Italy Introduces Capital Tax on Cryptocurrency Gains – Will Other Countries Follow Suit?
Italy’s parliament has approved a proposal for a 26% tax on crypto gains above 2,000 euros ($2,110).
In addition to bringing a hefty tax on crypto gains, the new law also introduces incentives for taxpayers to report their crypto. Under the law, crypto owners are entitled to an amnesty for unreported gains achieved in previous years by paying a “substitute tax” of 3.5%, plus a 0.5% fine for each additional year.
The law was passed by the Italian parliament on December 29 as part of the budget for 2023, local news outlet Rai News reported.
As was expected, the law also allows taxpayers to deduct their crypto losses over 2,000 euros.
Another incentive in the proposal is to let taxpayers declare their crypto holdings as of January 1 and pay a tax rate of 14%.
The budget, which the new crypto gains tax is a part of, is the first brought by Italy’s new prime minister Giorgia Meloni, who during her campaign promised significant tax cuts for Italians.
Italy’s move comes after the EU last year approved the Markets in Crypto Assets (MiCA) bill. The bill establishes a consistent regulatory framework on crypto across the EU, and is expected to come into effect in 2024.
Portugal no longer a crypto haven
Recently, Portugal also proposed to tax crypto gains, after the country for a number of years now has been known as a crypto tax haven.
According to the proposal, gains on crypto held for less than one year will from 2023 be taxed at a rate of 28%, higher than the rate in Italy. However, given that the tax only applies to gains on crypto held for less than a year, Portugal could still be seen as one of the more crypto-friendly countries in Europe.
Portugal has until now not taxed crypto gains at all, which has helped make it a popular destination for newly rich crypto owners looking for a new home.
Among other things, tax lawyers in Spain were reporting that Spaniards with crypto holdings were “fleeing” to Portugal to escape levies on their token-related profits. They warned that Spain was on the verge of becoming a “crypto desert” as the country ramps up its regulation of the sector.
Portuguese lawmakers have argued that the move to tax crypto is necessary to bring rules in line with other European countries’ crypto legislation, including Germany, where investors pay no taxes if they hold crypto for more than a year.
So far, no other European countries have announced new tax rules specifically relating to crypto for 2023.