Taxation for mining cryptocurrencies: the most complete and simple explanation

Cryptocurrency mining is one way to obtain cryptocurrencies (others would be: sale, exchange, stacking, inheritance, etc.).

Although mining is less popular than buying and selling, since this activity requires a high technical knowledge of blockchain, mining occupies an important part in the Spanish sector.

In this sense, in 2020, the cryptocurrency sector had a turnover of € 328 million, employing more than 1,200 people in Spain.

Therefore, mining cryptocurrencies is profitable.

But how does cryptocurrency mining taxation work in Spain? How is the Treasury paid for exercising this economic activity?

Questions about the taxation of cryptocurrency mining

What is cryptocurrency mining?
Taxation for mining of cryptocurrencies in Spain
Is it profitable to mine cryptocurrencies?
How to avoid cryptocurrency declaration errors

What is cryptocurrency mining?

Cryptocurrency mining uses computer systems to solve mathematical problems (for example, hitting an arithmetic problem) in exchange for a financial reward.

In this way, when a block of information is verified, the miner receives a reward in the form of new cryptocurrencies introduced to the market.

Well.

First of all, it is important to know that cryptocurrency mining at a fiscal level:

it is an economic activity
and is taxed in personal income tax or corporation tax, tax on economic activities (IAE).

Next, we will see when it is taxed in each case.

Taxation for mining cryptocurrencies in Spain

Cryptocurrency mining in the Income Statement (IRPF)

This activity has not gone unnoticed by the Tax Agency and the General Directorate of Taxes. As it is an economic activity, you must register with the Economic Activities Tax (IAE) and declare said income in the general income tax base for income from economic activities.

To carry out the cryptocurrency mining activity as a self-employed person, you must meet the following requirements:

Registration with the IAE with Form 036 or 037.
Registration with the RETA.
Presentation of Form 130 (payments on account of personal income tax) and the annual summary through form 190.
Registration in the Register of Intra-Community Operators (ROI)
Presentation of Form 347 (informative declaration of operations with third parties).

Keep in mind that you can deduct the expenses associated with that activity.

Taxation of the mining of cryptocurrencies in the Corporation Tax

It is also possible to set up a commercial company for mining activity. In this case, the activity is taxed in Corporation Tax.

In the case of recently created companies (up to the first two years after its constitution), the reduced rate of 15% will be applied to corporate tax (instead of the general 25%).

If you want more information about the best way to set up a cryptocurrency mining company, contact us now.

Is cryptocurrency mining subject to VAT?

Cryptocurrencies for tax purposes are virtual currencies, that is, payment in terms of article 20. one. 18 j) of the VAT Law.

Therefore, any operation carried out with cryptocurrencies is exempt from VAT.

But that it is exempt does not mean that it is not subject to VAT.

For its part, the activity of mining cryptocurrencies is an activity that is not subject to VAT tax.

Mining involves creating new blocks from which the new currencies derive; the system is remunerating this activity with a certain amount of said cryptocurrency. In cryptocurrency mining, it cannot be understood that there is a relationship between provider and recipient; therefore, since there is no direct relationship between the service provided and its consideration, cryptocurrency mining is not subject to VAT.

Now, in the sale of cryptocurrencies, the same does not happen since the sale is subject to (but exempt) from VAT.

Is it profitable to mine cryptocurrencies?

Is cryptocurrency mining really worth it?

Many of our clients come to the office and tell us that a friend is dedicated to cryptocurrency mining but do not dare to leap because they do not know if it will be profitable.

The most important thing is that you keep in mind that the value is not constant because it depends on many factors.

For this reason, it is interesting that you check the profitability of cryptocurrency mining yourself.

There are platforms to calculate your profitability. However, as we say, profitability is not constant; it changes every moment so that what appears at a specific moment will cease to be valid the next day or even that same night.