- Within the new budget for 2023 approved by the Italian Senate, a new tax system for cryptocurrencies is established, which includes a 26% tax on profits and defines cryptocurrencies as “a digital representation of value or rights.
- The new tax on digital currencies is activated only in the event that capital gains of more than 2 thousand euros are accrued. and losses in crypto assets greater than 2 thousand euros in a tax period will be considered as tax deductions.
On December 29, the Italian Senate approved its budget for 2023, with which he took a new step in the path of digital assets, approving, among other topics, a new tax system for cryptocurrencies.
As expected by analysts and citizens, taxation only refers to capital gainshence, if any gains are made from the sale of digital assets, those gains will now be taxed at 26 percent. Also, the new tax on digital currencies it is activated only in the event that capital gains of more than 2 thousand euros are accrued.
Another interesting point of the legislation is that defines cryptocurrencies as “a digital representation of value or rights that can be transferred and stored electronically, using distributed ledger or similar technology”.
This point is important, since before the approval of this law, digital currencies were treated as foreign currencies, with lower taxes.
Italy encourages its citizens to declare their crypto assets
Another relevant fact of the cited document is that it details a series of incentives for taxpayers to declare their holdings of digital assetsby proposing a pardon on the profits made, by paying a 3.5 percent “substitute tax” and adding a 0.5 percent penalty for each year.
Another incentive to motivate Italians to join the execution of this law is that it will allow taxpayers cancel their capital gains tax at 14 percent of the price of the digital currency that they had on January 1, 2023, since it would be substantially less than the price paid when said virtual currency was acquired.
Likewise, losses in crypto assets greater than 2 thousand euros in a tax period will be considered as tax deductions, therefore, they may be applied to the following tax periods.
Other topics introduced in said law include a series of tax breaks to reduce penalties for late tax payments, as well as tax incentives for the creation of new jobs, together with a lowering of the retirement age.
It also covers €21 billion of tax breaks for companies and households facing the energy crisis.
How to calculate the profit?
To calculate earnings of capital, it is only necessary to carry out a simple calculation, since The user must subtract the purchase price from the sale price, to later multiply said result by the amount of sold tokens.
Likewise, in the event that a user cannot or does not want to use the cost or purchase value, they have the option of paying a single substitute tax of 14 percent on the total amount of everything sold, that is, without calculate capital gain.
Will NFT be regulated by the new law?
The new definition that encompasses cryptocurrencies also involves non-fungible tokens, which means that all intangible assets or application assets based on distributed ledger technologies enter the same tax bag.
Therefore, it is to be understood that any capital gains generated from trading NFTs will also be subject to 26 percent tax if it exceeds €2,000, plus NFTs also apparently have to be declared.
If so, it adds a bit more difficulty to trading NFTs as these new rules are very different from what they currently run as far as traditional artworks are concerned, this means that a non-fungible token from a work of art, is treated differently from the work of art itself.
Furthermore, it is very difficult to establish the market value of an NFT if it is only sold, as this makes the correct ownership statement on the Form RW basically uncertain.
Italy follows in the footsteps of others
It is important to note that Italy lacks a comprehensive regulation in the field of digital assets, therefore, the European country is following in the footsteps of Portugala nation that included a similar capital gains tax at a rate of 28 percent as part of its 2023 budget law.
You might be interested in: