New tax rates on cryptocurrencies

 In Alternative assets, Cryptocurrencies, News

From next year, cryptocurrencies will be subject to taxes as set out in the State Budget for 2023.

This does not mean that you will have a duty to declare the possession of cryptocurrencies. However, you will have to declare future gains or income associated to cryptocurrency operations and other crypto assets.
If you purchased a cryptocurrency several months ago (i.e., within less than one year) and have sold it and made a profit, this sale operation will have to be reported on your IRS declaration form and the capital gain made, taxable at 28%.
Capital gains resulting from the sale of crypto assets will have to be declared with the tax authorities when filling out the IRS form. IRS forms will have been adjusted with a new section to take into account such operations.
When selling or transacting cryptocurrencies, assuming that the holder had the currency for less than 365 days, if a positive balance overall is achieved on gains and losses, this positive balance will be subject to IRS at 28%. This means that if the overall capital gain is €1000, the tax payer must pay €280 in tax.
Failing to report capital gains resulting from a cryptocurrency operation by omitting such information on the tax return will result in fines, the amount of which will depend on the situation in hand. Taxpayers will also have to pay the compensation on the interest due on the undeclared tax at the annual rate of 4%.
Any gains regarding cryptocurrency operations on crypto assets purchased 365 days ago or over will be tax exempt.
If the crypto asset holder has units of the same crypto asset purchased at different times: one over a year ago; the other under a year, and a profit was obtained from the sale of one of them, but the holder doesn’t know which, the First In, First Out IRS rule will apply, which means that assets produced or acquired first are sold, used or disposed of. The tax authorities will assume that the assets with the oldest costs are included in the income statement’s cost of goods sold (COGS).
If the crypto assets portfolio gained in value over the past 365 days, but no transaction was made, this increase in value is not subject to tax providing no transaction is made.
Crypto asset mining* on the blockchain is now considered a commercial activity under Category B of IRS. Income made on this professional activity will be subject to IRS tax at a progressive rate.
If a crypto asset is transferred as a gift as a result of a transaction, there is a tax of 10%.
If income is derived from the professional buying and selling of crypto assets, then income obtained from this exercise must be declared assuming that this is a repeated and continuous practice.
On aggregation of income, the capital gains obtained from the sale of crypto assets should be listed on the tax form under Category G. In this case, all gains covered by this category (patrimonial increments) are subject to progressive IRS taxes.
A negative balance reported in each year regarding the sale of crypto assets may be reported for the five subsequent years providing these are listed under Category G on aggregation of income.
Profits made on the purchase and sale of NFTs (Non-Fungible Tokens) also fall under the definition of a crypto asset and capital gains are liable to tax.


*The competitive process that verifies and adds new transactions to the blockchain for a cryptocurrency that uses the proof-of-work (PoW) method. The miner that wins the competition is rewarded with some amount of the currency and/or transaction fees.