Italy’s parliament has approved a new tax on cryptocurrency as part of the country’s budget law for 2023. Under the new law, cryptocurrency gains in excess of 2000 euros will be subject to a 26% tax rate during the tax period.
This law was passed on December 29th.
This Has Been Coming
The Italian government has been proposing a capital gains tax on cryptocurrency since December 1st when the draft for the budget law was presented. The approved law includes incentives for taxpayers to disclose their cryptocurrency holdings, including an amnesty on gains, a “substitute tax” of 3.5%, and an additional fine of 0.5% for each year.
Under the new budget law, taxpayers have the opportunity to pay a reduced capital gains tax rate of 14% on their cryptocurrency holdings as of January 1st, 2023. This rate is significantly lower than the price that was paid when the cryptocurrency was originally purchased. This incentive is included in the budget law as a way to encourage taxpayers to declare their cryptocurrency holdings.
Under the new budget law, cryptocurrency losses in excess of 2000 euros during a tax period can be claimed as tax deductions and carried over to future tax periods. This provision is included in the law as a way to encourage taxpayers to declare their cryptocurrency holdings and losses.
New Law Raises Questions
The new budget law specifies the conditions under which cryptocurrencies will be taxed. It does, however, state that “the exchange of crypto assets with similar characteristics and functions does not constitute a taxable event.” Because the law does not define “crypto assets having the same characteristics and functions,” users may require assistance in properly reporting their taxes. Taxpayers should seek guidance and clarification on this point to ensure that they are in compliance with the law.
Italy’s new budget law, which includes a capital gains tax on cryptocurrency, is similar to the one recently implemented in Portugal. Portugal’s budget law for 2023 includes a capital gains tax on cryptocurrency at a rate of 28%, which may potentially jeopardize the country’s status as a haven for cryptocurrency companies and holders. Italy, which does not have comprehensive regulation for cryptocurrency, is following the example set by Portugal.
In addition to the capital gains tax on cryptocurrency, the new budget law also includes provisions for taxing the free transfer of cryptocurrency and the commissions charged by cryptocurrency exchanges and other crypto operations for facilitating transactions. This proposal was first revealed in October. It is important for taxpayers to be aware of these provisions and to properly report any applicable taxes in order to ensure compliance with the law.
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