Taxation of cryptocurrencies, declaration after the deadline

For a long time, we have heard about cryptocurrencies as a form of investment or payment, among other uses, so doubts arise as to the tax implications they may have. This article talks to you about cryptocurrencies’ taxation and what happens if you make the declaration after the deadline.

What are cryptocurrencies?

In 2014, the European Central Bank gave the following definition of cryptocurrency: It is a digital representation of the value, which a central bank does not issue or a public authority or necessarily connected to fiat money, but is accepted as a means of payment and it can be transferred, stored or exchanged electronically.

Among the most common cryptocurrencies, we can find Bitcoin, but others such as Ethereum or Litecoin.

How are cryptocurrencies taxed?

Regarding the taxation of cryptocurrencies, we must differentiate several types of returns that we can obtain and that will be taxed in the Personal Income Tax (IRPF):

• Returns obtained from the sale or exchange of cryptocurrencies (when we act as investors/traders).
• When we act as generators of new cryptocurrencies (miners).
• Other income (interest, referrals)

In the first case, it is important to consider that the purchases and sales of cryptocurrencies or the acquisitions of other cryptocurrencies paying, in turn, with cryptocurrencies (that is, exchanging some cryptocurrencies for others), are taxed in the Personal Income Tax ( Personal income tax) as do stocks or investment funds. That is, they are taxed as a capital gain or loss as appropriate.

In the second case, that of cryptocurrency generators, we face a different assumption since it is about people who are dedicated to mining cryptocurrencies through the technology called Blockchain. In Spain, to be able to act as a miner, it is necessary to be registered in the Economic Activities Tax (IAE) and Social Security. This economic activity will be declared in personal income tax as the economic performance of economic activity.

In the case of interest charges in which specific online platforms can pay you back (whether they are charged in legal tender or cryptocurrencies), these are considered income from movable capital and are included in the income statement in the tax base of the savings, along with the rest of said capital returns (interest on savings accounts, interest on obligations, bonds, dividends, etc.).

Finally, various investment platforms can pay for the “customer acquisition action”, that is, for recommending the platform’s services to other users. They are called “referrals”. These returns, if they are collected sporadically, as a further complement to our investments in cryptocurrencies, are taxed as capital gains in our general tax base (along with income from work, for example), while, if the collection of referrals is linked to a possible commercial and habitual relationship with the online platform, returns from economic activity are considered to be included in the Personal Income Tax.

Other taxes: Cryptocurrencies are part of personal assets, so if we are obliged to file the Wealth Tax, they must be added to the rest of private assets for the purposes of determining the taxable base of said tax, as well as being part of the taxable base of the Inheritance and Gift Tax, if we are going to receive said assets as inheritance or donation.

In addition to the above, cryptocurrency holders will be forced to declare them in the informative declaration of assets abroad, Form 720 Spain.

What happens if you don’t declare the cryptocurrencies?

Suppose you do not declare the capital gain that you have obtained with the cryptocurrencies or other income previously outlined. In that case, it can be considered that you have committed a tax offence that can be slight, serious or very serious, depending on the case.

To declare this income, if you have not declared them in time, you must submit a supplementary income statement.

In Personal Income Tax (IRPF), the consequences of non-declaration depend on several circumstances:

• If the statement has a result to pay or to return.
• If you submit the return voluntarily or if the Tax Agency has sent you a request. For example, if the result is to be paid, but the Tax Agency has not required you. You present the complementary declaration, you will have to pay a surcharge that will be 5%, 10% or 20% of the amount entered, depending on the delay in the presentation of the declaration regarding the usual term of presentation.

If it is the Tax Agency that requires you, in addition to having to enter the amount not paid at the time, they may impose a penalty of between 50% and 150% of the amount not paid on time.

If the result of the declaration is to be returned or there is no amount to be paid, the fine will be 100 euros if there is no requirement from the Treasury and 200 euros if there is.

In addition to the above, it is essential to consider the sanctions imposed for failure to present Form 720 Spain or other taxes previously outlined.