Tax treatment of Bitcoin and cryptocurrencies

Tax treatment of Bitcoin and cryptocurrencies
Tax treatment of Bitcoin and cryptocurrencies

The Bitcoin (which we will take as a reference as the most widespread among cryptocurrencies), the virtual currency used for online transactions, conceived in 2008 and introduced in 2009, does not require intermediaries and does not use a central body.

This is why it defines itself currency peer to peer.

Like any other currency, Bitcoins still allow thepurchase of goods and services and there are several sites where you can change yours Bitcoin with Dollars, Euros, Yen or other currencies.

Bitcoins can eventually be set aside in a electronic wallet in your PC, or be entrusted to one electronic bank.

As mentioned, it is a decentralized system, which does not provide for the intervention of banks or other intermediaries and with a completely open source software. And unlike the purchases by credit card, transactions take place anonymously.

The real problem, moreover, is precisely that this kind of coins could become one sort of virtual tax haven. And the various tax administrations, aware of this, are beginning to pose the problem.

Bitcoin and cryptocurrencies: what they are and on which system they are based

Ma how does the “system” bitcoin?

The units of Bitcoin (and other cryptocurrencies) are purely immaterial in nature, reflecting themselves in mere accounting records that become part of the Blockchain, a distributed ledger of all transactions. The individual Bitcoins are put into circulation through the so-called “mining”, that is theextraction.

Verification of uniqueness and security of transactions takes place via the solution of complex mathematical operations, to solve which a considerable computing power is required (now almost completely closed to the home user, due to the considerable amount of energy and availability of hardware that these operations require).

This verification is essential for the functioning of the system, and is therefore rewarded with thefree Bitcoin allocation.

All transactions, confirmed through mining, are included in the blockchain in a uniquely and mathematically certified way.

I Bitcoin wallets allow you to do one transaction only to those who own it “Private key”, a alphanumeric string protected by a common password which is used for sign transactions, mathematically certifying the identity of the owner of that wallet.

However, there are several IT platforms where it is possible to convert cryptocurrencies into other assets, starting with fiat currencies; but, progressively, cryptocurrencies are gaining momentum to the point that they have begun to be accepted as payment method by several sellers of goods and service providers worldwide.

Indeed, gods have already been born Bitcoin ATM where it is possible to buy them, and then spend them with those who are willing to accept them.

Bitcoin and cryptocurrencies: the legal framework

Given the operation, what is the correct legal framework to give to Bitcoin and the others cryptovalute?

A first path is the one that leads Bitcoin back to legal category of money.

However, in a world of fiat currencies, money in a technical sense is just that.set of paper banknotes and coins which is issued, or authorized by central banks, and which receives legal value from them.

A second hypothesis to consider is to bring Bitcoins back to the category of “Financial products”: they can in fact be extracted or purchased also for the purpose of investing one’s savings.

Also “Financial products” in a technical sense, however, they are only those that fall into one official definition, provided in this case by Consolidated Law on Finance, according to which they are such “Financial instruments and any other form of investment of a financial nature”.

At this point, all that remains is one last way and that is to consider it as goods. After all, like gold and silver, it has value as long as people and companies on the market freely decide to attribute value to it. Therefore, the most correct classification of Bitcoin (and other cryptocurrencies in general) is that it is an asset, in the proper sense defined by the civil code: ““The things that can be made subject to rights are goods”» (art. 810 c.c.).

Of course it will be a intangible movable asset.

Given the functioning and the legal nature, we need to address the profile more “Thorny” That of the tax treatmentwhereas, moreover, the regulation of such a delicate matter would require at least an intervention in the Community.

Tax treatment of Bitcoin and cryptocurrencies

To arrive at a correct classification of the case for VAT purposes the Court of Justice, on 22 October 2015, however established that theArticle 2 (1) (c) of Council Directive 2006/112 / EC of 28 November 2006, must be interpreted in the sense that they constitute provision of services for consideration operations that consist of traditional currency exchange versus unit of the virtual currency “Bitcoin” and vice versa, made against payment of a sum corresponding to the margin consisting of the difference between, on the one hand, the price at which the operator concerned buys the currencies and, on the other, the price at which he sells them to his customers.

