R eporting your Bitcoin and cryptos in your Spanish tax return may seem controversial, until now.
* Article updated as of June 2021
The popularity of Bitcoin and the exorbitant growth experienced by some cryptocurrencies over the last few years took many people to multiply the investments made in cryptos, which, in turn, has given rise to many doubts among these investors on how and when to report and tax the capital gains obtained in their respective personal income tax returns in Spain (IRPF).
The main question in these cases is knowing when crypto transactions are taxed, how these transactions should be included in the personal income tax return (IRPF), and whether the tax agency should be informed of the holding of Bitcoin, Ethereum, and other cryptos through the modelo 720.
Reporting your cryptos in your tax return
PURCHASE OF CRYPTOCURRENCIES
Acquiring cryptos is not taxed according to the Spanish income tax law, so when buying Bitcoins or any other crypto, we must not include this information in our income tax return.
However, the Spanish tax authorities understand that when the acquisition is made through an exchange of cryptos (e.g. exchange of Ethereum for Bitcoin), even when this is carried out in the customer’s own wallet, this transaction will be taxed as an exchange, even if the wallet holder has not received a single euro in this transaction. Therefore, when the acquisition of crypto is made by the exchange between two cryptocurrencies, this transaction must be included in the holder’s personal income tax return.
SALE OF CRYPTOCURRENCIES
The sale of cryptos must be declared in the capital gains section of the personal income tax return. We must include all the gains and losses that may arise from the sale of our cryptos.
NOTE : Article 96 of the Spanish Personal Income Tax law, regarding the obligation to file a tax return, that taxpayers who only obtain capital gains, up to a limit of 1,000 euros per year, and capital losses of less than 500 euros are not obliged to file a tax return.
Capital gains are taxed at a flat rate of 19% for the first 6,000-.-€, 21% from 6,000-.-€ to 50,000-.-€ and 23% thereafter.
OBLIGATION TO INCLUDE YOUR CRYPTOS IN THE MODELO 720
The modelo 720, or declaración sobre bienes y derechos situados en el extranjero in Spanish, is the form that Spanish tax residents must file informing on their assets (shares, bank accounts) or real estate owned in a foreign country.
Cryptocurrencies do not fit into any of the above elements for which the obligation to file the modelo 720 applies, so, in principle, we must not file a modelo 720 informing on the cryptos located in a wallet or broker outside Spain.
Despite all the above, we will have to keep a close eye on the evolution of this point, as the government is working on a draft law under which holders of cryptocurrencies will be obliged to include them in their declaration of assets abroad. This law could be passed very soon would come into force for the 2022 tax year, so it is important to keep a close eye on its evolution.
Do not hesitate to contact our team of tax advisors for further information on how to report and file your tax return in Spain, specially if you hold or trade with cryptocurrencies.