Capital Gains Tax in Italy: What You Need to Know
Key Takeaways
- In Italy, cryptocurrency gains are taxed at a 26% rate, similar to other financial assets like stocks and bonds. This tax applies to both individual and business transactions involving crypto assets.
- There is an exemption for holdings under €51,645.69 if maintained for a continuous period of at least seven days.
- Taxpayers must keep thorough records of all crypto transactions, including dates, prices, and associated fees for accurately reporting gains on annual tax filings.
- Failure to report crypto gains can result in severe penalties ranging from 120% to 280% of the tax owed, plus interest.
In recent years, Italy has established itself as one of the EU countries with explicit laws governing the taxation of cryptocurrency transactions.
Governments around the world are working toward improving tax laws and compliance regulations for this digital asset class due to the increasing popularity of cryptocurrencies as a payment and investment alternative.
The Italian Revenue Agency (Agenzia delle Entrate) has adopted a taxation structure that handles cryptocurrency similarly to other financial investments in recognition of the industry’s quick acceptance. While some countries regard crypto as a form of money, Italy classifies it as an asset, placing it under the purview of capital gains taxation.
Italian citizens are subject to taxes on their worldwide crypto gains as a result of this regulatory approach. Any increase in value from the time of acquisition to the time of sale, trade, or disposition is regarded as a capital gain and is taxable if specific thresholds are reached because cryptocurrency is regarded as a capital asset.
Regulations for businesses that deal with cryptocurrency vary depending on whether their operations are considered commercial enterprises, and they may be subject to additional taxes such as the regional business tax (IRAP) in addition to the ordinary corporate income tax (IRES).
What is Crypto Capital Gains Tax?
The tax applied on gains from the sale or exchange of cryptocurrencies is known as the crypto capital gains tax. Cryptocurrencies are liable to capital gains tax, just like stocks or real estate, because they are categorized as assets rather than currency in many nations.
Capital gains tax on cryptocurrency is applied to any profit you make when you sell, trade, or dispose of your cryptocurrency for more than the purchase price. The difference between the purchase (or acquisition) price (sometimes referred to as the “cost basis”) and the sale price is used to calculate the gain. Both short-term and long-term holdings are subject to this tax:
- Short-term capital gains: Usually applied to assets held for less than a year, it is taxed as ordinary income.
- Long-term capital gains: It refers to assets kept for more than a year and is often taxed at a lower rate.
The specific rates depend on local tax laws and your income bracket.
Taxable Event
A taxable event in cryptocurrency transactions is any time you change your holdings or make a gain or loss. Typical taxable events consist of:
- Selling cryptocurrency for fiat (traditional) currency: Capital gains tax is imposed on any profit or loss resulting from the sale of cryptocurrency for fiat. For example, if you bought Bitcoin for $5,000 and sold it for $10,000, you would have a taxable gain of $5,000.
- Trading one cryptocurrency for another: Even when no fiat money is exchanged, exchanging one cryptocurrency for another (for example, Ethereum for Bitcoin) also results in a taxable event. To ascertain any gains or losses, you must calculate the cryptocurrency’s fair market value at the moment of trading.
- Using cryptocurrencies for goods and services: Using cryptocurrencies to purchase goods and services, such as a gift card, a car, or coffee, is likewise taxable. The gain or loss is calculated by comparing the value of the cryptocurrency at the time of purchase to your cost basis, or the amount you originally paid for it.
- Receiving cryptocurrency as payment or income: If you receive crypto as income (e.g., salary, business payments, or rewards), it’s taxed as ordinary income based on the fair market value at the time you receive it. You might have to pay capital gains tax on any future increases in value if you decide to sell that cryptocurrency.
- Crypto mining and staking rewards: The income from cryptocurrency mining or staking rewards is frequently recognized as taxable income at the time of being received, even if it is not usually regarded as capital gains, and the cost basis established here is used when calculating gains or losses for later sales or exchanges.
How is Crypto Capital Gains Tax Calculated in Italy?
