Cryptocurrency taxation

WRITTEN BY Pol Martí i Salgado
04 Sep, 2023 — 3 min
 Cryptocurrency taxation

Cryptocurrency Taxation. In recent years, investment in cryptocurrencies has gained popularity among investors. Well-known coins such as Bitcoin, Ethereum, Xrp, or Dogecoin have shifted from being an unknown aspect of society to being assets for both small and large investments with the objective of being able to get a return on investment.

To operate with these virtual currencies, many investors take advantage of the notable volatility of these assets to sell them at a higher price than they were acquired. However, some may not be aware that these operations involve generating capital gains or losses for individuals residing in Spain, and therefore, the obligation to pay income tax (IRPF).

For this reason, it is important to consider the following three operations in the fiscal field when filing taxes:

  1. Operating with Virtual Currencies

In this operation, the goal is to obtain economic benefit by buying and selling cryptocurrencies, taking advantage of the high volatility of these assets. Once the asset is sold, a capital gain or loss is generated, determined by the difference between the acquisition value and the transmission value. These operations follow the same criteria as the purchase and sale of listed securities, always considering the FIFO (First In, First Out) criterion, meaning that the sale always considers those securities acquired first.

It is essential to operate on platforms that provide us with enough information about the exchange value at the time of purchase and sale to avoid incurring fiscal risks.

  1. Exchange of Virtual Currencies for Different Currencies

When operating with these assets, it is common to exchange one cryptocurrency for another different one. In these types of operations, even though they do not really generate any return, it is considered that there is an alteration of the patrimony by replacing some coins with others. To quantify the corresponding capital gain or loss, the valuation rule of the exchange is applied, where the return is determined by the difference between the acquisition value of the virtual currency that is delivered and the market value of the received currency.

  1. Mining or Manufacturing of Cryptocurrencies

Undoubtedly, it is an economic activity and, therefore, it is also subject to income tax (IRPF). The income is the cryptocurrencies converted to euros, while expenses and investments are those related to obtaining income derived from economic activity."

Given the level of complexity that these operations can present, it is advisable to count on the help and advice of professionals in taxation. This will ensure that tax obligations are met correctly and that the fiscal situation related to the world of cryptocurrencies is efficiently managed.