Key Takeaways:
- A 26% tax on cryptocurrency earnings has been announced by Italy and is reportedly applicable to both commercial and retail investors.
- This change integrates cryptocurrency taxes with the regular capital gains tax rate in Italy.
A 26% capital tax on cryptocurrency gains has been enacted by the Italian Parliament as part of the 2023 budget law, which was voted on December 29.
The document also suggests a 3.5% aliquot for undeclared bitcoins held before December 31, 2021, and a 0.5% punishment for each consecutive year, as incentives for citizens to disclose their cryptocurrency investments.
Notably, until the end of 2022, cryptocurrencies were subject to foreign currency tax laws, so capital gains did not count towards determining income unless the stock held was worth more than 51,645.69 euros.
This change harmonizes cryptocurrency taxes with the regular capital gains tax rate in Italy. It might have wide-ranging effects on the nation’s cryptocurrency economy and alter its prospective regulatory framework.
According to Gianluigi Guida, general manager of Binance Italy, as stated by the Italian news agency Corriere, “This legislation will be challenging to implement in practice and could potentially open the doors to multiple conflicts, with the risk of obtaining an effect contrary to that hoped for.”
That applies to any gains over €2,000 per year, and unlike some other countries, Italy will not tax transactions from one cryptocurrency to another. However, critics note that it is unclear whether the €2,000 barrier applies to all transactions combined or just to a single one.
More importantly, the idea of a “Substitute Value Tax” was implemented to compel Italian citizens to declare all of their cryptocurrency holdings in their tax reports.
By following this guideline, gains will be taxed at a reduced tax rate of 14% rather than 26% if you declare the complete worth of your assets as of January 1st of every year.
Notably, the decision by the Italian government comes as cryptocurrencies continue to gain popularity around the world and a lot of nations are changing their tax laws to take into consideration this new asset class.
Although it is unclear how this approach will affect the acceptance of digital assets in the nation, it may persuade other countries to reexamine their tax laws with regard to cryptocurrencies.
