Spanish Tax Agency Cracks Down on Crypto Holders

The Spanish Tax Administration Agency (AEAT) wants to send out 328,000 warning notifications to individuals who are responsible for paying their taxes for the 2022 fiscal year. This move is being made in an attempt to collect taxes on crypto assets. The number of notices has climbed by forty percent in comparison to the previous year, reaching a total of fifteen thousand in 2021. This rise is a clear indication that the monetary authorities are beginning to take the matter more seriously.

The efforts of the AEAT to collect taxes are not primarily concentrated on cryptocurrencies and related assets. This year, more than 660,000 people who underreported their rental income will get a notice, and 807,000 people who did not record their income earned outside the country will receive a notice. Both groups will receive letters. The notifications function as an offer to voluntarily pay the tax, the rate of which ranges between 19% and 23% and applies to profits realized from the sale of digital assets. Those who are late in making their tax payments will be liable to a fine of an extra 26%, which will be determined based on the total amount of money that remains due.

According to the research published by the National Securities Market Commission in August 2022, there is a rising population of crypto asset holders in Spain. According to the report, 6.8% of the country’s population now own crypto assets. The majority of these holders have at least some level of higher education, are between the ages of 35 and 44, and make more than 3,000 euros per month. The nation also has the most cryptocurrency ATMs in all of Europe, with 231 machines, which accounts for around 15% of the entire number. This places it in first place in Europe. Spain comes in at number four on the global scale, after the United States, Canada, and Australia.

The expanded efforts of the Spanish Tax Administration Agency reflect a rising pattern of governments throughout the globe striving to regulate and collect taxes on crypto assets. This trend was highlighted by the enhanced efforts of the Spanish Tax Administration Agency. This should not come as a surprise considering the expanding usage of cryptocurrencies across a wide variety of sectors, as their popularity continues to rise. Individuals and enterprises need to ensure that they are up to date on their tax duties in order to prevent the possibility of facing legal repercussions as a result of the proliferation of crypto assets.


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Arkansas passes Bitcoin mining regulation bill

Arkansas has become the latest state in the United States to pass a bill seeking to regulate Bitcoin mining activity within its borders. The bill, which has been named the Arkansas Data Centers Act of 2023, will now move to the governor’s office for final approval. If passed, the legislation would create guidelines for miners and protect them from discriminatory regulations and taxes.

The bill was proposed by Senator Joshua Bryant on March 30 and quickly passed by Arkansas’ state legislators. The legislation recognizes the value of data centers to local communities and acknowledges that they create jobs and pay taxes. As such, it seeks to regulate the Bitcoin mining industry in the state.

One of the key provisions of the bill is that digital asset miners must pay applicable taxes and government fees in acceptable forms of currency. Additionally, they must operate in a manner that causes no stress on an electric public utility’s generation capabilities or transmission network.

Under the legislation, crypto miners will have the same rights as data centers. The bill outlines that Arkansas’ government should not impose different requirements for digital asset mining businesses than those that apply to data centers.

The move by Arkansas follows a similar initiative in Montana, where the state’s Senate passed a bill to protect crypto miners operating within the state. The legislation is designed to protect miners against taxes on digital assets used for payments and eliminate energy rates discriminating against home crypto miners and digital asset businesses.

In contrast, in November 2022, New York’s Governor Kathy Hochul signed the proof-of-work mining moratorium into law, banning crypto-mining activities in the state for two years. On a federal level, President Joe Biden introduced a budget proposal on March 9 that could subject crypto miners in the United States to a 30% tax on electricity costs aimed at reducing mining activity.

The regulation of Bitcoin mining in the United States is gaining momentum, with individual states proposing legislation to govern the industry. The Arkansas Data Centers Act of 2023 is just the latest in a series of bills designed to create guidelines for miners and protect them from unfair treatment.


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Binance Launches Tax Reporting Tool to Help Users Comply with Local regulations

Because the tax season is just around the horizon for many nations, businesses in the cryptocurrency sector will need to be ready to assist their customers in complying with the requirements that are in place in those countries.

The cryptocurrency exchange Binance made the announcement on February 6 that it would be developing a tax reporting tool to assist customers in keeping track of their cryptocurrency transactions for the purposes of filing tax returns.

