Bitcoin in records and cryptocurrencies once again stealing the spotlight. Highs and noise in networks attract new investors. Perhaps fewer positions in taxation in the digital world come across a new requirement, beyond the already known accountability with the Treasury in the income tax return.
The clock is ticking. This year, Tax Agency form 721 comes into force, which reports on the possession of cryptocurrencies when they exceed 50,000 euros in foreign entities. The deadline to complete it started in January and expires on March 31. It specifies the digital assets held on December 31, 2023, and each year the calendar will be repeated: a still photo at the end of the year that will have to be accounted for in the first quarter.
It is purely informative, it does not imply the payment of taxes, highlights Juan Osuna, partner responsible for tax at Fieldfisher, and all types of cryptocurrencies are included. Operating in Spain one may believe that one is saved, but as the main platforms and exchanges are foreign, one must make sure whether or not the obligation exists. “You can consult the platform if it has already transmitted our data to the Tax Agency… But I would declare it to ensure, doing so does not involve paying taxes,” he comments.
The procedure is annual, but after the first time “we will only have to declare in two cases: if there have been alterations due to sales or an increase in value of more than 20,000 euros.” Thus, if nothing is touched, one is free. To avoid blindly trusting the platforms, the ideal is to write down the transactions or conversions in Excel, with dates and quotes, as a follow-up. It is not a minor issue: skipping the obligation can lead to sanctions. “The normal thing is that we are always at the minimum of 300-500 euros”, but they can go to 20,000 or even exceed them if data is omitted or falsified.
It must be remembered that the profits or losses from exchanging and operating with cryptos are also included in the income tax return, as capital gains in the savings tax base.
Taxation aside, another big question is what will happen now with contributions. After the push for the approval of spot bitcoin ETFs in the US, the market is still awaiting the halving in this cryptocurrency, a technical process scheduled for April that will reduce the reward for miners. It happens every four years and usually shoots the price to records. “In the short term we can expect a price oscillation trying to break the maximum of $69,000 multiple times, something abnormal compared to other halvings: it had never reached maximums before it happened,” says Matteo Taronna, analyst at the Bitget platform.
When the process arrives, it could fall due to the factor of “buy the rumor, sell the news,” he points out, “but this time it could be different since the entry of capital multiplies the sales force of the miners by 10.” Additionally, he believes that the approval of ETFs has caused miners to stop selling so aggressively. Thus, while those who want to sell fall and bitcoin becomes scarcer, “supply is 10 or 12 times less than demand.” He mentions that a model that compares bitcoins in circulation with capital inflows (stock-to-flow) projects that the price could reach $200,000 or $300,000 by 2025. “It is a projection that is not seen outside of reality,” he says.
With the bitcoin record there is a certain carryover effect. If it fires, it pushes the rest. Although it cannot be predicted whether others will be strengthened, “there are factors such as the correlation with bitcoin, market sentiment or the bases of specific projects, their use, technology and equipment” that can benefit other cryptocurrencies, lists Javier García de la Torre, director of Binance Spain and Portugal. Memecoins have also grown, a highly speculative segment of cryptocurrencies initially conceived as a joke (meme), whose identifying image is dogs or frogs. Some like Pepe or Floki skyrocketed 60% in one day these days.
“The recent rallies may seem tempting to a certain investor. It is crucial to proceed with caution and research your purpose and value proposition before any decision. It is a volatile and speculative market segment. Understanding our investment objective and risk tolerance is essential,” she warns. As a reminder, Dogecoin, a benchmark memecoin, is worth 75% less today than at its 2021 peak.