L’Article 135 (1) (e) of Directive 2006/112 it must be interpreted as providing services, which consist in the exchange of traditional currency for units of the virtual currency “Bitcoin” and vice versa, made against payment of a sum corresponding to the margin consisting of the difference between, on the one hand, the price at which the operator concerned buys the currencies and, on the other, the price at which he sells them to his customers, they make up transactions exempt from value added tax pursuant to this provision.

The judgment of the Court has therefore put a fixed point on the story, at least for indirect tax purposes (and with reference, however, only to one of the various uses of bitcoin).

Exchanging a euro for a Bitcoin is therefore equivalent to a prestitution of services and being bitcoin comparable to a payment instrument, as established by the Court of Justice, the transaction is exempt for VAT purposes.

The solution given by the sentence, however, concerns only the case in which the bitcoin has changed into another and a fee is requested for this operation, that is, essentially respecting only theactivity of exchangers, that is, of those subjects who change bitcoins (and not being, for example, applicable to end users, nor to miners, that is, to those who “mine” Bitcoins).

Also on the national front something has moved.

On 2 September 2016 theRevenue Agency has in fact issued a Resolution (n.72 / e of 2 September 2016), assimilating, among others, virtual currencies to foreign currencies.

With regard to the case of withdrawal of currency from accounts or deposits, art. 67 co. 1-ter of the TUIR establishes that the capital gains deriving from the sale for consideration of foreign currencies deriving from deposits and current accounts combine to form income provided that, in the tax period in which they are realized through withdrawal from the deposit or account, the total balance of deposits and current accounts held by the taxpayer with all intermediaries, calculated according to the exchange rate in force at the beginning of the reference period, is greater than 51.645,69 euro for at least 7 continuous working days.

In the presence of this obligation, all transactions carried out in the calendar year must therefore be declared, even if prior to the date of exceeding the threshold.

Considering therefore that the electronic money should constitute a “surrogate” of cash, the purchase of virtual currency against foreign currencies from current accounts should be equivalent to withdrawal of foreign currency from the account, which, as mentioned, could generate taxable income based on the aforementioned regulatory provision.

In short, a still very confused picture, in which the Resolution intervened, which in any case intervened only in the response to the questioning, with all the limits of the case, did not bring the required clarity, even considering that clarity in such a sector does not it may disregard a fundamental issue, which is the responsibility of other bodies (Bank of Italy in primis), such as that of exact legal definition of bitcoins.

Also on the fiscal front, the instructions for completing part RW last year also included a specific indication on the subject of virtual currencies.

In the code table of the assets held abroad it is in fact specified that it is necessary to indicate – with code 14 – also this type of currency, with the specification that the code of the foreign country may not be indicated.

Basically, for the first time, the instructions relating to the RW panel make it explicit that, within the same panel, the virtual currencies, where, based on the provisions of Article 4 of the Legislative Decree 167/1990, natural persons (in addition to non-commercial entities and simple companies) must fill in the part RW of the declarative model, relating to tax monitoring, in the event of holding “investments abroad or foreign financial activities likely to produce taxable income in Italy “.

Tax treatment of Bitcoin and cryptocurrencies: a look to the future

In conclusion, beyond the possible technical-legal solutions, what appears undeniable is that the dissemination of electronic money it should be governed in some way, also because it exposes its users to considerable risks.

And this not only from a tax point of view, but also from the anti-money laundering discipline.

Waiting, therefore, for the international community and the European institutions to adopt the appropriate regulatory measures for the phenomenon of “virtual currencies”, it appears necessary for the national legislator to adopt specific measures.

In fact, within ten years, the technologies that rely on principles of the blockchain will record the financial transactions related to the 10 percent of world GDP.

And therefore we must avoid having to deal with a river of “money” without control.

What is certain is that we are witnessing one today clash between financial systems, where it cannot escape the fact that, often, the declines of cryptocurrencies follow proclamations of unreliability, launched precisely by the traditional financial community.

Fluctuations also occur as a result of a series of news “negative” (as well as the regulatory announcements of the states, China and South Korea in the first place), which push investors to get rid of the virtual currency.

the cryptovalute they are therefore an evolving world, at an unthinkable pace until just a few years ago and perhaps so fast that they even anticipate every forecast.

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