Spanish Tax Authorities Clamping Down on Cryptocurrency Holders

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With global governments now appreciating the potential tax revenues available on the back of cryptocurrency profits, the Spanish tax authorities seem to be following suit. According to a report by Spanish news publication El Pais, the Spanish Treasury is now one step closer to identifying thousands of individual owners of cryptocurrency holdings.

The government department initially launched a program back in April with the view of investigating whether it could locate those behind large-scale cryptocurrency profits.

This included a range of Spanish-based financial institutions, as well as more than 40 organizations linked to the blockchain space. Regarding the latter, this consists of firms such as third party cryptocurrency exchanges, point-of-sale crypto payment providers and Bitcoin ATMs.

Spain Cryptocurrency

It appears that the identification exercise was a success, with El Pais claiming that the Spanish Treasury are now in receipt of more 15,000 tax payer names who currently have an interest in the blockchain space. However, it remains to be seen how the list breaks down, with respect to the specific number of private individual’s and companies.

Nevertheless, Spain enforces a cryptocurrency capital gains tax on cryptocurrency profits that amounts to between 19-23%. This particular taxation is based on the size of the gains made by the tax payer in question. However, as with all cryptocurrency tax framework’s, the underlying regulations are somewhat complex.

Cryptocurrency Taxation Remains Complex

First and foremost, it remains unclear as to what period the capital gains are liable for.

As we reported earlier this month, a U.S. based student that increased his $5,000 investment up to more than $1 million during the crypto-craze of late 2017 was hit with a tax bill amounting to more than $400,000, even though his current portfolio is worth significantly less. The key problem is that should investors fail to cash-out their gains, then they could be liable for a substantial tax bill, even if their crypto holdings have tanked in value.

Crypto Tax Bill

This problem is further amplified when one consider the difficulties regarding accurate reporting. For those that engage in high-frequency cryptocurrency trading across a vast range of third party platforms are at times unable to calculate their gains with any certainty, especially when one adds in the perils of high volatility.

The second key issue regards settlement. If one were to assume that a significant proportion of the 15,000 identities that the authority currently holds are based on cryptocurrency investments that are still in their digital form, then it remains to be seen how payment will be initiated, without first cashing out.

Spanish Authorities Tighten Grip on Cryptocurrency Transparency

It appears that the Spanish government are looking to develop a stringent framework that will provide a more transparent regulatory oversight of the blockchain space. Just last month, it was reported that Spain approved a draft bill that would require investors to transparently reveal their cryptocurrency holdings.

Spain’s finance minister, Maria Jesus Montero, announced that by identifying holders, alongside their respective balances, it would allow the nation to initiate tax liability proceedings. If this particular draft subsequently results in enacted legislation, then it will require crypto holders to follow the nation’s standard “720 form” process. In a nutshell, this carries a notable fine of 5,000 EUR for each error that is made within the filing.

Ultimately, Spain is not alone in its endeavors to create a stringent framework for cryptocurrency taxation. It is widely believed that third party exchange platforms, who essentially act as a facilitator for both fiat-to-crypto and crypto-to-crypto transactions, will need to play a major role in collaborating with tax authorities. Otherwise, it remains to be seen how authorities will enforce the rules they dictate. Moreover, there needs to be more clarity on liabilities, insofar that the current system is perceived to be somewhat disproportionate, especially if cryptocurrency holdings are not cashed out.

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Kane Pepi

Based on the Blockchain-Isle of Malta, Kane holds a Bachelor’s Degree in Accounting and Finance, a Master’s Degree in Financial Investigation and he is currently engaged in a Doctorate – researching financial crime in the virtual economy. With a keen passion for research, he currently writes for a variety of publications within the Financial and Cryptocurrency industries. Contact

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