Crypto Taxes in Italy: A Comprehensive Guide
Crypto taxes in Italy are very similar to that of most countries in the European Union – You pay a capital gains tax rate of 26% on your crypto gains over €2,000 and a progressive tax rate of 23%-43% on your crypto income.
But there is more. The Italian Revenue Agency also offered an alternative tax regime for people declaring their crypto holdings.
As of now, the exact guidelines and framework around crypto taxation in Italy are still unclear. In this guide, we’ll break down the new crypto tax regime in Italy, what it means for different crypto transactions, how to reduce your tax liability and more.
But first, let’s quickly go over the history of crypto taxes in Italy.
The History of Crypto Taxes in Italy
Up until this recent development, crypto gains in Italy were almost tax-free.
Before the 2023 budget, The Italian Revenue Agency didn’t consider trading, selling or disposing of crypto assets as taxable events. Instead, they put out a guideline stating that if your crypto holding exceeds €51,645.69 in value for more than seven consecutive days, you’ll be subjected to a 26% capital gains tax.
But, of course, all of that changed after the proposed bill was signed into law on Dec 30, 2022. It seems Italy is following in the footsteps of Portugal, which was once considered a tax haven, in introducing new tax laws and tightening regulations around crypto.
How Does the Italian Revenue Agency (Agenzia delle Entrate) View Cryptocurrency?
The Italian Revenue Agency or Agenzia delle Entrate haven’t released specific guidelines on how they view and treat crypto yet. However, based on the new tax laws, it’s safe to assume that they view crypto as an asset or property for tax purposes.
How is Crypto Taxed in Italy?
Crypto taxes in Italy are actually quite simple and investor-friendly.
Capital Gains Tax
As mentioned, crypto gains above €2,000 are subject to a 26% capital gain tax rate. This is when you sell, spend, swap, or dispose of your crypto in any way and incur a profit of more than €2,000.
Similar to tax laws in other countries, you can also claim your crypto losses and offset them against your gains to reduce your tax bill.
If you receive your salary or accept payment for your goods and services in crypto, you’ll be liable to personal income taxes in Italy.
Meaning you’ll pay a progressive tax rate of 23%-43% on the fair market value (at the time of acquisition) of the crypto. Also, you’ll be liable to capital gains tax again if you sell the received crypto in the future and make a profit of more than $2000.
The following is a breakdown of the personal income tax rate in Italy:
|Up to €15,000||23%|
|€15,001 to €28,000||25%|
|€28,001 to €50,000||35%|
Substitute Income Tax
Alternatively, the Italian Revenue Agency offers an option called “substitute income tax”, where investors can declare their crypto holding and pay a 14% tax on its value held on January 1st each year.
This is to incentivize Italian taxpayers to report their crypto holdings and earnings by offering a much lower tax rate.
How to Calculate Crypto Taxes in Italy
Calculating crypto taxes in Italy may seem like a daunting task, but it’s a crucial part of being a responsible investor. Whereas income tax calculations are quite simple, calculating capital gains can get complicated due to different accounting methods.
First, subtract the cost basis of your crypto from its selling price or fair market value (FMV) to calculate the capital gain.
Cost Basis – Selling Price (FMV) = Capital Gain
Your true cost basis is the original price you paid for the crypto, excluding any fees or expenses. But there is a problem. If you buy multiple coins of the same cryptocurrency, how do you know the cost basis of the one you’re selling?
This is where accounting methods come in. We’ve done an in-depth guide on different cost-basis accounting methods. But in Italy, there are only methods you can use – the First-in-First-Out (FIFO) method and specific identification method.
The FIFO method assumes that the first crypto assets acquired are the first ones sold, regardless of their cost. This method is simple to use but may not accurately reflect the cost basis of specific crypto assets.
The specific identification method, on the other hand, allows taxpayers to identify specific crypto assets that they have sold and match them with the corresponding cost basis. This method provides more accuracy but requires careful record-keeping and documentation, which is not possible manually.
