In our previous article we were talking about the famous message that many Spaniards have received in recent days from the Tax Agency, kindly reminding taxpayers that they were aware that they had cryptocurrencies and that they had to declare them.
However, there was no further information in this message, neither in which cases cryptocurrencies should be declared nor in which cases they should not. Because yes, there are cases in which even if you have cryptocurrencies you do not have to declare them to the Tax Agency.
That is why we have decided to present this guide so that you do not have any doubts about what you have to do (and if you do, contact us so we can help you).
What do I have to declare?
As of today there is no specific regulation in relation to cryptocurrencies, but there are binding consultations that give us certain guidelines in this regard that we must follow.
Thus, if during the year 2020 you have had profits trading with cryptocurrencies, we are sorry to tell you that these profits, called capital gains, must be declared in your income tax return.
We recommend you to use programs such as CoinTracker so that you can keep an up-to-date accounting of your crypto gains and losses. This type of program allows you to obtain annual reports that you can submit together with your income tax return or you can use it directly to know how much you have to declare.
Therefore, if during the last year you have made movements with your cryptocurrencies and you have obtained profits, you have to declare it in your personal income tax return in the section of EQUITY GAINS.
How are the profits obtained from cryptocurrencies taxed?
Let’s take an example, let’s imagine that you have earned this year 150,000€ trading with different cryptocurrencies.
According to the table established by the Tax Agency, your profits will be taxed as follows:
The first €6,000 will be taxed at a rate of 19%: So you will pay €1,140.
The following 44.000€ will be taxed at a rate of 21%: So you will pay 9.240€.
Finally, the surplus, i.e. the remaining €100,000 will pay 23%: Which makes €23,000.
| SAVINGS TAXABLE INCOME: CAPITAL GAINS | PERSONAL INCOME TAX RATE |
| From 0 to 6,000€ | 19% |
| From 6,000€ to 50,000€ | 21% |
| More than 50,000€ | 23% |
If we add the above amounts, we have that for profits obtained by trading with cryptocurrencies of 150.000€ we will have to pay to the Spanish tax authorities the total amount of 33.380€. So your real profit after taxes would be €116,620.
Now, to make it simple, we want to compare what you pay in Spain with what you would really pay in Andorra if you were a tax resident in the Principality.
Obtaining the same benefits: 150.000€.
The Andorran law in question establishes that on these profits, the first 3.000€ are completely exempt (unlike Spain, where you pay from the first euro of profit) and the rest will be taxed at a fixed rate of 10%.
So doing numbers: 150.000€- 3.000€= 147.000€. 147.000€ *10%= 14.700€ is the total amount that you will pay in taxes in Andorra (more than half of the amount that is taxed in Spain). Thus being €135,300 your real profit after tax.
What do I not have to declare in my Personal Income Tax?
This is simple, the simple holding of cryptos is not taxed. And for the same reason these cryptos should not be declared in your income tax return.
What about the 720 model?
This model was not created to declare cryptocurrencies, in fact as there is still no specific legislation on crypto, this model is not a 100% suitable model to declare this type of assets.
Specifically, this model establishes that we will have to report assets and rights located abroad, such as:
- Accounts located abroad opened in entities engaged in banking or credit traffic.
- Titles, assets, securities or rights representing the capital stock, equity or patrimony of entities.
- Life annuities.
- Real estate and rights over real estate.
But what about cryptocurrencies, are they included in these examples? It was not clear.
One of the last measures approved by the Council of Ministers is the Draft Law of measures to prevent and fight against tax fraud where this obliges to declare cryptocurrencies in the 720 model if the value of the same exceeds 50,000€.
The presentation of this model is done telematically and be very careful because the deadline to present this model was March 31, 2021 (it is preferable that you present it even if it is out of time) although it is likely that you will face some penalty.
Penalties for not declaring Cryptocurrencies
The previous Draft also establishes the possible penalties that may be incurred by those taxpayers who do not declare their cryptocurrencies in the 720 model:
[…] Up to €5,000 will be fined «for each piece of information or set of information referring to the same account that should have been included in the declaration or had been provided incompletely, inaccurately or falsely, with a minimum of €10,000».The same amount will be applied if «in the case of non-compliance with the obligation to report on securities, assets, securities, rights, insurance and income deposited, managed or obtained abroad referring to each asset individually considered according to its class, which should have been included in the declaration or had been provided incompletely, inaccurately or falsely, with a minimum of 10,000 euros».
There will also be penalties when the delivery of information related to cryptocurrencies in portfolio is delayed. «The penalty will be 100 euros for each data or set of data referring to each asset item individually considered according to its class, with a minimum of 1,500 euros, when the declaration has been submitted after the deadline without prior requirement of the Tax Administration.» […]
Now, for those who do not correctly declare the amount earned in their income tax returns, the penalties established are usually 26% of what has not been paid.
Finally, if you voluntarily make a complementary declaration, declaring your earnings out of time, you will have a surcharge of 5, 10, 15 or 20%.
