🎓 The Italian Finance Law for 2023 came into effect on 1st January 2023 and provides many changes regarding the taxation of cryptocurrencies!

A specific regime is now in place and provides clear and precise tax rules for the taxation of cryptocurrencies.

Let's take a closer look at how the taxation of cryptocurrencies in Italy now works...

The new law has created a new Article 67 of the Income Tax Consolidation Act (TUIR).

It is this new article that defines the tax framework for cryptocurrencies in Italy.

Key points:

Here are the main features of the tax regime applicable to cryptocurrencies:

What transactions are taxable?

The taxable event is the transfer of a cryptocurrency to a fiat currency or the purchase of a good or service in cryptocurrency.

Crypto-to-crypto transactions remain tax-free!

What is the method for calculating gains or losses?

The method for calculating the gain or loss on a sale is the LIFO (last in, first out) method. To calculate the capital gain or loss, the purchase price must be deducted from the sale price, and this calculation must be made for each taxable transaction.

Example: I buy 1 ETH for €2,000 on 1st February 2022. I buy 1 ETH for €3,000 on 1st July 2022. On 5th November 2022, I sell 1 ETH for €3,500. The acquisition price used is that of the last purchased token, the ETH bought on July 1st for €3,000. The capital gain is therefore €500.

What is the tax rate?

Taxable capital gains are subject to a flat tax rate of 26%.

How are passive gains taken into account?

Passive gains from staking, lending, farming, and mining operations are included in the value of the portfolio with an acquisition price of €0.

These gains are not taxable upon receipt but will be taxable when sold for fiat or used to pay for a good or service.

Example: You receive 1 ETH in staking rewards. At the time of receipt, this ETH has a fiat value of €2,000. This ETH will be added to your cryptocurrency portfolio, but its acquisition price will be €0. If you immediately resell this ETH for €2,000, the taxable gain will be €2,000. If you resell it later for €4,000, the taxable capital gain will be €4,000.

Are capital losses deductible and carryable?

Capital losses are deductible from your capital gains realized during the same year.

If the result is negative, these losses can be carried forward for 4 years to offset future gains!

💡 The law implemented an option to choose to pay a substitute tax (e.g., 14% or 18% depending on the specific Finance Act) on the value of one's portfolio as of January 1st to revalue the acquisition cost. This option is not permanent. We have to wait for the Budget Law each year to know if this window will be opened for the incoming year.

Essentially, you decide to replace the original purchase price of your cryptocurrency with the market value on January 1st of the revaluation year.

This value becomes your new acquisition price.

👉 Any capital gains made at a later date will be calculated as the difference between the sale price and this new recalculated acquisition price.

❗️ It is not a choice between the two taxes.

The Italian taxpayer can choose to apply the value of his assets on January 1st as the acquisition value. If he then makes a taxable sale, he will still be subject to the 26% tax on the capital gain: the two taxes are independent.

💡 With the new law, the IVAFE tax is applicable to cryptocurrencies. This tax is due if the crypto-assets are held with a non-resident intermediary, or if they are stored on a private device (e.g., cold wallet). Assets held on Italian platforms are generally not subject to this tax as the intermediary applies the stamp duty directly.

The tax is 2 per thousand (0.2%) per year and relates to the total value of the portfolio on 31st December.