Overcoming the previous approach of the Italian Revenue Agency, which wanted to equate them with foreign currencies, the Budget Law 2023 (No. 197/2022) definitively placed crypto-currencies in a new macro-category of instruments called "crypto-assets", i.e. "a digital representation of value or rights that can be transferred or stored electronically, by using distributed ledger technology or similar technology".
It is a category in which instruments with radically different characters and functions are lumped together under one discipline: from NFTs to bitcoins to tokens that enable voting in the context of a DAO.
While from this perspective the approach offered by the Budget Law is questionable, from another perspective the same approach brings with it two useful elements for those who have invested or intend to invest in cryptocurrencies: (i) the possibility of redetermining the tax value of crypto assets by realigning it to the current value by paying an ad hoc substitute tax, thus benefiting from a potential tax saving on capital gains generated by transactions related to this type of currencies, and (ii) a regularisation procedure for those who have realised such capital gains in the past, but have failed to declare them and pay the relevant taxes.
First, the question that needs to be asked about these new rules is what constitutes capital gains for the purposes of these rules.
The answer provided by the Budget Law is that (i) income from crypto-assets is not subject to taxation if it is less than, in total, than EUR 2,000 in the tax period and (ii) "the exchange between crypto-assets having the same characteristics and functions does not constitute a tax-relevant case ".
If the last mentioned provision appears clear with reference to the exchange of cryptocurrencies into ordinary currency (taxable) or from crypto to crypto (not taxable), it remains to be understood what position exactly the tax authorities will take when faced with the intermediate option of so-called stablecoins, i.e. cryptocurrencies whose value is linked to state-issued currencies, but which are not comparable to the latter.
This is a phenomenon that is far from negligible, both because of the recent opaque events in the crypto world (above all, the collapse of the trader FTX and the judicial events that have followed), which have pushed investors to fall back on less volatile instruments, and because of the recent choice of the European Central Bank (the timing of which is evidently not coincidental) to launch a digital Euro project aimed at fostering the exchange of cryptocurrencies into EU currencies.
Instead, coming to the cases in which the capital gain from cryptocurrencies actually falls under the criteria of the new rules (the details of which can be found in our Budget Law Update Circular), (i) for the future a substitute tax of 26% will apply, and (ii) for assets declared until 31 December 2021, a 14% substitute tax will apply.
From this point of view, as mentioned above, the Budget Law addresses the case of those who realised such capital gains in the past and did not declare them by 31 December 2021, establishing a special procedure for those who intend to regularise their position.
Subjects required to comply with tax monitoring obligations, and thus natural persons, non-commercial entities, and simple and equivalent companies resident in Italy, may access the regularisation procedure by paying a tax equal to 3.5% of the value of the assets held at the end of each year, or at the time of realisation, together with a surcharge of 0.5% of the same value, by way of penalties and interest, to cover violations on tax monitoring, i.e. if the taxpayer has omitted to make the relevant indication in the RW panel.
In this regard, it is curious to note that the aforementioned percentages are not calculated on the value of the capital gain realised, but rather on the entire portfolio of cryptocurrencies held by the declarant.
This is clearly a choice of the legislator aimed at facilitating access to the regularisation procedure: by doing so, the taxpayer is exempted from proving the accuracy of the declared capital gain, which would have to be verified on the basis of the conversion value of the cryptocurrency at the time of its purchase.
Conversely, such a demonstration, certainly not easy in a volatile market aimed to a heterogeneous (and not always informed) audience such as the crypto market, will fall on investors who will need to declare such capital gains under the ordinary rules in the future: for them, the proof of "when" and under what circumstances the investment was made could prove decisive in the event of a challenge by the tax authorities.
While waiting and hoping that the implementing measures of the regularisation procedure will clarify (and perhaps lighten) this evidentiary burden, it only remains to advise those wishing to invest in these instruments from now on to keep all relevant supporting documentation.
Originally published 21 February 2023.
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