Source: alexlmx/Adobe
Spain’s tax administration agency, popularly called Agencia Tributaria has released new rules governing digital asset reporting in the country that will see holders declare their foreign-held assets.
The tax agency released form 721, a tax reporting form for users that hold assets in non-Spanish exchanges. Per the announcement, the submission period for the form will kick off on Jan 1 2024 with a deadline on March 31, 2024.
Corporate entities and individuals will be required to declare their holdings according to their portfolios in their appropriate forms. While firm 721 is required for non-Spanish exchanges, citizens who utilize self-custody wallets are to report their holdings using form 714, the standard wealth tax form.
The benchmark for individuals under the new regulations starts from users holding over €50,000 approximately $55,000 in foreign assets.
Spain and crypto taxation
Spain has been on course to roll out wider digital asset tax rules after the government began a crackdown to stop the under-reporting of digital asset holders in the country.
In April, the country issued 328,000 notices to residents who failed to pay their digital asset taxes the previous year with the agency still unsatisfied with current figures despite a year-on-year (YoY) growth in the past three years.
This year’s unpaid notices grew by 40% to 328,000 while 2022 students stood at 150,000, a massive jump from 15,000 notifications in 2021.
“The reason for the gradual growth is the increasing information that the Spanish Tax Agency has about operations with cryptocurrencies, and that information will be expanded next year with the new reporting obligations planned for crypto exchanges.”
A major challenge for regulators in taxing digital assets has been the initial framework due to the nature of cryptocurrencies and their enforcement. The real question posed is how the government intends to know the exact amount citizens own in crypto which leads to collaboration with centralized exchanges.
Over the years, users have developed other methods including deploying decentralized exchanges and privacy coins to make their asset holdings as regulators swarm in.
David Kemmerer, the CEO of CoinLedger opined that the tax agency may likely request the information directly from exchanges.
“The Spanish government is likely coming to the realization that crypto tax compliance is relatively low within the taxpayer base compared to other asset classes. Their warning letters are a way to drive further tax compliance amongst their tax base,” he added.
As several tax administrations roll out regulations, users express mixed feelings over the development with users on one hand saying excessive taxes are harmful to adoption especially in a bear market while others see it as key to regulatory compliance.
This year, Spain has made multiple efforts at virtual asset regulations including pushing a comprehensive framework for the Markets in Crypto Assets (MiCA).
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