Q: Cryptocurrencies and ‘Virtual Currencies’: a quick tax guide

Download the free e-book ‘Cryptocurrencies and “Virtual Currencies”: a quick tax guide for investors’ edited by Dr Giorgio D’Amico, available using this link. The sole purpose of this brochure is to provide information of a general and informative nature in relation to the tax obligations associated with transactions involving “virtual currencies”. Although it has been drafted with the utmost care and attention, it cannot and must not be considered a substitute for professional advice in making decisions regarding specific cases. Studio Dr. Giorgio D’Amico and Young Platform therefore expressly disclaim any liability for any consequences arising from actions taken or not taken by anyone on the basis of the contents of this document.

Question 1

How should activities involving cryptocurrencies be treated for tax purposes?

Accepted Answer

Income-generating activities and instruments associated with Virtual Currencies must be treated on the basis of their actual characteristics. This page and the Guide by Dr. Giorgio D&#8217;Amico in fact only focuses on income deriving from buying and selling activities carried out in a &#8220;non-professional&#8221; manner. Therefore, income derived from other activities such as mining, the production and trade of NFTs and &#8216;professional&#8217; trading or from derivative contracts (forwards, futures, options, CPD etc.) must be considered separately, as they respond to different regulatory frameworks.

Question 2

How can fees be reduced on Young Platform?

Accepted Answer

Buying and selling fees on Young Platform are reduced for Club members. By joining the Bronze Club, you get a 30% discount on fees. The discount is increased 50% with Silver Club membership, and to 75% for Gold Club membership. Fees are reduced to zero for Platinum Club members. View the table explaining the full range of discounts provided by each Club. To register for the Young Platform Clubs, simply block a share of your YNG tokens. The subscription process can be followed directly in the exchange.

Question 3

Cryptocurrencies and ‘Virtual Currencies’: a quick tax guide

Accepted Answer

Download the free e-book &#8216;Cryptocurrencies and &#8220;Virtual Currencies&#8221;: a quick tax guide for investors&#8217; edited by Dr Giorgio D&#8217;Amico, available using this link.

The sole purpose of this brochure is to provide information of a general and informative nature in relation to the tax obligations associated with transactions involving &#8220;virtual currencies&#8221;. Although it has been drafted with the utmost care and attention, it cannot and must not be considered a substitute for professional advice in making decisions regarding specific cases. Studio Dr. Giorgio D&#8217;Amico and Young Platform therefore expressly disclaim any liability for any consequences arising from actions taken or not taken by anyone on the basis of the contents of this document.

Question 4

Is the Young Platform account considered a current account?

Accepted Answer

No, your account is not considered a current account, so you do not have to declare it as such for tax purposes.

Question 5

Consider the above warnings

Accepted Answer

Given the complexity of the subject matter and the rapid changes in legislation and interpretations, Dr Giorgio D&#8217;Amico&#8217;s Guide and the entire contents of this page are for guidance purposes only. They should not be used as sole sources of information, and cannot in any event replace professional advice. The entirety of the content is in fact based on interpretations that, even if carefully considered and authoritatively agreed upon, could be contradicted in the future at a regulatory level.

Question 6

If I activate a discount on Young Platform is it also valid on Young Platform Pro?

Accepted Answer

The discounts and, more generally, the benefits of Club memberships are valid on both Young Platform and Young Platform Pro. The validity of any other type of discount depends on the characteristics of the relevant promotion, so please read the rules carefully.

Question 7

What are transaction fees?

Accepted Answer

Fees are necessary for a transaction to be authorised and executed on the blockchain. They are a necessary contribution to the functioning of the technology. Fees vary according to the network. For example, transactions on the Ethereum network tend to be more expensive than those on the Bitcoin network. All exchanges add a small percentage to the network fees to cover the service they provide.

Question 8

What are the tax obligations when buying cryptocurrencies?

Accepted Answer

If your total holding of foreign fiat currencies and Virtual Currencies other than the Euro has exceeded the equivalent of €51,645.38 for more than seven continuous business days, you are required to complete the RT, i.e. the income declaration included in the modello UNICO.

WARNING: Income therefore not be declared with Mod 730. The ordinary deadline for submitting the modello UNICO is the 30th of November of each year. The modello UNICO form refers to the calendar year preceding the declaration, so on the 30th of November 2022 you may have to declare any capital gains generated in 2021.

Thus, to determine whether you have to file the quadro RT, you must refer exclusively to your total amount of investment in cryptocurrencies (and any investments in foreign fiat currencies such as the dollar) held during the year. The amount of realised gains counts for nothing: the &#8216;threshold&#8217; does not apply to gains. The amount of realised capital gains/losses is therefore completely irrelevant. Capital gains only have to be declared and are only taxed when the value of the investment exceeds EUR 51,645.38 for more than 7 continuous business days.

For the purpose of verifying that the threshold of €51,645.38 is exceeded, the value of the investment must be determined using the price recorded at the beginning of the year as the price of the Virtual Currencies.

CAUTION: for the purposes of assessing whether the threshold has been exceeded, ALL positions in foreign currencies (fiat excluding EUR, including banks) must always be taken into account.