Crypto capital gains tax is calculated based on the profit or loss realized when a cryptocurrency asset is sold or exchanged. Finding the transaction’s net gain or loss is part of the calculation, and gains over €2,000 in a tax year are subject to 26% tax.
Calculation of Gains
- Selling price: At the time of sale or exchange, this represents the cryptocurrency’s market value. If a taxpayer sells or converts cryptocurrency (for instance, exchanging Bitcoin for Euros), the selling price is the amount received or the market value of the crypto they exchanged.
- Acquisition Cost: This comprises the initial cost of purchasing the cryptocurrency as well as any related charges, such as exchange fees, transaction fees, and other upfront expenses.These costs are essential in determining the cost basis of the asset, as they reduce the net capital gain when deducted from the final selling price.
- Net Gain: The difference between the purchase price and the sale price is the taxable capital gain, For example: If you bought 1 Bitcoin for €10,000 and sold it for €15,000, your net gain is €5,000. Since the gain exceeds the €2,000 threshold, it would be subject to a 26% tax rate.
Offsetting Losses
Crypto losses can be deducted against capital gains under Italian tax rules, which could reduce the total taxable gain. The following methods can be used to accomplish this:
- Direct offsetting: Within the same tax year, any losses you sustain from trading or selling cryptocurrencies may be used to offset other capital gains. In the event that you made €5,000 on one transaction and lost €1,000 on another, for example, your taxable gain would be lowered to €4,000.
- Carry forward: You have up to five years to carry forward losses above €2,000. This is particularly useful if a taxpayer incurs a loss one year and gains the next, as they can use the previous loss to offset future gains and gradually lower their tax liabilities.
Crypto capital gains and losses must be reported on tax returns by Italian taxpayers. This includes detailing all taxable events and any losses carried forward from previous years. Keep thorough records of every transaction, including dates of purchase and sale, prices, and fees, as improper reporting of these gains may result in penalties.
Crypto Tax Rates in Italy
Current Tax Rate
Capital gains from cryptocurrency trades are subject to a 26% tax rate in Italy. Those who profit from the sale or exchange of cryptocurrency assets are subject to this rate. The tax is levied similarly to other financial instruments, such as stock and bond sales, under the Italian financial income tax regulations.
Thresholds and Exemptions
There is a noteworthy exception for people whose total cryptocurrency holdings for a continuous period of at least seven days throughout the tax year do not exceed €51,645.69 . Capital gains from crypto transactions are often exempt from the 26% tax if the value of an individual’s cryptocurrency portfolio remains below this threshold. Small-scale investors and those with smaller portfolios benefit greatly from this exemption since they are exempt from capital gains tax unless their total assets surpass the €51,645.69 threshold.
This cutoff point attempts to distinguish between occasional or small-scale cryptocurrency owners and those making larger commitments. If investors over this threshold, they will be subject to a 26% tax on any capital gains that are made during the tax year.
When Is Crypto Capital Gains Tax Due in Italy?
Tax Reporting Period
During the yearly tax return filing period, which normally takes place between May and June for the previous tax year, cryptocurrency capital gains tax is required to be reported in Italy. Any capital gains from crypto trades must be reported by Italian taxpayers on their Modelo Redditi (Italy’s Income Tax Return form) or, in the case of simplified tax scenarios, the Modello 730 form. The entire profit or loss from cryptocurrency transactions that had taken place during the tax year is detailed in the gains section under “other financial income” (Redditi Diversi).
Payment of Tax
Once the gains are reported, the tax owed (26% on net crypto gains above the exemption threshold) must be paid within the annual tax settlement period. Payments are normally due in June, but taxpayers who want to pay in two installments have an extra deadline in November. Via accredited financial institutions or online banking platforms, taxes are paid directly to the Agenzia delle Entrate (Italian Revenue Agency).
Accurate documentation of all cryptocurrency transactions, including purchase prices, sale prices, dates, and any associated fees, is crucial for individuals with taxable gains since it facilitates proper reporting and compliance to Italian tax laws.
