Cryptocurrencies must be declared in the IRPF 2021 tax return, just like other assets. Above all, because as they are an increasingly common investment, the Treasury is paying attention to them.
Cryptocurrencies have become a trend for many who observe how their investments can become a real headache when filing their income tax return. In view of the lack of clarity, we will try to summarize the keys to cryptocurrency taxation. in view of the lack of clarity
How should cryptocurrencies be declared in the IRPF 2021?
First of all, we will have to define what a cryptocurrency is.
What is a cryptocurrency?
They are virtual, non-physical currencies that use Blockchain technology as a means of control. They can be traded and exchanged for another traditional, virtual currency, good or service. And they are used to make all kinds of commercial transactions, as you would with any other currency.
How cryptocurrencies should be declared in the IRPF 2021?
To see how to declare cryptocurrencies in the IRPF 2021, we must first see the differences in an investor or someone who is mining cryptocurrencies. Because while the former will be taxed on the savings base at the rates we have discussed. The “cryptocurrency miner” performs an economic activity.
Cryptocurrency mining
“Mining cryptocurrencies” means generating new virtual currencies through a computer process. Let’s say we would be a manufacturer of cryptocurrencies, in this type of cases, for example, at accounting level we should treat cryptocurrencies as stocks.
For this reason, in the case of the person who mines cryptocurrencies, when it comes to taxation, he/she should do it as a return on economic activity. But not as an investment. And, therefore, it must be adjusted to the general base of the IRPF and deduct the expenses generated as in any other economic activity.
Investor in cryptocurrencies
If it is the case of the investor in cryptocurrencies, which is the most usual, since being a “manufacturer” is not so simple, when it comes to taxation, it is the same as if you had an investment fund or shares. That is to say, it will be taxed in the savings base.
What happens if I exchange for another currency, good, right or service?
In the case of an exchange, that is, the exchange of one virtual currency for another or the purchase of a good or service in exchange for virtual currency. In order to determine the gain or loss, it must be taken into account that the sale value of the virtual currency will be the higher of the following two values:
- The market value of the good or right delivered.
- The market value of the good or right delivered in exchange.
In this case the market value of the virtual currencies being exchanged will be the price agreed for their sale between the intervening persons at the time of the exchange.
The acquisition price will be the price paid at the time of purchase, for the good/right or virtual currency that is delivered in the exchange.
How to proceed when exchanging cryptocurrencies for euros?
In the case of operations of sale of virtual currencies in exchange for euros carried out outside an economic activity, the loss or capital gain will be determined by the difference between the transfer value and the acquisition value.
They must be included in the Personal Income Tax return in the section “Capital gains and losses derived from the transfer of other assets”. Entering in box [1626] the key 0, which corresponds to “Virtual currencies”.
It may be the case of partial sales of homogeneous cryptocurrencies, for example, bitcoins. These may have been acquired at different times and at different values. In these situations, the FIFO criterion will be followed, and therefore those that are transmitted are the ones acquired first.
Gains and losses on transfer and capital gains are taxed in the special personal income tax base:
- First, from €0 to €6,000 profit, at 19%.
- From €6,000 to €50,000, at 21%.
- From €50,000 to €200,000, at 23%.
- More than 200.000€, at 26%.
How cryptocurrencies to be declared on other taxes in 2021
Let’s see the cases in which cryptocurrencies have to be declared not only in the IRPF 2021.
Wealth Tax
In addition, you will have to take into account your balance, for Wealth Tax purposes. Simply by owning cryptocurrencies and forming part of the taxpayer’s wealth, they must be declared in form 714.
Inheritance and Gift Tax
In the case of inheritance or as a gift they are also taxed, according to the inheritance legislation, both state and autonomous. Thus, tax residents in Spain will have to declare the value of the digital coins left to them. Which, according to the state regulatory framework, are taxed at rates ranging from 7.65% to 34%.
However, in this case it is necessary to take into account above all the regional regulations. For example, in communities such as Madrid, a rebate of up to 99% may be applied. But this will depend on the degree of kinship with the deceased or donor.
Other legal obligations
People who have cryptocurrencies deposited abroad are obliged to report the virtual currencies whose ownership they hold by means of Form 720, also known as Informative Declaration on Assets and Rights Abroad. It will be mandatory to include in this declaration all the cryptocurrencies held on December 31 of the previous year. As long as their amount exceeds €50,000.
However, the fact that it is money in a virtual account/purse and not deposited in entities belonging to any specific country generates a logical controversy about the obligatory nature of filing form 720, despite what the regulations say.