Crypto adoption is gaining momentum in Italy. According to a recent Consob report, crypto usage in Italy has grown by 125% in the past two years—from 8% in 2022 to 18% in early 2024. However, with this growing interest comes the question: Is crypto taxed in Italy?
The quick answer is yes, crypto is taxable in the country. Let’s discuss what you need to know about crypto taxes in Italy to help you stay compliant and avoid legal issues while using crypto.
Disclaimer: This article was written for educational purposes only and should not be taken as tax, legal, or financial advice. Please reach out to a legal professional to stay updated with the latest crypto tax regulations in Italy.
The Basics of Crypto Taxes in Italy
The Agenzia delle Entrate (or The Italian Revenue Agency) is responsible for enforcing, documenting, and with the support of the Finance Police, verifying the correct application and compliance with the tax regulations issued by the Italian government., including the taxation of cryptocurrencies. The latest Italian crypto tax rules under the 2023 Budget Law were approved in December 2022. Here’s what you need to know:
All Crypto Gains Above €2,000 Are Taxable
As per the Italian 2023 Budget Law, any capital/crypto gains above €2,000 are considered miscellaneous income for the purposes of income tax, and will be subject to 26% tax. These include earnings from selling crypto for euros, trading crypto, converting non-fungible tokens (NFTs) to crypto, and purchasing goods or services with crypto.
However, if you have crypto losses over €2,000, you can use them to offset your profits. If you have more losses than gains in a particular year, you can also carry forward those extra losses in the following four fiscal years.
Cryptocurrency Activity Tax
For each portfolio held on a non-Italian centralized exchange (CEX) or decentralized exchange (DEX), a cryptocurrency activity tax (IC) of 0.2% of the asset's value is due, calculated at the end of each holding period and proportionate to the number of days held.
Crypto Mining
The Italian tax authorities have not given specific rules on how to tax income from crypto mining for individuals. The way the income is taxed depends on whether the mining is done as a professional activity and the type of agreement between the parties (like whether the payment depends on successful mining).
But generally, if an individual mines crypto but does not do it professionally, the income from mining is considered "miscellaneous income" and is taxed at a rate of 26%. On the other hand, if the mining is done as part of a professional activity, the income is categorized as "professional income." In this case, the same tax rules that apply to professional earnings (as detailed in other tax provisions) would be used.
Staking
The same tax rules for mining rewards also apply to earnings from "proof-of-stake" activities.
Specifically, the Italian tax authorities have clarified that any fees taken by crypto service providers from income earned through staking cannot be deducted from the total taxable amount if those individuals are not conducting a professional activity.
However, since income from holding crypto assets is taxed at 26%, it is likely that staking rewards are also taxed at 26% upon receipt, and gains upon disposal are taxed at 26% as well.
What Constitutes a Crypto Gain or Loss?
Crypto gains or losses refer to the difference between the amount you spent to buy cryptocurrencies in Italy and the amount you received when you sold, traded, or used them.
How to Calculate Your Gains or Losses
Calculating crypto gains or losses involves the following steps:
1. Determine the Cost Basis.
The cost basis is the original value or purchase price of the cryptocurrency. This includes the purchase price plus any transaction fees incurred during the acquisition.
2. Determine the Selling Price.
The selling price is the amount you received from selling, trading, or using the cryptocurrency. This includes the sale price minus any transaction fees incurred during the sale.
3. Calculate the Gain or Loss.
- Subtract the cost basis from the selling price to determine the gain or loss.
- If the selling price is higher than the cost basis, the result is a gain.
- If the selling price is lower than the cost basis, the result is a loss.
Formula: Gain or Loss = Selling Price−Cost Basis
Example:
- Purchase: You bought 1 Bitcoin for €60,000, and the transaction fee was €400.
- Cost Basis = €60,000 + €400 = €60,400
- Sale: You sold 1 Bitcoin for €65,000, and the transaction fee was €425.
- Selling Price = €65,000 - €425 = €64,575
- Gain or Loss:
- Gain = €64,575 - €60,400 = €4,175
Documents to Keep for Crypto Taxation
Given the absence of clear instructions, it is advisable to keep the following records:
- Transaction Dates: Document the dates on which each of your transactions occurred.
- Type of Transaction: Identify whether the transaction was a buy, sell, trade, or use of crypto to purchase goods or services.
