The European Union is finally moving to regulate via a tax, Bitcoin and the rest of cryptocurrencies. The taxation is just one of many regulatory maneuvers that there will be starting in 2023, the year of transparency and regulation of crypto businesses.
From capital gains tax to the redetermination of Bitcoin’s value, here are the EU’s moves
On Thursday, the European Union specifically stated that it will make sure that all companies engaged in the crypto world, report the holdings of their European users to tax authorities. The directive, has a clear purpose and could go so far as to force companies based outside the EU to register with local tax authorities.
“Anonymity means that many crypto-asset users who make significant profits fall under the radar of domestic tax authorities. This is not acceptable.”
These are the words of the European Commissioner for Taxation, Paolo Gentiloni.
It is not yet known how these measures will be applied, given the various entities and residences in various jurisdictions of the cryptocurrency industry. Asked how the EU will apply the measures to companies outside the bloc, Gentiloni told reporters:
“We will work on this. What matters to us is that EU residents are targeted by these measures, even if they use cryptocurrency providers from elsewhere.”
What we do know about the proposed measures is that they would promote the regulation of cryptocurrency markets in the EU, which allows foreign companies to acquire EU customers using a procedure called reverse solicitation.
The tax plan requires any company with EU customers to register and report within the bloc, but may face logistical challenges in an industry where companies are largely online and sometimes claim not to be headquartered at all.
The EU said it believes the move could generate up to $2.5 billion (€2.4 billion) through the introduction of the directives.
Crypto taxation in Italy: there is room in the new budget law
In the draft Budget Law 2023, as many as five articles are dedicated to regulating the taxation of cryptocurrencies and the related carried out activities. Consideration is given to various aspects of operations, transparency, regulating them and applying taxes on activities.
Included in Budget Law 2023 are plans to impose a 26% levy on profits over 2,000 euros made on cryptocurrency trading, according to Bloomberg.
Historically, digital currencies have had lower tax rates because they have been considered “foreign currency.”
The bill presented by Prime Minister Giorgia Meloni’s government also offers taxpayers the option of declaring the value of assets starting 1 January 2023, paying a 14% tax. The goal is to encourage Italians to declare their holdings of digital assets in their tax returns. The proposed law, which may be amended in parliament, also includes disclosure requirements and extends the stamp tax to cryptocurrencies.
The new rules would come during a prolonged rout in digital asset prices that has accelerated the fall of several large cryptocurrency platforms. The wave of spectacular failures and collapses (including the recent FTX exchange crash) have led lawmakers globally to tighten their control over the nascent asset class.
Premier Giorgia Meloni and her government, are trying to follow in the footsteps of Portugal, one of the nations most plugged into the crypto world in Europe. In fact, Portugal has proposed a 28% tax on capital gains from cryptocurrencies held for less than a year.
In its 2023 state budget, the Portuguese government addressed the taxation of cryptocurrencies, which had previously been untouched by tax authorities because digital assets were not recognized as legal tender.
The introduction of such innovative legislation raises the need to properly harmonize tax treatment for both the past and the future. Finally, in addition to the above, it should not be forgotten that crypto-assets and crypto-currencies do not have a status attributable to traditional currencies or currency.