Who is Liable for Crypto Capital Gains Tax?
- Residents vs non-residents: Crypto capital gains tax liability applies primarily to Italian residents. Regardless of where the crypto transactions occur, residents must pay capital gains tax on the earnings because Italy taxes residents on their global income. The tax only applies to non-residents who obtain capital gains from Italian-based sources, such as Italian exchanges or specific commercial ventures conducted in Italy.
- Individual investors: If an individual investor’s holdings are above the €51,645.69 exemption threshold over a seven-day period, they are required to pay a 26% capital gains tax on cryptocurrency profits. This applies to personal investments and includes buying, selling, or exchanging crypto as a private individual.
- Businesses and corporations: Although the regulations vary, companies and businesses that trade in cryptocurrencies are likewise subject to taxes. Since cryptocurrency transactions are typically seen as a component of their business operations, any earnings could be subject to additional taxes like the IRAP in addition to corporate tax rates (IRES). In order to properly report and fulfill tax requirements, corporations must also keep detailed records of all cryptocurrency transactions, including acquisition costs, gains, and losses.
How to Report Crypto Capital Gains In Italy
It is necessary to maintain precise records and adhere to tax filing laws in order to report cryptocurrency capital gains in Italy. Here’s a guide to managing the process effectively:
- Transaction dates: The dates of every buy, sell, or trade.
- Prices and amounts: The price in euros at the time of the transaction, as well as the quantity of cryptocurrencies purchased or sold.
- Transaction fees: Any fees paid to platforms or exchanges that can be subtracted from the sale price or added to the purchase cost in order to determine net gains.
- Proof of purchase: Records such as invoices or confirmations from wallets and transactions.
- Exchange rates: If a transaction is made in a foreign currency, the exchange rate in effect at the time of the transaction.
Proper records also serve as evidence if the Agenzia Entrate (Italy’s tax authority ) requests clarification on reported gains.
Filing the Tax Return
Individuals and businesses must follow specific steps to report crypto capital gains in Italy.
Use Form Modello Redditi PF
Complete Form Modello Redditi PF as the main income tax form for individuals, and attach Form RT for detailed capital gains reporting. Include Form RW when declaring foreign-held cryptocurrency holdings.
Steps for Reporting Crypto Gains
- Calculate gains: Deduct the acquisition costs, including fees, from the sale price to find your net capital gains.
- Declare gains on form RT: Report each gain or loss from crypto sales, exchanges, and any disposals where ownership changes.
- Foreign assets: To report cryptocurrency assets on foreign exchanges, utilize Form RW.
- Offsetting losses: If applicable, deduct any appropriate cryptocurrency losses from taxable profits.
Necessary Documentation
You should keep the following records to back up your tax return and ensure accuracy:
- Transaction history: An exhaustive record of all cryptocurrency transactions made through all wallets and exchanges during the tax year.
- Proof of purchase and sale: Documents such as exchange confirmations, blockchain transaction IDs, or receipts attesting to the dates and quantities of cryptocurrency purchased and sold.
- Fee breakdown: Records that appropriately adjust acquisition costs by displaying fees paid throughout transactions.
- Evidence of exchange rates: Document exchange rates on the day of the transaction if it was made in a currency other than euros.
Businesses and Corporations
According to corporate tax regulations, companies and businesses that deal with cryptocurrencies must record any income related to them:
- Financial statements: At the market value on the reporting date, record cryptocurrency holdings on balance sheets.
- Income reporting: Any profits from the sale of cryptocurrency or cryptocurrency paid for services should be included in business revenue and subject to corporate income tax regulations.
- Documentation: Companies should keep thorough records of every transaction, invoicing, and evidence of any transmitted or received cryptocurrency payments.
Special Cases and Exemptions
In order to differentiate between smaller-scale or personal use and bigger investment operations, Italy’s cryptocurrency tax structure contains a number of unique instances and exemptions.