A more efficient solution is to use a crypto tax tool, like Bitcoin.Tax, which seamlessly integrates with all your exchanges and wallets and automatically performs the calculations using your preferred accounting method. This tool will save you the headache of manual calculations, making the process quick and easy.
Crypto Taxable Events in Italy
Now that we’ve laid down the foundations of crypto taxes in Italy, let’s look at some common crypto transactions and their tax consequences.
Selling or Spending Crypto
Selling or spending crypto is a disposal event, meaning if you sell or spend your crypto to buy any goods and services and incur a gain of more than €2,000, you’ll pay capital gains taxes.
In most cases and countries, swapping crypto is considered a disposal event. Hence, a taxable event. However, the document explaining the new tax laws in Italy is a little vague and confusing, especially around swapping crypto.
That is why we recommend you consult a local tax professional to gain more clarity on this.
Getting Paid in Crypto
As mentioned, getting paid in crypto is viewed as crypto income. Hence, you’ll pay personal income taxes on the fair market value (at the time of acquisition) of the crypto.
Staking or Lending Rewards
There are no official guidelines from the Italian Revenue Agency on the treatment of staking and lending rewards. However, based on the tax laws of other countries in the EU, it’s safe to assume that staking and lending rewards will also be subjected to personal income taxes.
Once again, there are no official guidelines from the Italian Revenue Agency on the treatment of staking and lending rewards, but you can expect personal income taxes on your crypto mining rewards.
Airdrops & Hard forks
There are no official guidelines on airdrops and hard forks as well. However, it’s difficult to predict its tax consequences as airdrops and hard forks have varying tax laws in different countries.
Italy has an inheritance/gift tax law for assets, which may also apply to crypto. If it does, you’ll pay 4%-8%, depending on who you’re gifting crypto to.
However, this gift tax doesn’t apply to foreign assets. And some people might argue that crypto is a foreign asset. As we discussed, the Italian Revenue Agency hasn’t released any official statement on how they view crypto for tax purposes, so we can’t be certain about it.
Until we do get official guidelines regarding the grey areas of crypto taxes in Italy, you should consult a tax professional for more help
Tax-Free Crypto Transactions in Italy
In Italy, you can deduct up to 10% of your total personal income by making donations. However, it’s not clear if this law applies to crypto donations as well.
Buying and Holding Crypto
As per the new tax laws, buying and holding crypto is not a taxable event since it’s not a disposal event.
Transferring Crypto Between Personal Wallets
Transferring crypto between personal wallets doesn’t trigger a taxable event since the crypto assets are not changing ownership, meaning there are no disposal events. Hence, it’s tax-free.
How to Avoid Crypto Taxes in Italy
First things first, you can’t really avoid crypto taxes in Italy. Tax evasion, not only in Italy but in most countries, can put you in jail. And the Italian tax authorities can track people avoiding taxes, as most crypto exchanges in Italy report to their government.
That being said, there are some ways you can reduce your tax bill. For example, tax loss harvesting, where you sell your non-performing assets to incur losses that you can use to offset gains and reduce taxes.
If crypto donations really are tax-deductible, that can also be an effective tax-saving strategy, among many others.
The best approach, however, is to consult a tax expert who can customize a strategy tailor-fitted to your situation and needs.
How to Report Crypto Taxes in Italy
The financial year in Italy is the same as the calendar year – January 1st to December 31st. The deadline for reporting capital gains from the disposal of assets, including cryptocurrency, is by the end of September.
The tax return form in Italy is known as the “Modello Unico” or “Modello Redditi Persone Fisiche.” This form should be filed with the Italian Revenue Agency (Agenzia delle Entrate) by the end of June. You can file your tax return either through the online portal or by postal.
Make sure you keep all records, like transaction history, acquisition costs, expenses, selling price, etc.
You should use a crypto tax tool, like Bitcoin.Tax, for this, as it can simplify the process and ensure accuracy in the calculations. It can automatically calculate all your gains and taxes and create a tax report that you can directly file in the online portal.