Buying and selling virtual currencies: taxation in the investor's personal income tax

Natural persons, taxpayers of Personal Income Tax , can buy and sell virtual currencies and when said operations are not carried out within the scope of an economic activity, they may give rise to a capital gain or loss for the difference. between the transmission value and the acquisition value.

Depending on the type of transaction carried out, the following assumptions can be distinguished:

a) Exchange of virtual currencies for legal tender (fiat currency)

Regulations: Articles 35, 14 and 46.b) Law Personal Income Tax

Subject

In accordance with article 1.6. of Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism, will be understood as “exchange of virtual currency for fiduciary currency” the purchase and sale of virtual currencies by delivering or receiving euros or any other foreign currency of legal tender or electronic money accepted as a means of payment in the country in which it was issued.

Capital gain or loss

The sale of virtual currencies in exchange for euros or other legal tender currencies, carried out outside of an economic activity, will give rise to a capital gain or loss the amount of which will be determined by the difference between the respective transmission and acquisition values.

The capital gain or loss must be determined, for each sale operation of each type of cryptocurrency, by the difference that exists between the amount of euros obtained in the sale (unless it is lower than its normal market value on the date of sale , in which case the latter will prevail) and its acquisition amount in euros, determined, where appropriate, by applying the exchange rate to euros of the currency in force on the date of acquisition of the cryptocurrency object of the sale, taking into account the expenses and taxes that arise from carrying out said operations, and to which article 35 of the Personal Income Tax Law refers, provided that they are directly related to them and are paid by the taxpayer.

Identification of transmitted coins

Cryptocurrencies of a type, computable by units or fractions of units, have their origin in the same computer protocol and all of the same type have the same characteristics, being equal to each other, which gives the different units or fractions of units the cryptocurrency in question the nature of homogeneous goods.

For the purposes of determining the corresponding capital gain or loss and to the extent that the Personal Income Tax Law does not establish a different specific rule to identify, in the case of homogeneous virtual currencies (for example, bitcoin), those that are understood to be transmitted, it must be considered that in the event of partial sales of virtual currencies that have been acquired at different times and at different values, those that are transmitted are those acquired first ( criterion FIFO ).

Temporary imputation of capital gain or loss

In accordance with article 14 of the Personal Income Tax Law , it will occur at the time the virtual currencies are delivered by the taxpayer under the purchase and sale contract, regardless from the moment in which the sale price is received, and therefore the capital gain or loss produced must be attributed to the tax period in which said delivery was made.

Income class

The amount of capital gains or losses that are evident in the transmissions of virtual currencies in exchange for money constitute savings income in accordance with the provisions of article 46. b) of the Personal Income Tax Law and are integrated and offset in the tax base of savings in the manner and with the limits established in article 49 of the same Law.

The sales operations of virtual currencies in exchange for euros carried out outside of an economic activity must be included in the personal income tax return corresponding to the tax period in which said operations were carried out in the specific section "Equity gains and losses derived from the transfer." or exchange of virtual currencies by individuals" of the declaration.

b) Exchange of a virtual currency for a different one

Regulations: Articles 37.1.h), 14 and 46.b) Law Personal Income Tax

Delimitation

The exchange of a virtual currency for another different virtual currency constitutes, to the extent that they are different goods, an exchange, in accordance with the definition contained in article 1,538 of the Civil Code, which provides: “The exchange is a contract by which each of the contracting parties undertakes to give one thing to receive another” .

Capital gain or loss

Said exchange, when carried out outside of an economic activity, gives rise to an alteration in the composition of the assets, since an amount of a virtual currency is replaced by an amount of another different virtual currency, and on the occasion of this alteration It reveals a variation in the value of the assets materialized in the value of the virtual currency that is acquired in relation to the value at which the virtual currency that is delivered in exchange was obtained.

Consequently, the exchange between different virtual currencies carried out by a taxpayer outside of an economic activity gives rise to income that is classified as capital gain or loss.