This information is taken from the e-book &#8216;Cryptocurrencies and &#8220;Virtual Currencies&#8221;: a quick tax guide for investors&#8217; edited by Dr. Giorgio D&#8217;Amico, available using this link.

Question 9

Should cryptocurrencies be declared in the annual declaration of assets held abroad (quadro RW)?

Accepted Answer

The quadro RW must be filled out regardless of the amount of Virtual Currencies you held during the year, i.e. even if the value of your cryptocurrencies does not exceed €51,645.38.

Furthermore, the response to interpello 788/2021 clarified that virtual currencies must be reported in the quadro RW; whether they are held on private wallets or on Italian or foreign exchanges. Therefore, you must also declare the cryptocurrencies you hold in your wallet on Young Platform&#8217;s exchange in the quadro RW.

Virtual Currencies are not subject to VAFE (Tax on the Value of Foreign Financial Assets), so the quadro RW must be filed for monitoring purposes only.

This information is taken from the e-book &#8216;Cryptocurrencies and &#8220;Virtual Currencies&#8221;: a quick tax guide for investors&#8217; edited by Dr. Giorgio D&#8217;Amico, available using this link.

CAUTION: Infringements of declaration obligations with respect to the quadro RW are punishable by penalties of up to 30% of the countervalue of assets held abroad that have not been declared.

Question 10

Exemptions from filing income tax returns

Accepted Answer

Under the legislation, capital gains are not taxable (i.e. not taxed) if the total value of the foreign currencies and/or Virtual Currencies held has not exceeded €51,645.38 for more than 7 continuous business days. This means that if the fiat-value of your cryptocurrencies has not exceeded this threshold, you are not required to declare the income generated; in this case, ALL realised capital gains, of whatever amount, will consequently be exempt from taxation.

CAUTION: This exemption only covers the purchase and sale of cryptocurrencies. For other transactions (forwards, futures, CPD, options etc.) capital gains are always taxable regardless of the amounts.

This information is taken from the e-book &#8216;Cryptocurrencies and &#8220;Virtual Currencies&#8221;: a quick tax guide for investors&#8217; edited by Dr. Giorgio D&#8217;Amico, available using this link.

Question 11

What can you do if you exceed the threshold of €51,645.38 for more than 7 continuous business days?

Accepted Answer

All capital gains of the year must be calculated because they are taxable and must be declared. For the purpose of verifying that the threshold of EUR 51,645.38 is exceeded, the fiat value of the investment must be determined using the price of the cryptocurrency as it was at the first day of the year. Thus, for example, for the purpose of establishing the taxability of capital gains for 2021 (Unico 2022 to be filed by the 30th of November 2022 ) the conversion of the amount of cryptocurrencies held during 2021 into Euro must be made on the basis of the crypto prices on the 1st of January 2021.

This information is taken from the e-book &#8216;Cryptocurrencies and &#8220;Virtual Currencies&#8221;: a quick tax guide for investors&#8217; edited by Dr. Giorgio D&#8217;Amico, available using this link.

Question 12

What can I disclose to my accountant?

Accepted Answer

Your accountant should be given your transaction history, which can be downloaded directly from your account settings, as explained here.

Warning. If you use both Young Platform and Young Platform Pro, make sure you download the transaction history from both platforms.

This information is taken from the e-book &#8216;Cryptocurrencies and &#8220;Virtual Currencies&#8221;: a quick tax guide for investors&#8217; edited by Dr. Giorgio D&#8217;Amico, available using this link.

Question 13

How can I fill in the quadro RW?

Accepted Answer

Download a step-by-step guide on how to fill in the quadro RW by clicking here.

Question 14

How can I fill in the quadro RT?

Accepted Answer

Download the step-by-step guide to filling in the quadro RT by clicking here.

Question 15

Where can I declare my cryptocurrencies and related income?

Accepted Answer

The amount of cryptocurrencies you held during the year must always be declared by filling out the quadro RW, regardless if the value of your cryptocurrencies does not exceed EUR 51,645.38 or if you hold them on an Italian or foreign exchange or in a personal wallet.Income deriving from cryptocurrency trading, as &#8216;capital gains of a financial nature&#8217;, falls within the quadro RT of the modello UNICO, and cannot therefore be declared with Mod 730. The ordinary deadline for submitting the modello UNICO is the 30th of November each year.

FAQs Taxes on Cryptocurrency

Introduction

How should activities involving cryptocurrencies be treated for tax purposes?

Cryptocurrencies and ‘Virtual Currencies’: a quick tax guide

Is the Young Platform account considered a current account?

Consider the above warnings

Tax Obligations and Exemptions

What are the tax obligations when buying cryptocurrencies?

Should cryptocurrencies be declared in the annual declaration of assets held abroad (quadro RW)?

Exemptions from filing income tax returns

Documents

What can you do if you exceed the threshold of €51,645.38 for more than 7 continuous business days?

What can I disclose to my accountant?

How can I fill in the quadro RW?

How can I fill in the quadro RT?

Where can I declare my cryptocurrencies and related income?