According to the statement, Binance Tax provides its customers with the ability to receive a tax summary report that details any profits or losses that have taken place in their Binance account during the course of the year. This includes contributions made in cryptocurrency, spot transactions, and fork prizes that are based on blockchain technology.

According to the corporation, this decision was made in response to an increasing number of enquiries received from consumers concerning their respective tax responsibilities.

Currently, France and Canada are participating in the pilot programme for Binance Tax, which will later this year be rolled out to more worldwide areas inside the Binance ecosystem.

At the moment, it can only be used to access data that is stored on platforms owned and operated by Binance; however, the company has said that it intends to grow and eventually interface with other platforms used in the sector.

This follows the announcement made by Binance one month ago on its involvement in an association to ensure compliance with worldwide sanctions.

Over the course of the last year, global authorities have increased the pressure they apply to the cryptocurrency business. This is especially true in the wake of the FTX crisis, which rattled the market.

The Securities and Exchange Commission of Thailand recently made an announcement that it intends to tighten up regulations for the cryptocurrency business with a primary emphasis on the safety of investors. Exchanges in inquiries have been targeted for investigation by regulators in both South Korea and the Netherlands for alleged non-compliance with local rules.

The cryptocurrency industry has also caught the attention of regulators in the United States. Compliance issues led to a settlement that needed to be reached between the bitcoin exchange Kraken and the Office of Foreign Assets Control within the Treasury Department.

The United States Securities and Exchange Commission issued a call for companies in December 2022, requesting that they report their exposure to crypto bankruptcy and risks. In the meanwhile, the head of a House committee on crypto innovation has presented a measure that would let businesses can apply to government agencies for what is called a “enforceable compliance agreement.”


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Hopes Dashed for India’s Crypto Community

The expectations of millions of cryptocurrency holders in India were dashed when the country’s federal budget for the year 2023 included no reference to cryptocurrencies or the technology known as blockchain. Many people in the cryptocurrency community in India had great hopes that the hefty cryptocurrency tax that was established in March 2022 will be lowered in some way.

Nirmala Sitharaman, the Indian Minister of Finance, delivered the union budget on February 1st, during which she announced many significant modifications to the income tax bands. However, over the course of the discussion, the minister did not discuss cryptocurrencies, digital currencies issued by central banks, or blockchain technology. As of the previous year, India imposed a tax of 30% on crypto earnings and a tax of 1% deducted at source (TDS) on all crypto transactions, which effectively put a stop to a growing business almost immediately.

The major goal of imposing a TDS on any and all cryptocurrency transactions was to compile an accurate count of the number of Indian people who are now engaging in cryptocurrency use. Beginning in May 2023, the information pertaining to this data will be made accessible to the government when Indians submit their income tax forms.

Within ten days of the new tax policy being implemented, the trading volume on major cryptocurrency exchanges in India plunged by 70 percent, and it dropped by almost 90 percent over the next three months. Cryptocurrency traders were driven to use offshore exchanges, and nascent cryptocurrency ventures were compelled to relocate outside of India as a result of the country’s stringent tax policy.

The previous Finance Secretary of India, Subhash Chandra Garg, said before that there should be a great deal more clarification about crypto taxation. He said that it was possible that the forthcoming budget for 2023 would not include any fresh modifications. In addition to this, Chandra was the head of the committee that was responsible for writing the first crypto law.


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Portugal to Impose Taxes on Cryptocurrencies

Portugal’s government has announced plans to tax crypto income. 

Fernando Medina, Portugal’s new finance minister, announced in the parliament on Friday that crypto coins will be subject to taxation in the coming future.

Medina stated, “many countries already have systems; many countries are building their models in relation to this subject and we will build our own”.

While the government has not developed details regarding crypto taxation, it has stated that future plans will include a tax on the gains of selling cryptocurrencies, among others.

António Mendonça Mendes, the Secretary of State for Fiscal Issues, further disclosed that the government will not only tax crypto gains but also include cryptocurrencies in other types of taxation, such as VAT and Stamp Tax.

According to the report, The Left Bloc (BE) – the left-wing opposition party – has proposed that cryptocurrencies be taxed in Personal Income Tax (IRS) like any other gain. The opposition argues that it would be disappointing if the Socialist Party (PS) – the ruling party – rejects to include such a change to the State Budget for 2022 to end the current “offshore of cryptocurrencies”.

