Form 721: New Informative Declaration for Cryptocurrencies

For this tax year 2024, the Tax Agency (AEAT) has implemented a new information declaration about possessing digital currencies or cryptocurrencies located abroad, form 721. This declaration aims to compile all the information necessary to know the sum of assets in the form of cryptocurrencies by tax residents in Spain. Consequently, this information will be used to contrast with other statements related to said assets, such as their income tax returns.

It is important to know some essential points about whether or not you are obliged to declare. To this end, we present the following scheme to help you know your situation as a cryptocurrency investor. There will be an obligation to present it when:

Your coins are in a hot wallet. This means the asset must be safeguarded by a managing entity connected to the internet and operating on exchange services. Thus, it is the most used to carry out virtual currency transactions.

Those found to have a cold wallet, characterised by not being connected to the internet and simply being a place to store digital currencies, should not be presented in any information declaration. This follows from the binding consultation V2290/2023 made to the General Directorate of Taxes. Virtual currencies in hot wallets, for which you maintain control of the keys and, therefore, are not guarded by an exchange, should also not be declared.

Your manager resides abroad. The Bank of Spain has already published a list of all registered cryptocurrency management entities and tax residents in Spain. When digital currencies are held in these entities, as they are not considered foreign, there will be no obligation to present Form 721.

In other words, you must check if your safeguard entity is resident in Spain and if it has a Spanish NIF. If you have one, your managing entity must submit Form 172 declaring your assets for you.

On the other hand, there will only be an obligation when you have more than 50,000 euros of assets in digital currencies on December 31. It is essential to emphasise the digital currency’s valuation, as it can sometimes take time to find the proper exchange.

After submitting it for the first time, you must submit it again every time; as of December 31, you have an increase of 20,000 euros concerning your last declaration, or there are cancellations/sales.

Regarding the information we need to make a correct declaration of your cryptocurrencies, it is the following:

A list containing all your cryptocurrency assets located abroad.

It must include:

• The denomination of the currency.
• The units.
• Its total value must be in euros as of December 31.
• The name of the safeguarding entity.

All of this information must be broken down by cryptocurrency and exchange.

Complete information on the safeguard entities with which you operate, indicating whether the manager is a resident of Spain and its NIF.

Using a managing entity with a Spanish residence, you must ensure whether your manager is the same Spanish entity or, on the other hand, said entity from a subsidiary abroad. This is how you are usually registered on the entity’s portal.

It is also important to mention the sanctioning regime of this form.

On the one hand, we have the sanctions imposed for failing to pay taxes on the income from cryptocurrencies, typically taxed by personal income tax. But in this case, we will focus on the sanctions for hiding digital currencies from the Administration. Failure to provide the information constitutes a minor infraction, and it is subject to a penalty of 20 euros for each piece of data or set of data referring to the same person or entity that is not declared and may rise to a maximum of 20,000 euros.

Finally, it is worth remembering that this form only applies to cryptocurrencies not endorsed by any state or entity.

That is, FIAT money (legal tender fiduciary money, for example, euros, dollars, pounds, etc.) held in the same wallets will not be subject to Form 721 but to Form 720.

Finally, we remind you that the declaration period ends on April 1, 2024.