How to correctly declare your cryptocurrencies in the 2021 INCOME | Technology

With the advance of cryptocurrencies in recent times, the Government approved the Draft Law on measures to prevent and combat tax fraud. Since then, the declaration of cryptocurrencies must be made effective in several cases. We are going to try to tell you everything you need to know about this topic.

First of all, we must make it clear that we will try to guide you on how you can carry out this task, but the best thing will always be to have it reviewed by an expert tax advisor in cryptocurrencies to present your taxes in the best way, given the amount of cryptocurrencies and the clarity is lacking about many of them.

That said, let’s try to better understand and know how should we proceed if we have cryptocurrencies to declare them in this new fiscal year.

What is clear is that more and more people are investing in this type of currency such as bitcoin, Ethereum or Ripple, among others, and it is extremely important to know what our tax obligations are.

Table of Contents:

What are cryptocurrencies?

Satoshi Nakamoto launched, shortly after writing an article called “BitconBitcoin: a peer-to-peer electronic cash system”, the first electronic currencies and thus being born, cryptocurrencies.

So we can consider that these are virtual currencies that are used to operate and be exchanged for one of the traditional ones or to carry out some type of commercial transaction. On Spain have been legal to pay since 2015.

Everyone talks about cryptocurrencies but… do they really contribute anything, beyond their status as merchandise to speculate on? Let’s see what they are used for.

Taxation of cryptocurrencies

The first thing to be aware of is that it is not mandatory to include earnings from
cryptocurrencies in the Income Statement, as well as payroll, interest, dividends or rents, if these do not exceed 1,000 euros.

If the income exceeds such amount, even if it has only been exceeded by one euro, we will be required to declare and to present it in a mandatory way, always putting the profits obtained.

If there have been losses, they are not mandatory, but all experts advise putting them to compensate in the future.

To reflect the cryptocurrencies in the declaration, we must be clear that they are divided into four blocks:

  • Earnings and loses: the activity that is normally done for the sale of cryptocurrencies.
  • Yields: refers to those platforms to which cryptocurrencies are sent and generate a return. A good example of this is Binance, the virtual wallet that is capable of generating additions.
  • Gains and losses without transmission: are the airdrops (referral programs), that is, those cryptocurrencies that appear without any transmission.
  • Economic activity: refers to the mining of cryptocurrencies.

The profits and losses of everything that has to do with cryptocurrencies are taxed in the special part for Income.

But since only profits should be taxed, as we have already told you before, all of them are divided into several sections such as:

  • For the first 6,000 euros earned 19% is paid.
  • From €6,001 to €50,000 profit, 21%.
  • From €50,001 to €200,000 won, it’s time to pay 23%.
  • From €200,001 of earnings, the amount will be 26%.

Yes with the sale of cryptocurrencies you have lost moneyyou can compensate it with the profits derived from other transmissions up to 25% with respect to returns on capital.

If you did not have any other type of earnings, you will not be able to compensate it.

Every day they land on the cryptocurrency market with great ambitions, but these 5 in particular have a really promising future.

wealth tax

Another thing that we must take into account is the Wealth Tax, which is nothing more than a lien on the net worth of a natural personbeing a complement to personal income tax.

If you are required to submit it, you must include the value of the cryptocurrenciespaying as applied if necessary. This will depend on which autonomous community you reside in, since everything can vary so much that some bonuses reach 100%.

Model 720

Since Law 11/2021, of July 9, on measures to prevent and combat tax fraud, was approved, a new regulation on those who own cryptocurrencies or cryptoactives came into force.

What is sought is that there is less opacity about the balances and the owners of the coins that exist on the network. These happen to have a series of informative obligationsfor the possession of this type of virtual currency, such as:

  • The first is for companies that manage cryptocurrencies, because they must report each of their different balances, as well as the identity of their holders.
  • Second, it does reference exchanges so that they report on addresses, tax identification, the price and the date of the operations carried out.

But there are also news about people who have cryptocurrencies abroad, forcing them to declare them (also those that one has in exchanges outside of Spain) through Model 720.

The fines for not doing so can reach up to 5,000 euros for each data referred to each virtual currency individually, although a recent judgment of the European Court of Justice This has knocked down these amounts, urging Spain to modify them.

Recently the Ministry of Finance has clarified that cryptocurrencies should not finally be included in the 2021 Income statement, urging that from the next statement it will be mandatory.

If you are thinking of entering the world of cryptocurrencies, here are some tips so you do not run out of money.

Box 46 on virtual currencies

According to the 2021 Income tax return models, which we can start to do as of April 6, in box 46 of the Wealth tax return, it says Balances in virtual currencies.

Until now, when we wanted to declare this, we had to go to the section Other goods and rights of economic content.

Therefore, now we must declare in that box what we mentioned before, that is, only when we have benefits thanks to virtual currencies, since the losses will already be compensated in the future with the profits.

Remember that the Deadline to submit the Personal Income Tax (IRPF) and Wealth Tax return will be June 30, 2022knowing that there will be cases in which you must include your cryptocurrencies as you have just seen.

With all this information you can be more secure when declaring or not, your virtual currencies, regardless of the type, although always advised by an expert, it is advice that we give you so that everything goes well for you. You already have the base, so you already have much more criteria so that no one deceives you.

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