Meanwhile, Mariana Mortágua, a member of parliament for BE said: “It is unbelievable how the PS refuses to tax fortunes created within seconds on the internet while maintaining the VAT on electricity and not increasing the minimum wage in the context of inflation”.

However, Mendes said: “We are evaluating by comparing internationally what is the definition of crypto assets, which includes cryptocurrencies. We are evaluating the regulations in this area, be it in the fight against money laundering and the regulation of markets, to present a legislative initiative that truly serves a country in all aspects, not a legislative initiative that makes the front cover of a paper”.

Strengthening Regulations

Portugal has been one of the few places in Europe with a 0% tax on Bitcoin, meaning profits from cryptocurrency trading are not taxed.

Changes in the blockchain industry have slowly evolved. Blockchain technology and cryptos are closely followed topics in the fintech industry by the Portuguese government and the relevant regulatory authorities.

In recent years, such technologies have been brought to public attention mainly because of the rise in crypto adoption and their market capitalization. The attention is driven by some significant developments that the Portuguese market has witnessed in recent years in this sector, majorly the rise of tech-based firms and the steady increase in the use of cryptocurrencies in the country.

Image source: Shutterstock


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No precedent: IRS court settlement doesn’t clarify crypto staking taxes

In May 2021, a Nashville couple known as the Jarretts filed a lawsuit against the United States Internal Revenue Service (IRS) over taxes they had paid on unclaimed and unsold Tezos (XTZ) staking rewards. At the beginning of February, news broke that the lawsuit filed by the Jarretts had come to an end, resulting in the IRS issuing the couple a tax refund for $3,793. 

Confusion among crypto holders

Not long after this news made headlines, confusion among the crypto community piqued. One crypto media publication sent a tweet from its official account on Feb. 2, 2022, saying, “BREAKING: IRS will not tax unsold staked crypto as income.” The tweet generated over 4,000 retweets and over 18,000 likes, as Crypto Twitter rejoiced over the assumed notion that the IRS would not tax unsold staked crypto.

More confusion resulted as mainstream media outlets proceeded to publish articles implying that the IRS would not tax passive income from staked crypto. For example, a recent Forbes article published by a senior contributor stated:

“This is a huge win for crypto holders in the U.S. In light of this new information, even without this formal court ruling, some taxpayers might decide to follow a bit aggressive approach and not report staking income at the time of receipt.”

Clearing the air: A ruling was never made

Seth Wilks, head of government relations and SME at TaxBit — a platform specializing in cryptocurrency taxation — told Cointelegraph that a slew of misinformation was spread and false conclusions being made regarding the lawsuit:

“In the eyes of the IRS, nothing has changed. Their position on staking income is the same as it has been for the last several years. This case was really more about a legal procedure than anything else. There was no court ruling that another taxpayer could point to as precedent. Settling this case was the only thing in contention here.”

Wilks said that a court ruling is still to be made, as the IRS has only settled the dispute by paying the couple a refund. He added that assuming the plaintiffs don’t come up with an unexpected legal argument to keep the case moving forward, the likely outcome would be for the judge to fully dismiss the case. “From a legal standpoint, I envision the Department of Justice — which is the law firm for the IRS in these matters — will file a motion with the court to have the case dismissed, citing mootness, meaning it’s no longer applicable since a refund was issued.”

On the other hand, Wilks pointed out that the Jarretts may continue to push the case forward, noting that the couple is working with a team of savvy lawyers while also receiving support from the Proof of Stake Alliance (POSA), which is an industry advocacy group. Given this, the Jarrett’s recently released a statement indicating their goal to have the IRS clarify its position on taxing staking and block rewards “for both proof-of-stake and proof-of-work” systems. 

This is important since no clear guidance currently exists for taxing unclaimed staking rewards. As of now, the IRS only asks taxpayers whether they have “received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency.”

Alison Smith Mangiero, a member of the POSA board of directors and president and founder of Tocqueville Group — an asset management firm — told Cointelegraph that the Jarretts’ case may represent the first legal opinion to be written on the subject of taxation of crypto staking rewards. 

