Spaniards Must Respect Certain Rules to Use Cryptocurrencies
The income tax on investments in cryptocurrencies ranges from 19% to 23% for more than EUR 50,000. All crypto companies must duly register with the BDE and adopt the KYC-AML and CFT measures.
The government of Spain has been skeptical of cryptocurrencies since 2018 when they first spoke out against them. Bitcoin and other cryptocurrencies have never been illegal in that European country, but people can use and buy them there.
However, the Bank of Spain (BDE) and the National Securities Market Commission (CNMV) issued an extensive warning in 2018. After the great boom of Bitcoin and the Initial Coin Offerings (ICOs) in 2017, both organizations decided to protest.
The BDE reaffirmed that same position in early 2021, recalling the risks of trading cryptocurrencies. The institution mentions high volatility, liquidity problems, difficulty in guaranteeing user rights, and cross-border issues. Although the government has not yet banned them, it has imposed some strict regulations on them, with others to follow.
Rules that Institutional Actors Must Follow
As usual, most of the existing rules only apply to institutional users. These include companies dedicated to cryptocurrency services, such as exchanges, custodians, and wallets. They also consider those institutions wanting to invest in or use cryptocurrencies in Spanish territory or involving Spanish citizens.
In November 2020, the government approved a regulatory sandbox targeting FinTech companies, which includes crypto-companies. By participating in this sandbox, they promote innovation while receiving protection within the legal framework.
A reform of the law in March 2021 ruled that the CNMV would be in charge of regulating advertisements for cryptocurrencies. No one knows the final measures yet, but all announcements should include a respective risk statement.
In April, another decree adopted the European regulation called Directive 2018/843 (AMLD5). All companies related to cryptocurrencies, especially exchanges and custodians, must duly register with the BDE. Likewise, they must adopt mandatory measures against money laundering (AML) and terrorism financing (CFT) in their operations. That includes strictly identifying users (KYC) and sharing their data with authorities across Europe.
In that sense, a new law would force cryptocurrency custodians to provide information on the holders and the transactions of the coins in their possession. Custodial exchanges should do this starting this month. Likewise, Spanish insurers must report whether they have investments in Bitcoin.
Everyone Must Pay Income Tax on Cryptocurrency Investments
Both institutional and personal users must report and pay taxes on their gains on capital invested in cryptocurrencies. It works when liquidating positions to fiat currency and making a profit on exchanging one cryptocurrency for another.
The percentages for tax payments range from 19% to 23%. The first percentage particularly applies to earnings of up to EUR 6,000. From EUR 6,001 to EUR 50,000, the amount to pay increases to 21%. From then on, taxes on profits go up to 23%.
Bitcoin miners will not be exempt from paying taxes if their earnings are equivalent to those of a company. In that case, they must receive an income of around 501 times the minimum wage, or EUR 475,950, in total assets. Additionally, the wealth tax is between 0.2% and 4%, starting at EUR 400,000, depending on the region.
Those who do not declare taxes must pay fines of up to EUR 5,000 for each item not included. Also, if the amount exceeds EUR 120,000, the payment can be up to five times the undeclared amount.
By Alexander Salazar