News about Form 721

Do you have cryptocurrencies abroad? Do you know what tax forms you must declare? If you want to invest in cryptocurrencies, you should know Form 721 and the news of said model for 2022. We will tell you all the details in this article.

Form 721 has been created for taxpayers with cryptocurrencies abroad to declare them to avoid fraud and tax evasion. Until now, Form 720 (informative declaration of goods and rights abroad) did not contemplate cryptocurrencies in a specific way, so, to control them, the new Form 721 has been approved. Form 721 is aimed at natural persons with cryptocurrencies abroad with a minimum value of 50,000 euros.

News regarding Form 721 and cryptocurrencies in 2022

If you have cryptocurrencies abroad or are considering investing in this type of asset, you must know the news that occurred in 2022 regarding Form 721. They are the following:

• Start of use of Form 721. The form is expected to start operating in 2023.
• First statement. The first declaration with form 721 will refer to the year 2022 and will be produced in the first quarter of 2023, between January 1 and March 31, 2023.
• Cryptocurrencies. This year they have also established which cryptocurrencies will be considered to be located abroad. In this sense, the Tax Agency has established that the assets are considered to be in another country when the person, entity or permanent establishment that guards them by providing services to safeguard the private cryptographic keys on behalf of third parties, as well as to maintain, store and transfer said currencies, was not obliged to declare in the IRPF or the tax on corporations or wealth or the income of non-residents.
• Content of Form 721. As far as the content of Form 721 is concerned, it is very similar to that of Form 720 and must include the following data: full name of the taxpayer or company name, address and telephone number, data of the platform that holds the cryptocurrencies ( name, address and NIF), code of the country of tax residence, public key relative to the declarant’s cryptocurrencies, number of coins held at the beginning of the year and those held as of December 31, as well as their value. It is established in the applicable regulations that the average price as of December 31 offered by the main trading platforms will be considered, or mechanisms usually used for valuation will be used that provide a reasonable estimate of the market value in euros.

Obligation to present Form 721. There will be no obligation to present Form 721 about cryptocurrencies in cases where the balance as of December 31 of each year does not exceed 50,000 euros jointly. Therefore, if you have several types of cryptocurrencies, the value of all of them will be added, and if the result is greater than 50,000 euros, you will have to present Form 721.

Other complementary forms. Along with Form 721, two other forms have been approved that must be submitted. They are Form 172 and Form 173 that must be presented by companies that have their tax residence in Spain, and that intervene in operations with cryptocurrencies, that is, the platforms that create virtual wallets and exchange agencies, among others. With Form 172, the balances are declared, and with Form 174, the operations. The two forms must be presented during January of each year. The first declaration will also be made in January 2023.

Other tax obligations that you must comply with if you have cryptocurrencies

Along with Form 721 (for the case in which you exceed the limit of 50,000 euros), about cryptocurrencies, you must consider other taxes such as the following:

• Personal Income Tax (IRPF). If you obtain a capital gain derived from the sale of cryptocurrencies or the exchange of cryptocurrencies, you must include the income in the income tax return. Although there is no obligation to declare the losses that occur due to the transmission of cryptocurrencies, it is advisable to do so since future profits obtained by the taxpayer can be offset in the income statement.
• Wealth tax. In the case of wealth tax, each autonomous community establishes a minimum exemption that is usually 700,000 euros, so that those who have wealth with a higher value must declare this tax.
• VAT. In Spain, the sale of cryptocurrencies is exempt from VAT. However, if you buy a good or a service and pay for it with cryptocurrencies, you will have to pay VAT. In the case of cryptocurrency mining, the activity is also not subject to VAT, but whoever practices it will not be able to deduct the expenses derived from their activity.

Suppose you have sold cryptocurrencies or are considering investing in this type of asset. In that case, it is essential that you have the help of an expert tax advisor in cryptocurrency taxation that carries out a preliminary study of the investment you have made, assesses the profits you have obtained and prepares and files tax returns required by law. It is important to remember that, for example, the non-submission of Form 720 or the submission after the deadline may lead to the imposition of a high penalty and to which the personal income tax penalty must be added, which can reach 150% of the undeclared amount.

In short, before investing in cryptocurrencies, you should carefully analyse the tax repercussions of said investment to avoid making mistakes and have the Treasury inspect or impose a penalty or surcharge.