Tax treatment of crypto-assets: novelties introduced by the 2023 Budget Law

published on 15 March 2023 | reading time approx. 6 minutes

The Italian legislature, with the Budget Law for 2023, started to provide specific guidance on the tax treatment applicable to crypto-assets.

For tax purposes, cryptocurrency is defined as “a digital representation of value or rights which may be transferred or stored electronically, using distributed ledger or similar technology”.

Paragraphs 126-146 of Law 197/2022 (the so-called '2023 Budget Law') led to the ex-novo formulation of the tax regime of crypto assets through special supplements to the TUIR and Legislative Decree 461/97.

In particular, the Budget Law for 2023 regulated the tax treatment of crypto-assets with reference to:

taxation regime of income generated by non-entrepreneurs;
tax regime of income realised by entrepreneurs;
fiscal monitoring;
redetermination of the value of crypto-assets;
regularisation of crypto-activities;
stamp duty and VAT

Taxation of non-entrepreneurs

As regards the tax regime of crypto-assets for non-entrepreneurs, Article 1, paragraph 126 of the 2023 Budget Law introduced Article 67, paragraph 1, letter c-sexies) of the TUIR. This new article of the TUIR provides that capital gains and other income realised by non-entrepreneurs taxpayers, through redemption, sale for consideration, exchange or holding of crypto-assets qualify as miscellaneous income of a financial nature.

The capital gains referred to in Article 67(1)(c-sexies) are determined on the basis of the difference between the consideration received (or the normal value of the exchanged assets) and the cost/acquisition value of the crypto-assets.

Pursuant to Article 68(9-bis) of the TUIR, the cost or purchase value, which has been determined by the taxpayer, must be based on certain and precise elements in order to be deductible.

Capital gains and other income referred to Article 67 paragraph 1 letter c-sexies) of the TUIR are subject to the substitute tax of 26 per cent.

Furthermore the new Article 67(1)(c-sexies) of the TUIR provides that:

income from cryptocurrencies is not subject to taxation if it is less than EURO 2,000 during the tax period;
an exchange of crypto-assets having the same characteristics and functions does not represent a taxable event.

Assets regulated by the new regulation therefore include both classic virtual currencies and non-fungible tokens (NFT) under the assumption that these assets can be issued, registered, transferred and stored in a decentralised manner using blockchain technology.

This summary table shows the tax treatment of certain cryptocurrency transactions:

Operation	Tax regime
Exchange between virtual currencies	Exempt
Using a crypto-asset to purchase a good or service	Taxed
Using a virtual currency to purchase an NFT	Taxed
Conversion of a virtual currency into Euro or other FIAT currencies	Taxed

Taxation of entrepreneurs

For persons who realise a business income, Article 1, paragraph 131 of the 2023 Budget Law introduced paragraph 3-bis into Article 110 of the TUIR.

This paragraph specifies that the positive and negative components resulting from the valuation of crypto-assets at the end of the tax period, regardless of the allocation to the profit and loss account, do not contribute to the formation of income.

The legislator has therefore chosen a similar approach for crypto-assets as for currency transactions.

On the other hand, with regard to realisation acts relating to cryptocurrencies, the new legislation does not expressly regulate the tax treatment to be adopted by entrepreneurs.

Fiscal Monitoring

Article 1 paragraph 129 of Law 197/2022 makes some amendments to DL 167/90 for the fiscal monitoring of crypto-assets. The amendments concern:

1. transfers through banking and financial intermediaries and other operators, monitoring is extended to digital wallet service providers and other cryptocurrencies are included in addition to virtual currencies. In any case, this monitoring concerns transactions of EURO 5,000 or more;

2. transfers through non-residents, an amendment to Art. 2 of DL 167/90 includes digital wallet service providers among the entities for which data on the transactions under consideration can be requested;

3. monitoring in the tax return. The new legislation expressly provides for the inclusion of crypto-assets among the assets to be reported in the RW panel of the tax return. However, nothing is provided for the valuation of crypto-assets, so it is necessary to refer to the principles contained in Revenue Agency Order No. 151663/2013 on financial assets. In particular, the value of the crypto-assets would be determineted by the acquisition cost of the same being the only objective value available to the taxpayer.

Redetermination of the value of crypto-assets

The 2023 Budget Law also provides for an optional redetermination mechanism of the value of crypto-assets held as of 1 January 2023.

This optional regime, concerning only those persons who do not hold the crypto-assets under a business regime, allows them to assume, instead of the cost or purchase value, the normal value of the crypto-assets as at 1 January 2023 by paying a substitute tax of 14 per cent.

The taxable base of the substitute tax is therefore the normal value of the crypto-assets determined in accordance with the criteria set forth in Article 9 of the TUIR.

The normal value could be the value indicated by the exchange used on 1 January 2023.

For the purposes of the redetermination of the value, the aforementioned substitute tax must be paid alternatively:

in one lump sum, by 30 June 2023;
in instalments, more precisely in a maximum of three equal annual instalments with interest of 3% p.a. on the instalments following the first.

It should be noted that the revaluation of the crypto-assets has effect only for the purposes of miscellaneous income of a financial nature.

In fact, pursuant to Article 1 paragraph 136 of Law 197/2022, the assumption of the revalued value does not allow the realisation of capital losses deductible under the new Article 68 paragraph 9-bis of the Consolidated Income Tax Act.

Regularisation of crypto-activities

Taxpayers subject to tax reporting obligations (i.e. individuals, non-commercial entities and equivalent companies resident in Italy) can access a regularisation procedure for past violations of non-reporting the holding of crypto-assets and the related income.

Regularisation takes place through the submission, by the taxpayers concerned, of a specific request, whose model will be approved and publish by the Italian Tax Authority soon.

The penalties to be paid for regularisation differ depending on whether:

the taxpayer did not realise any income in the tax period but has cryptocurrencies to declare in the RW return. In this case, the penalty is 0.5 per cent of the value of the undeclared assets for each tax period concerned;
the taxpayer has realised income in the relevant tax period, a substitute tax of 3.5 per cent of the value of the assets held at the end of each year (or at the time of realisation) must be paid together with a surcharge of 0.5 per cent of the aforesaid value as sanction and interest for the tax reporting omissions.

Regularisation allows the effects of income violations to be removed and excludes the application of penalties for tax reporting omissions.

Stamp duty and VAT

The 2023 Budget Law supplemented Article 13, paragraph 2-ter of the Tariff annexed to Presidential Decree 642/72 by extending to crypto-activities the stamp duty at the proportional rate of 0,20 per cent.

Stamp duty on crypto-activities is applied at the rate of 0,20 per cent per year.

As of 2023, VATFE is also to be applied to crypto assets held with a non-resident intermediary or if they are stored on memory sticks, PCs or smartphones. All resident entities are required to pay VATFE.