- Crypto for personal use: If cryptocurrency falls below specific thresholds, it may not be subject to a taxable event if it is held for personal use (such as holding small quantities or conducting trades occasionally). For example, incidental transactions with low monetary value or usage without profit intent may not incur capital gains tax. Nevertheless, depending on the amount involved, utilizing cryptocurrency to pay for goods and services usually does count as a taxable event.
- Holding crypto for long-term: Unlike several other nations, Italy does not currently offer a lower tax rate for long-term cryptocurrency holdings (such as a year or more). However, people whose total holdings do not surpass the €51,645.69 level for at least seven days in a row throughout the tax year are exempt. Taxpayers can completely avoid paying capital gains tax on cryptocurrency assets by staying below this threshold.
- Small transactions exemption: Small transactions, especially those that fall below the €51,645.69 level, may be excused if the person’s assets don’t surpass this sum for the allotted period. This exemption benefits those using crypto minimally or with a limited investment size.
Penalties for Non-Compliance
Failure to comply with Italian tax reporting obligations on cryptocurrency can result in significant penalties:
- Late filing and payment: Penalties and interest may be assessed for late payments or files.Penalties for late filing may be calculated as a percentage of the tax owed, increasing the longer the delay.
- Failure to report crypto transactions: Not reporting crypto gains when required is considered tax evasion, which can lead to fines and legal consequences. Intentional underreporting or hiding of crypto assets can result in fines of up to 120–280% of the tax owed, plus interest. Italian tax officials have increased their scrutiny of crypto holdings. Therefore, to avoid these fines and continue to be in compliance with Italian tax regulations, precise reporting and the maintenance of clear records are crucial.
Is Crypto Mining and Staking Taxed in Italy?
Cryptocurrency mining and staking are both subject to taxes. Income from these sources is often taxed at progressive rates dependent on the individual’s total income and is classified as miscellaneous income (Redditi Diversi). The profits received by individual miners or stakers are usually subject to personal income tax. The cost basis of the mined or staked cryptocurrency is determined by its fair market value at the moment of receipt.
Additional taxes, such as corporate tax (IRES) and perhaps regional tax (IRAP), may be imposed on companies or people who mine or stake as a professional activity. In these situations, revenue from mining and staking is included in business revenue.
Due to the intricacy of these operations, accurate record-keeping is necessary for ensuring correct filing and compliance with Italian tax authorities. This includes recording transaction dates, fair market values, and related expenses.
Conclusion
If yearly gains in cryptocurrency surpass €2,000, they are subject to 26% taxation in Italy. Profits from cryptocurrency exchanges, sales, and purchases are all subject to the tax. If holdings stay below €51,645.69 for seven days in a row, there is an exemption. Income from cryptocurrency mining and staking is taxable as well, falling under the category of miscellaneous income.
Maintaining accurate records of prices, fees, and transactions is crucial for compliance and avoiding potentially harsh fines. Gains are reported by Italian taxpayers on Modello Redditi once a year, and payments are normally due in June. Small-scale investors may be exempt if they stay below the threshold, providing freedom to occasional users while guaranteeing that sizable earnings are appropriately taxed.
FAQs
Is there a tax exemption threshold for crypto holdings in Italy?
Yes, Italy offers an exemption if the total value of crypto holdings remains below €51,645.69 for at least seven consecutive days during the tax year. If holdings stay under this threshold, capital gains tax on crypto transactions is not required.
How do I report crypto capital gains if I've traded across multiple platforms?
When trading across multiple platforms, it’s essential to maintain detailed records of each transaction, including purchase and sale dates, amounts, prices, and fees. These records should be consolidated and reported on Italy’s Modello Redditi form, attaching Form RT for capital gains and Form RW if you hold foreign crypto assets.
Does holding cryptocurrency for a long period reduce the tax rate in Italy?
No, Italy does not currently offer a reduced tax rate for long-term cryptocurrency holdings. All crypto capital gains are subject to the 26% tax rate if the total annual gains exceed €2,000, regardless of the holding period.