“This is huge, as POSA has been working on this issue since we started almost three years ago,” she remarked. According to Mangiero, many taxpayers are in similar positions as the Jarretts. Therefore, she thinks it’s crucial for legal arguments to be made around this issue. “This is an argument backed by over 100 years of tax law, and it’s important for people to understand this is a viable position,” she said.

Mangiero added that the POSA worked with law professor Abraham Sutherland in 2019 to initially make the argument around taxation for block rewards. As a result, a detailed report was published by Sutherland in the SSRN, formerly known as Social Science Research Network. The report’s abstract notes that Sutherland “concludes that for both proof-of-work and proof-of-stake cryptocurrencies, the best approach is to tax reward tokens only when they are sold or exchanged.”

With this in mind, Mangiero remarked that the IRS does not determine what is taxable income, but rather its job is to enforce the tax code. She further noted that Sutherland is a legal advisor for the POSA, who also serves as a counsel in the Jarretts’ case.

Next steps: Clarification on staking

Even if the case does progress, Wilks said that the IRS must still issue clear guidance around the definition of staking before an official court ruling can be made. As of now, there is no specific IRS guidance on the definition of staking, resulting in added confusion. Wilks said:

“The IRS needs guidance on delegating staking rewards and staking on DeFi [decentralized finance] networks, for example. I’m guessing they are trying to sort this out now, which is why it’s also inaccurate to say that the IRS has just given up on the matter entirely.”

As such, Wilks believes crypto staking rewards and taxation will remain a crucial issue for the IRS, noting that advocacy groups like the POSA will keep pushing for clarity. Indeed, Mangiero noted that the POSA has been working on educating Congress around the issue of how staking rewards should be treated. She explained that the POSA worked with leaders from the Congressional Blockchain Caucus to help write a letter to the IRS in 2020 on issuing formal guidance detailing why staking rewards should be treated as created property. She added:

“We will continue to fire away on all fronts. In terms of defining staking, we are focused narrowly on people participating in securing PoS [proof-of-stake] blockchains and being rewarded for creating those tokens. That is what the focus is for The Jarretts’ case, and this is where we are trying to focus first since it’s one of the least complicated staking situations.”

While educational initiatives from the POSA may help with clarity on the topic, Wilks pointed out that the IRS guidance on mining could also potentially support tax implications for staking activities. He mentioned that this may be likely due to the similarities the IRS perceives between staking crypto rewards and mining.

“It is very unlikely that the IRS would make a policy change on staking without taking into consideration mining,” said Wilks. Although it’s difficult to predict what such a policy would entail, Wilks


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Simple math says Russia could collect up to $13B in crypto tax each year

The Russian government is expected to collect up to 1 trillion rubles ($13 billion) in crypto tax each year, as per an estimation by the authorities.

The Bell, a local Russian publication, reportedly got its hands on the government analytic note that estimated the yearly tax revenue. According to the letter’s authors, Russians hold 12% or nearly $214 billion in crypto. The number of users on foreign exchanges is estimated to be about 10 million, added with the significant number of over-the-counter (OTC) crypto trades. The government agency believes even the most straightforward tax imposition can generate anywhere from 146 billion rubles to 1 trillion in crypto tax revenue.

The note suggests two possible taxation methods: One for the crypto platforms such as exchanges, intermediaries, and OTC desks, another tax for investments and income from crypto. According to the estimates by the analytical group, the state could see revenue of 90 to 180 billion rubles ($2.4 billion) a year from crypto platforms with base taxation of 6% and generate another 606 billion rubles ($8 billion) in revenue by taxing crypto investments and income.

Assuming a basic tax of 6% at present, the total crypto market of $200 billion would generate an estimated $12 billion in revenue without the mining industry. It is also important to note that Russians hold only 1% of global wealth compared to 12% of global crypto holdings.

Related: Central bank overkill: Russia’s proposed crypto ban and why everyone’s against it

The government report also notes the highly scattered and unregulated crypto mining industry, most of which are unaccounted for. The note reportedly said that the estimation is purely based on the simple tax bracket, and the original taxation could look very different based on the actual size of the market.

Russia is moving ahead with its plan to regulate the large crypto market after the central bank proposal for a blanket ban on crypto mining and trading was declined. As Cointelegraph reported earlier, the Russian finance ministry has already submitted a crypto framework for review and new regulations are expected to make their way soon.