In Italy, when it comes to cryptocurrencies, crypto-assets and taxation, the regulatory framework of reference is far from clear. Moreover, the fact that many consultants and professionals have passively complied with certain indications provided by the Italian Revenue Agency certainly does not help to eliminate the many doubts.
Summary
News from the Ministry of Economy and Finance (MEF)
This situation could become more complicated with the arrival of some rules that impact monitoring and privacy. The framework of regulatory uncertainty affects the final approval of the MEF decree on “mode and timing with which providers of services relating to the use of virtual currencies and providers of digital wallet services are required to communicate their operations on the national territory”.
According to reports, exchanges operating in Italy are expected to be subject to quarterly monitoring obligations and periodic reporting of data on their customers’ transactions to the OAM, the Italian body that manages lists of agents and credit brokers. This data would be fully accessible to the GdF and law enforcement agencies.
To this must be added that Article 9 of the decree relieves public administrations of a series of obligations that have until now protected taxpayers’ data. Moreover, Article 2 of Legislative Decree 196/2003 is repealed, as it gave the “Privacy Guarantor” the power to intervene and impose specific measures on the public administration in case of excessively disproportionate collection and processing activities.
With the justification of the fight against evasion, the taxpayer is precluded from exercising a series of rights recognized under the GDPR such as:
- access to processed data (Art. 15);
- the right to rectification (Art. 16),
- erasure and forgetting (Art. 17),
- to restriction of processing (Art. 18);
- the right to obtain notification of rectification, erasure and restriction of processing (Art. 19);
- the right to the portability of processed data (Art. 20).
Above all, the right to object to processing by means of profiling (Art. 21), and the right not to be subjected to a decision based solely on automated processing which produces legal effects concerning him or significantly affects his person (Art. 22) may also be excluded.
Taxation and cryptocurrencies, the rules that are missing in Italy
For many taxpayers who invest and move cryptocurrencies, this can be a great source of concern. We are talking about those who have not understood exactly what tax obligations they are subject to and who, perhaps, were hoping for the protection of anonymity, while waiting for the framework of tax legislation to become a little clearer.
One of the most discussed and interesting questions for taxpayers who decide to make transactions in cryptocurrencies, is whether or not the capital gains obtained from the purchase and subsequent resale of cryptocurrencies are an income subject to taxation.
In Italian law, there is no rule that explicitly establishes the capital gains obtained from the purchase or exchange of cryptocurrencies. The Italian tax authorities support this on the basis of a fundamental assumption: that cryptocurrencies should be treated as foreign currencies.
This assumption is not only strongly criticized, but also goes in the opposite direction to what the Court of Justice of the European Union has ruled with the well-known Hedqvist judgment.
In this judgment, the Court clearly stated that cryptocurrencies should be considered as means of payment, but cannot be equated with “legal” currencies.
Although the conceptual and structural differences between legal tender and cryptocurrencies are numerous and obvious, the point of the discussion dies here. This is because there have been no specific case law precedents, nor the issuance of other practice documents that would return to the issue and challenge it with a formal act.
In the meantime, a large number of professionals in charge of following the tax and accounting situation of taxpayers, who have been trading in cryptocurrencies, have fallen for the questionable interpretation of the tax authorities.
Assuming that on the capital gains obtained from the purchase and subsequent resale of cryptocurrencies one has to pay taxes as if they were transactions carried out on sterling or dollars, under what conditions one is subject.Â
The rule that, according to the Italian tax authorities, would apply in this case would be the one on the taxation of miscellaneous income. The mechanism, transferred from foreign currencies to cryptocurrencies, should work in this way: if a taxpayer, during the tax year, holds cryptocurrencies whose value, on all his wallets, for more than seven working days in a row during the year, has exceeded the threshold of €51,645.69 (a threshold to be calculated at the “exchange rate in force” on January 1 of that tax year), that same taxpayer will be subject to tax.
If this threshold is exceeded and a certain profit is made from the conversion of the cryptocurrencies in that tax year compared to their original purchase cost then tax will be charged on that profit.
Falling points
Having said that, however, this transposition to the crypto world of rules conceived in relation to assets on “official” and regulated markets, has a number of fall-off points. Even if one were to espouse the theses of the Italian tax authorities, it is really problematic on a practical level to implement them.
One of the most obvious downfalls is that, unlike state currencies, for cryptocurrencies there is no “current exchange rate”, because there are no official lists, nor regulated currency markets. And establishing what may be a reliable average value in the boundless world of listings on private exchanges is somewhat complicated. Another critical point is that legally it is not sustainable to equate a wallet with a current account.
The determination of the storage thresholds, which is an essential prerequisite for taxation, is therefore a critical aspect.
This interpretation, often accepted and passively taken for granted, of the taxation equivalence of cryptocurrencies to foreign currencies, does not withstand the impact of a slightly more incisive study.
It is, therefore, one of those themes on which professionals should never give up the fight. The issue becomes even more complicated when considering another widely felt question: that of fiscal monitoring, that is, the existence or absence of an obligation to declare crypto assets in the RW framework, on foreign financial assets, of the tax return. But we shall have the opportunity to talk about this.
