According to Budget 2022, regardless of the taxpayer’s tax bracket, capital gains from crypto assets would be taxed at a rate of 30%.
Everyone is aware that various new tax rules were included in the Finance Act, which was enacted at the end of December 2022, for people who get income from so-called crypto assets.
Notwithstanding all debates about the faults of the passed legislation, it nevertheless presents several chances that, depending on the circumstances, may be highly advantageous to seize.
Let’s attempt a detailed analysis of them.
Managing cash flows carefully: taxes and cryptocurrency
If there was any reason to doubt the taxes of revenue from bitcoin trading operations up until yesterday, there is no longer any basis for doubt today.
According to the legislation, capital gains from cryptocurrency trading are subject to a substitution tax of 26%. (for cashouts made on or after January 1, 2022).
The amount of these capital gains must surpass 2,000 euros in the tax year in order for the tax to be triggered.
Of course, the circumstances in which a taxable capital gain is deemed to have occurred must be made explicit.
The legislator claims that for this condition to hold true, there must be acts of disposition that, in essence, “land down” the value of virtual currencies in the real world throughout the course of the year, as well as an increase in the value of the cryptoassets held (and thus a difference between the value reached during the year and the purchase value). And that is what is meant by “dispositions for consideration,” which refers to a broad range of business dealings.
It’s crucial to understand that, in accordance with the legislation, exchanges between cryptocurrencies with similar features and functionalities are tax neutral. As a result, they do not count as consideration transactions that result in tax liability.
Beyond the question of when, in the case of an exchange, one can speak about crypto assets that do or do not have the same functions and characteristics, the main issue is that since these are the rules, there are many options to keep under control the potential tax burden that may result from the activities of buying, holding, converting, and moving cryptocurrencies or crypto assets. For clarification on this issue, contact the Italian tax agency Agenzia delle Entrate.
To “dose” the amount of any taxable capital gains, it is crucial to record and maintain track of transactions, watch the counter values of cryptocurrencies owned, and prepare for cashout transactions or those that incorporate “selling for consideration” under the law.
How? First and foremost, it might be helpful to employ certain software designed for tracking and documenting cryptographic values and transactions. By the way, such programmes are a huge assistance practically when it comes to submitting a tax return.
Being backed by specialists, accountants, and accounting experts who have a focus on cryptocurrencies and understand how to manage this specific form of asset is equally crucial. This is a perceived need, and as a result, AllCore S.p.A., a business and tax consulting firm, has established a special division called Crypt&Co. [cryptandco.com], where clients can access a pool of experts in the fields of crypto tax, legal, and accounting to provide targeted services of this nature, related to the management and legal and tax implications of crypto assets.
Possibility of “amnesty”
The word “amnesty” may not be the most technically accurate one, but the package of regulations contained in the Finance Act includes specific measures to encourage the emergence of cryptocurrency holdings and to regularise the tax positions of taxpayers who, in the past, that is, during the time before the regulations’ approval, failed to declare their possession.
Hence, according to Article 1 of the Budget Law, paragraphs 139 and 140, it is possible to file an emersion petition for crypto assets owned as of December 31, 2022, by submitting a particular statement.
The rule’s goal is to correct mistakes or forgetfulness that resulted in failure to timely declare holdings or any income on, respectively, the RW and RT forms of tax returns. This necessitates the provision of funds, the amount of which depends on whether or not income was earned during that period.
As a result, if no income has been produced, an annual payment of 0.5 percent of the total value of the cryptocurrency not reported on the RW return must be made (para. 139).
If income has been received, however, it will be necessary to pay 3.5 percent of the value of the cryptoassets retained at the end of each year or at the time of realisation in order to make up for the failure to comply with the disclosure duty. For failing to declare in the RW panel, they will also be required to pay an extra sum equal to 0.5 percent of the same value for each year of holding, in addition to penalties and interest.
Last but not least, Section 133 of the Budget Law allows for the potential of reevaluating cryptocurrency holdings as of January 1, 2023, subjecting them to a 14 percent replacement tax that may be paid over three years, the first of which is by June 30, 2023.
The use of an expert opinion on the value of the assets held could be very useful from the perspective of po, even if the law does not expressly provide for it. In these cases, even if the law does not expressly provide for it (and well would have done the legislature to include and regulate this possibility), the carrying values of the cryptocurrencies held in the past are significantly lower than the current value or, in those cases where the carrying values cannot be traced.
In conclusion, the legislation now gives a chance to regularise one’s position on cryptocurrencies for the past as well, following a time of complete chaos. It’s an opportunity that, despite the expenditures involved, deserves serious consideration and, if at all feasible, should be taken advantage of.
It’s also a good moment to stop improvising and manage your crypto assets sensibly while making decisions and setting up operations for the future.
The legislative framework with these higher certainties may permit the use of crypto-assets, now defined and governed by law, for capitalization activities, making it an intriguing period and a sign of prospects for enterprises.
Yet, nothing can be left to chance, and most importantly, nothing can be done without the backing of qualified experts like accountants and attorneys who have the necessary expertise.