To quantify the capital gain or loss the specific valuation rule for the exchange provided for in article 37.1.h) of the Personal Income Tax Law is applied, according to which the capital gain or loss is will be determined by the difference between the acquisition value of the virtual currency that is delivered and the greater of the following two:

• The market value of the delivered virtual currency.

• The market value of the good or right that is received in exchange.

For the purposes of subsequent transmissions, the acquisition value of the virtual currencies obtained through exchange will be the value that the taxpayer has taken into account by application of the rule provided for in the aforementioned article 37.1.h) as the transmission value in said exchange.

Regarding the market value corresponding to the virtual currencies that are exchanged, it is what would correspond to the price agreed for their sale between independent parties at the time of the exchange.

Identification of transmitted coins

Cryptocurrencies of a type, computable by units or fractions of units, have their origin in the same computer protocol and all of the same type have the same characteristics, being equal to each other, which gives the different units or fractions of units the cryptocurrency in question the nature of homogeneous goods.

For the purposes of determining the corresponding capital gain or loss and to the extent that the Personal Income Tax Law does not establish a different specific rule to identify, in the case of homogeneous virtual currencies (for example, bitcoin), those that are understood to be transmitted, it must be considered that in the event of partial sales of virtual currencies that have been acquired at different times and at different values, those that are transmitted are those acquired first ( criterion FIFO ).

Temporary imputation of profit

This imputation will occur, in accordance with article 14 of the Personal Income Tax Law , at the time the virtual currencies are exchanged.

The capital loss that may arise from an exchange between different virtual currencies must be accredited (at the request, where appropriate, of the tax management and inspection bodies) through the means of proof generally accepted by law.

Income class

The amount of capital gains or losses from swap operations between different virtual currencies constitute savings income in accordance with the provisions of article 46. b) of the Personal Income Tax Law and are integrated and offset in the tax base of savings in the manner and with the limits established in article 49 of the same Law:

Exchange operations between virtual currencies carried out outside of an economic activity must be included in the personal income tax return corresponding to the tax period in which said operations were carried out, which, where appropriate, must be submitted by the taxpayer in the "Profits and patrimonial losses derived from the transmission or exchange of virtual currencies by individuals" of the declaration.

c) Asset losses. Due to non-return of the deposited coins or bankruptcy of the virtual currency trading platform

Regulations: Articles 14.2.k) and 45 Law Personal Income Tax

In these cases, the amount of a credit not returned when due does not automatically constitute a capital loss, as the creditor maintains his credit right, and must resort to the special rule of temporary imputation provided for in article 14.2.k) of the Personal Income Tax Law for these cases of uncollected credits.

Temporary allocation of loss

According to article 14.2.k) of the Personal Income Tax Law capital losses derived from overdue and uncollected credits may be attributed to the tax period in which any of the following circumstances occur:

1. That a reduction established in a judicially comparable refinancing agreement referred to in article 71 bis and the fourth Additional Provision of Law 22/2003, of July 9, Bankruptcy, or in an extrajudicial payment agreement to the which Title X of the same Law refers to.

2. That, if the debtor is in a bankruptcy situation, the agreement in which a reduction in the amount of the credit is agreed upon becomes effective in accordance with the provisions of article 133 of Law 22/2003, of July 9, Bankruptcy, in which In this case, the loss will be computed by the amount of the reduction.

   In another case, the bankruptcy procedure concludes without the credit having been satisfied except when the conclusion of the bankruptcy is agreed for the reasons referred to in sections 1, 4 and 5 of article 176 of the Law 22/2003, of July 9, Bankruptcy.

3. That the period of one year expires from the beginning of the judicial procedure other than bankruptcy proceedings that has as its objective the execution of the credit without it having been satisfied.

When the credit was collected after the calculation of the capital loss referred to in this letter k), a capital gain will be imputed for the amount collected in the tax period in which said collection occurs.

Income class

As it is a capital loss that has not been revealed during the transfer of assets, it will form part of the general income , and must be integrated into the general tax base of the Personal Income Tax (articles 45 and 48 of the Personal Income Tax Law ).