taxpayer’s assets. This means that taxpayers who profit from their operations with cryptocurrencies must pay said income.
Although there is still no specific law on the use of cryptocurrencies in Spain, the Tax Agency has established that crypto users must pay taxes under certain circumstances.
Let’s see what the main taxes are in Spain to understand how they affect activities with cryptocurrencies:
- Value Added Tax (VAT).
- Personal Income Tax (IRPF).
- Wealth Tax (IP).
Likewise, other taxes, both at the state, provincial or local level, may affect cryptocurrency operations. Some of these taxes are Tax on Economic Activities (IAE), Corporate Tax (IS) and Inheritance and Gift Tax (ISD).
As there is currently no clear law that regulates the use of cryptocurrencies, the holders of these digital assets must be guided by the general regulations that regulate economic activities.
Let’s see in detail what treatment cryptocurrencies receive in the main taxes in Spain:
Cryptocurrency taxation: Value Added Tax (VAT)
In Spain, the purchase of cryptocurrencies is exempt from VAT, both for the buyer and the seller. Therefore, people who buy or sell these digital currencies should not add 21% VAT.
Another very different situation is to buy a good or service and pay for it with cryptocurrencies. In this case, the good or service purchased does carry its corresponding VAT, regardless of how it is paid.
Another topic where the VAT situation is also specified is cryptocurrency mining. Therefore, the European Union, and therefore the Treasury, considers cryptocurrency mining activities to be a service that is not intended for a final recipient or client. Following this logic, since they cannot issue an invoice to anyone, they cannot be taxed with VAT. This means that cryptocurrency mining is not subject to VAT. The counterpart of this good news is that the expenses incurred in tools and supplies to mine cryptocurrencies are not deductible either.
Cryptocurrency Taxation: Personal Income Tax (IRPF)
One of the most asked questions from crypto users is: should I declare cryptocurrency income if I exchange one cryptocurrency for another without going through fiat money? An example of this case would be trading ADA for LINK.
Faced with this doubt, the Tax Agency is unmistakable and blunt: it is necessary to pay taxes whenever there is an exchange with cryptocurrencies, regardless of whether it has been passed through fiat money.
For example, if a person buys 1,000 euros of ADA and soon exchanges his ADA for LINK, and if this change generates a profit for some fluctuation of these cryptocurrencies, then that profit must be taken into account in the IRPF.
Another frequent question is: if I have cryptocurrencies but do not make any movement with them, should I declare cryptocurrencies income, even if they rise or fall in value? In this case, the answer is no. There is no tax because no transaction was made with cryptocurrencies, and therefore there were no profits.
Income tax: declare cryptocurrency mining
On the other hand, the Tax Agency has clarified explicitly that cryptocurrency mining is considered an economic activity, for which it entails tax and social security obligations. Declaring cryptocurrency mining in Spain is a matter that should not be overlooked.
Likewise, the Tax Agency has not provided information on other activities related to cryptocurrencies, such as cloud mining, airdrops, lending, etc. In all these cases where there is no clear position in the Treasury, a detailed analysis must be carried out and try to associate them with existing services or products taxed without any confusion.
Cryptocurrency taxation: Wealth Tax (IP)
Income tax and VAT oblige taxpayers to pay taxes on what they earn or consume. On the other hand, the Wealth Tax requires paying taxes on the assets that taxpayers have.
In Spain, each Autonomous Community decides what amount the IP is paid. Many communities have a standard minimum of 700,000 euros, while this minimum is much lower in others. People who exceed the established amounts must declare and pay the IP.
Returning to cryptocurrencies, when calculating the total value of assets, they must be taken into account and added to the rest of the assets owned.
Cryptocurrency taxation: what happens to losses?
The Tax Agency requires citizens to declare cryptocurrencies, specifically all operations with cryptocurrencies that have produced a profit for the taxpayer.
On the other hand, if transactions with cryptocurrencies have generated losses, the taxpayer is not required to declare said operations.
Despite this, the most sensible thing is to declare them anyway, since the tax base in the income statement would be reduced in the event of future compensation produced by operations that give profits.
Let’s see an example.
Let’s imagine that a person lost money on cryptocurrency investment. Then, he can subtract that loss from what he has earned in other types of investments so that he will only pay the difference between the two.
Conclusion
Cryptocurrency taxation is serious business. Whether you make transactions with digital currencies through Binance or another platform, or even peer-to-peer, it is important that you seek advice and know what your tax obligations are.
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