In the following article, we will discuss a topic that has been in the news for some time now, one that causes confusion and uncertainty for many, and one that may lay the foundations for the future of the economy. We are talking about the taxation of cryptocurrencies or digital currencies, both for the best known, Bitcoin, and for all other existing cryptocurrencies.

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We don''t know if it is a passing fad or we are facing the beginning of the end of money as we commonly know it. What we do know is that more and more users are using or investing in this type of product, and it is our obligation to advise them, letting them know how to tax it.

However, before addressing the topic, we want to explain for those less versed in the matter, what a cryptocurrency is and what it is used for.

A cryptocurrency is a digital currency, without counterpart in a material good like gold, and that does not exist physically like traditional currencies. This type of currency does not need bank intermediation, and users use it not only to make purchases in establishments that allow it, but as a means of investment or speculation.

Now that we understand what cryptocurrencies are, we will delve into the main topic of the article, their taxation, specifically, when we act as natural persons and not as companies.

A natural person will have to present Income Tax Return (Form 100) when their total income in the year exceeds 1000 euros or if they have had at least a profit in cryptocurrencies of 1 euro. Therefore, if they have never sold or exchanged cryptocurrencies, they will not be obliged to declare the profits. In case of having had losses, despite not being obliged, it will be convenient to present said declaration, since it will allow offsetting future profits.

If you are part of the group obliged to present Income Tax Return for operations carried out with cryptocurrencies, you must distinguish what operations you have carried out, as each one can be taxed differently. They are the following:

1. Gains and Losses from Transfer. When you carry out the typical activity of buying, selling, and exchanging cryptocurrencies, a capital gain or loss is generated. They will be taxed in the special part of the Income Tax Return as follows:
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   1. The first €6,000 at 19%
   2. The following 44,000 at 21%
   3. Rest at 23%
   4. For 2021 income for €200,000 onwards at 26%
2. Capital Returns. Another quite common case is using the currency as if it were a bank deposit, known in the digital world as staking, where platforms generate interest in your account. They will be taxed in the special part of the Income Tax Return as follows:
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   1. The first €6,000 at 19%
   2. The following 44,000 at 21%
   3. Rest at 23%
   4. For 2021 income for €200,000 onwards at 26%
3. Gains and Losses without Transfer. Situations in which by the simple fact of having an asset on a platform, you obtain a different one without there having been a transfer of the asset. Examples include airdrops, referrals, hardforks, etc. They will be taxed in the general part of the Income Tax Return taking into account the brackets ranging from 18% - 47%.
4. Economic Activity. Cryptocurrency mining activity, as well as trading or buying/selling cryptocurrencies for third parties. They will be taxed in the general part of the Income Tax Return taking into account the brackets ranging from 18% - 47%.

It should be noted that those persons whose total wealth value (houses, current accounts, cryptocurrencies, etc.), regardless of the geographical location in which they are, exceeds the limit of their Autonomous Community, as of December 31 of the year to be declared, must present separately, the Wealth Declaration (Form 714). The limit is on average €600,000, although the specific situation in each case must be consulted.

Finally, we must watch out for the Declaration of Assets Abroad (Form 720), which is mandatory when you have real estate, current accounts, or shares abroad, as it is possible that in the near future, they will oblige to declare through this Tax Form, the holding of cryptocurrencies in Exchanges abroad, in case of exceeding 50,000 as of December 31 of the year to be declared. Bear in mind that in the Basque Country and Navarra there is such an obligation, within the movable assets category of Form 720.

Tax regulations are very changeable, and if we also address a relatively new topic, it is not surprising that we see many changes in the taxation of cryptocurrencies. Therefore, from NOMASPAPEL we recommend consulting with the Consultancy about taxation for your specific case.