Cryptocurrencies under the spotlight of tax authorities

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Whether they are considered investments or means of payment, cryptocurrencies are increasingly attracting the attention of stakeholders. In brief, cryptocurrencies are under the spotlight.

These assets do not yet have a tax framework in Italy, although the Italian Tax Authority already provided some clarifications regarding direct and indirect taxation in specific Rulings.

In particular, with regard to personal income tax, withdrawals of cryptocurrencies from deposits whose average balance exceeds Euro 51,645.69 threshold for more than 7 working days are considered taxable as other income pursuant to art. 67 of the Italian Income Tax Act (Tuir).

Regarding indirect tax, Response no. 14 of 28 September 2018 containing clarifications on IRES, IRAP and VAT tax regime relating to the offer of digital tokens, confirmed that the exchange or transfer of cryptocurrencies by a company pursuant to art. 10, paragraph 1, n. 3 of the VAT Decree, while for the purposes of corporate tax the accounting items relating to transactions in cryptocurrencies are relevant at the time of their posting in the income statement (art. 83 of Tuir) or at the time of their transfer (art.109 of Tuir).

OECD recently submitted to public consultation the document named “Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard“, containing some reporting obligations for intermediaries involved in the circulation of crypto-assets.

This publication reports the rules that are about to introduce a new set of obligations, named “Crypto-Asset Reporting Framework (CARF)“, on the basis of CRS (Common Reporting Standard).

Doubts remain for tax monitoring obligations (Form RW) to which cryptocurrencies would be subject, in particular if owned for investment purposes by individuals resident in Italy. That is the reason why cryptocurrencies are under the spotlight.

Since this is a virtual currency, some issues have arisen regarding the holding place of the currency or storage place of the digital token to be indicated within the tax return. The increasing assessments and verifications among Tax Authorities may also lead to a litigation with the Italian tax authority as a result of missed or incorrect reporting in Form RW, with the notification of administrative penalties to crypto-currency holders.

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