- Cryptocurrencies Used: Note the specific cryptocurrencies you used in each transaction.
- Transaction Amounts: Record the amounts of cryptocurrency for each transaction.
- Value in EUR: Convert and note the value of each transaction in euros.
- Gain or Loss: Calculate your gains or losses from each transaction.
Crypto Tax Forms in Italy
Italian taxpayers must use one of two forms to report their income, including crypto gains, depending on the nature of their income.
1. Modello 730
In Italian, modello means form. Model 730 is the primary tax return form in Italy, widely used by most taxpayers, employees and retirees, to declare their income, deductions, and credits. Individuals who receive income from self-employment without requiring a VAT number can also use Model 730.
This form can be used to report crypto employment income, credits, or deductions to declare or claim, but should be completed with the Form RT for capital gains. The deadline is every September 30 of the following year.
2. Modello Redditi PF
The Modello REDDITI Persone Fisiche (PF) is often associated with self-employed workers with VAT numbers, but it is actually used by various types of taxpayers. This form is the declaration alternative to Modello 730.
- First Section: This section is mandatory for all taxpayers. It includes the cover page with the declarant's identifying information, a list of dependent family members, and details about different types of income and deductible expenses (such as income from land, buildings, employment, pensions, medical expenses, and mortgages).
- Second Section: This section contains tables for declaring social security and welfare contributions, other income for taxpayers who do not keep accounting records, and specific tables for declaring investments abroad (Table RW) and for condominium administrators (Table AC).
- Third Section: This section is required for declaring additional income for taxpayers who are required to keep accounting records.
For 2024, the deadline is extended to October 31st. From next year, the deadline will be September 30th.
3. Forms RW and W
Forms RW and W (part of Modello Redditi) are crucial for taxpayers who hold investments or financial assets abroad, including cryptocurrencies. These are primarily intended to monitor foreign assets and ensure that Italian residents comply with tax obligations on income generated outside Italy.
What Is the Step-by-Step Reporting Process?
As of writing, here’s how you can pay your crypto-related taxes in Italy:
1. Collect and Organize Your Documents.
Gather all the necessary transaction records as mentioned above. Ensure that all conversions to euros are accurate and up-to-date.
2. Calculate Gains and Losses.
Compute your total crypto gains and losses for the year. Identify if your gains or losses exceed the €2,000 threshold.
3. Complete the Relevant Forms and Submit Before the Deadline.
Reach out to a tax professional to determine which tax forms are required for you to submit, and when you should submit them for compliance.
4. Pay the Required Taxes.
Calculate the 26% tax on any gains over €2,000 and ensure timely payment to avoid penalties.
Good to Know: MiCA Regulation Implementation
The European Union is working on establishing a comprehensive regulatory framework for cryptocurrencies called the Markets in Crypto-Assets (MiCA) regulation. It aims to govern a digital assets within the European Economic Area (EEA), while fostering innovation and providing legal certainty and protection to consumers.
MiCA will harmonize crypto regulations across EU member states, including Italy, which may lead to changes in how cryptocurrencies are taxed and reported.
Final Thoughts
While this article has all the basic things you need about crypto tax regulations in Italy, it's best to seek guidance from a crypto tax professional to get advice tailored to your situation, especially for complex situations, such as large portfolios, mining operations, or international transactions.
A tax professional can also guide you through the reporting process, ensure compliance, and help you stay informed about any changes in tax laws and regulations that may affect your crypto holdings.
FAQs
Do I need to pay crypto taxes in Italy?
Yes, cryptocurrencies are taxable in Italy. Depending on various factors such as the nature of your transactions, profits, and losses, you may be subject to capital gains tax or income tax on your crypto activities.
What happens if I don't file my crypto taxes in Italy?
You could face significant penalties if you fail to report your crypto taxes in Italy. These penalties can either be a fixed amount or a percentage of the tax that was avoided or evaded.
Additionally, there is a specific penalty for failing to monitor and report foreign assets, including cryptocurrencies held abroad. This sanction is generally set at 3% of the undeclared assets' value. However, to avoid these penalties, taxpayers have the option to voluntarily correct and supplement their declarations. This process allows you to rectify any omissions or errors in their tax filings and ensure compliance.
Is crypto regulated in Italy?
Yes, cryptocurrencies are legal and regulated in Italy. The oversight of cryptocurrency regulations in the country is the responsibility of the Italian Ministry of Economy and Finance.
