New information obligations related to holding and operating with virtual currencies

Regulations. Thirteenth Additional Provision. 6 and 7 Personal Income Tax Law

In order to use virtual currencies, we need them to be stored and safeguarded and it must be possible to prove who their owners are. For this purpose, there are, on the one hand, the so-called "electronic wallets" that provide custody services for virtual currencies and, on the other, the so-called "exchanges" (currency exchange platforms) that allow buying and selling operations with them.

In order to strengthen tax control over taxable events relating to virtual currencies, since July 11, 2021, Law 11/2021, of July 9, on measures to prevent and combat tax fraud, transposing Directive (EU) 2016/1164, of the Council, of July 12, 2016, establishing rules against tax avoidance practices that directly affect the functioning of the internal market, modifying various tax regulations and regarding the regulation of gambling, has modified the Thirteenth Additional Provision of the Personal Income Tax Law to establish two new information obligations regarding the holding and operation of virtual currencies.

1. Information obligations on holding virtual currencies

   For persons and entities that provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies, whether such service is provided on a primary basis or in connection with another activity, the obligation to provide the tax authorities with information on all virtual currencies they hold in custody is introduced. This supply will include information on balances in each different virtual currency and, where applicable, in legal tender, as well as the identification of the holders, authorized persons or beneficiaries of said balances.

   For these purposes, it should be noted that section 7 of article 1 of Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism, calls these persons or entities "electronic wallet custody service providers" by stating that " Electronic custody service providers shall be understood to those natural persons or entities that provide services for the safekeeping or custody of private cryptographic keys on behalf of their clients for the holding, storage and transfer of virtual currencies."

2. Information obligations on transactions with virtual currencies

   Likewise, for persons or entities that provide exchange services between virtual currencies and legal tender or between different virtual currencies, or mediate in any way in the performance of such operations, or provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies, the obligation to provide information about the operations on virtual currencies (acquisition, transmission, exchange, transfer, collections and payments) in which they intervene is established. This same obligation extends to those who make initial offers of new virtual currencies.

These new reporting obligations on virtual currencies are pending regulatory development .

Attention: Likewise, the Eighteenth Additional Provision of Law 58/2003, of December 17, General Tax Law, has been modified to establish an obligation to provide information on virtual currencies located abroad, which is also pending regulatory development.