Binance Tax Watch: Q1 2023 Crypto Tax Developments in Europe and CIS

Main Takeaways

• Binance is launching a new blog series to help crypto users stay on top of digital asset-related tax policies and requirements across the globe.

• The first issue of the series covers the updates from Europe and the Commonwealth of Independent States (CIS) during the first quarter of 2023.

• Learn which European jurisdictions introduced new taxes on crypto income in recent months and how different EU regulators think about the matters of NFT taxation — all in the first installment of Binance Tax Watch!

No matter where you are based, it is important to know what tax laws apply to you as a crypto user. Not only is being compliant good for you, but it also helps the larger Web3 industry thrive.  However, the rules of crypto taxation evolve faster than ever, and it can take significant effort to keep abreast of relevant developments. To help you navigate the essential field of tax law as it relates to digital assets, we are launching a new blog series powered by Binance’s expert tax policy team.

In the first article of the series, we look at new legislation, proposals, and consultations from across Europe published between January and April 2023.

Italy: New tax rules for the sale of crypto; mining proceeds and utility token issuance outside the scope of VAT

In January 2023, Italy introduced a tax on gains realized on the disposal of crypto assets (Law 197/2022). Under the new law, which applies to any individual with crypto gains exceeding EUR 2,000 in a tax year, these gains are treated as “miscellaneous income” (redditi diversi) and subject to 26% substitute tax.

The law also gave qualifying taxpayers an option to “step up” the value of cryptoassets held on January 1, 2023, and pay tax at a reduced rate of 14% on the stepped-up amount — either in a single installment (payable by June 30 2023) or in up to three annual installments starting on June 30, 2023, with interest payable at 3% on subsequent installments.

In other news, Italian tax authorities have confirmed (here and here, in Italian) that the mining of crypto falls outside the scope of value-added tax (VAT). Miners do not qualify as taxable persons in relation to the service they perform to the network and do not have the right to deduct VAT incurred on related purchases.

Furthermore, the Italian tax authorities have published a clarification that utility tokens issued in an initial coin offering (ICO) are outside the scope of value-added tax (VAT).

Portugal: New personal taxes on crypto income

In its 2023 State Budget (effective January 1, 2023), Portugal clarified the taxation rules for income and capital gains deriving from crypto. The new legislation defines cryptoassets for personal tax purposes as “any digital representation of value or rights that can be transferred or stored electronically using distributed ledger technology or similar,” but expressly excludes non-fungible assets. 

The new regime covers income or capital gains from trading, staking, mining, validation, salary or other payments made in crypto, and issuance of any token that meets the above definition of cryptoassets.

Profits generated from the disposal of cryptoassets will be treated as capital gains, taxable at a flat tax rate of 28% unless the assets have been held for more than 365 days, in which case an exemption may be available. The exemption does not apply to digital assets classified as securities.

Bulgaria: Proposed tax on crypto transactions

The Bulgarian Ministry of Finance conducted a public consultation on proposed amendments to the Personal Income Tax Act (PIT Act), including the introduction of explicit rules for the taxation of income from cryptocurrencies. 

The key proposal is to define taxable income from the sale or exchange of virtual currencies as the sum of the profits realized during the year, minus any losses realized during the year. Bulgaria taxes personal income at a flat rate of 10%.

Romania: Clarity on tax treatment of income from NFTs and crypto trading

On February 9, Romania’s tax authority published guidance relating to the tax treatment of income from NFTs and crypto trading.

Gains realized by NFT creators is considered to be income from intellectual property (IP) rights. Income from trading crypto assets is taxable at 10% as “other income,” with an exemption for gains below RON 200 (about $44) per transaction, if the total gain in one financial year does not exceed RON 600 ($133).

Spain: Crypto reporting obligations for businesses

On April 4, Spain’s Official Gazette published the text of legislation governing reporting requirements for crypto exchanges and related parties operating in Spain.

Article 39 states that Spanish resident entities or permanent establishments of foreign entities that provide crypto exchange services or a broadly defined range of related services will be obliged to present an annual informative declaration regarding transactions they process or facilitate.

Details of the format of the annual declaration are forthcoming. The information to be submitted includes personal data of the persons or entities to which the virtual currencies correspond at any time of the year, either as holders, authorized persons, or beneficiaries, along with the currency balance as of December 31 of the year in question (in EUR) and information related to the acquisition, transmission, exchange, and transfer of any virtual currencies.

Germany: Court rules that capital gains on the sale of crypto are taxable

In a February 14, 2023, decision, the German Federal Fiscal Court (Bundesfinanzhof) ruled that capital gains from the sale of cryptocurrencies constitute taxable income. 

The case concerned a German resident couple that had challenged the taxation of EUR 3.4 million derived from the sale of various cryptocurrencies in 2017. Capital gains realized by a German resident from private transactions are currently taxable if the total gains are at least EUR 600 during the tax year and arise from the disposal of movable property (excluding shares and bonds) within one year of the date of acquisition.

The question was whether cryptocurrency constitutes a movable property, as a result of which capital gains derived from its sale would constitute taxable income. The Court took a broad interpretation of the term “movable property” that included cryptocurrency in its scope and therefore held that capital gains derived from the sale of digital assets within one year after purchase constitute taxable income. This rule also applies to the exchange of cryptocurrency.

Denmark: Public consultation on crypto reporting obligations

On January 26, Denmark’s Ministry of Taxation opened a public consultation on the implementation of DAC8 in the country’s legislation. DAC8 is a proposed extension to the EU Directive on Administrative Cooperation (DAC) to cryptoassets and e-money.

A forthcoming EU law, the proposed Directive (DAC8) states that cryptoasset service providers and intermediaries of transactions relating to such assets are required to collect and report information on their clients to the tax authorities, which will subsequently exchange this information with other EU member states.

Belarus: Wide-reaching cryptocurrency tax exemption

On March 30, the government of Belarus issued Presidential Edict N.80, providing exemption from tax for income derived from cryptocurrencies effective from January 1, 2023, to January 1, 2025.

The provisions exempt individuals from personal income tax on crypto trading and investment profits, as well as income from staking and mining activities. These provisions also extend to crypto exchanges, providing exemption from corporate income tax and VAT.

Kazakhstan: New digital assets tax rules

On January 13, Kazakhstan’s State Revenue Committee of the Ministry of Finance announced that, effective January 1, 2023, capital gains arising from the sale of digital assets are subject to individual income tax.

Additionally, starting April 1, 2023, new provisions of the Tax Code will enter into force regarding the taxation of income derived by digital miners, from digital mining pools, and from the exchange of digital assets.

Expenses associated with the acquisition of digital assets sold outside of exchanges registered with the Astana International Financial Centre (AIFC) are not tax-deductible. Expenses for services provided by a digital mining pool are also not tax-deductible.

Stay tuned for the second part of our Q1 global tax review, which will cover relevant developments in Asia-Pacific and the Americas.

Further Reading

• Crypto Tax Policy: Do’s, Don’ts, and Best Practices

• Paying Your Crypto Taxes Helps You and the Entire Web3 Industry – Here’s How

• Crypto Myths – Debunked! Part 3: The Myth of Crypto Being Used For Tax Evasion

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