In Spain, the topic of cryptocurrency taxes is constantly evolving, but understanding the basics is key to managing your investments and meeting your tax obligations.

 

For this, you can rely on LedgiFi, an application where you can track your cryptocurrency portfolio and always know how much you have. Moreover, based on your transactions, it calculates your Gains or Losses so you can plan and declare effectively.

 

Firstly, in Spain, cryptocurrencies are treated as financial assets, not as legal tender. This means that when you sell cryptocurrencies and earn profits, those profits are subject to taxes. The declaration of your cryptocurrencies is carried out in several stages, starting with your Net Worth, Personal Income Tax (IRPF), and the declaration of your holdings through Model 721.

 

From here on, we will refer to Gains or Losses (Income) in cryptocurrencies, as the tax itself depends on your cryptocurrency income combined with all other income sources you generate, whether from your job, a business, stocks, etc. All these are summed up in your annual declaration in addition to the net worth declaration. Depending on the bracket you fall into, you will pay a certain percentage in taxes.

 

When Do I Need to Calculate My Gains or Losses?

It is common to think that if you haven’t withdrawn your money to a bank account, you don’t need to declare anything yet. This is incorrect. Determining if you need to declare is simple: if you dispose of a cryptocurrency, whether by using it to purchase a good or service, exchanging it for another cryptocurrency (including swaps), selling it for fiat currency, or any similar transaction, you must calculate the outcome of the transaction.

 

This process is technically called "alienation," so when you alienate a cryptocurrency, you must calculate whether you gained or lost.

 

Some examples include:

• Buying a coffee.
• Paying a bill.
• Exchanging or swapping one cryptocurrency for another.
• Selling it for a fiat currency like the Euro or Dollar.
• Paying fees with it (services).
• Donating or gifting cryptocurrencies.

 

Who Should Be Concerned About This?

If you have ever done anything with cryptocurrencies, this topic concerns you, regardless of whether you’ve already sold all your cryptocurrencies, closed your accounts, or simply want nothing more to do with them. Additionally, for those actively involved in the market, knowing your Gains or Losses is useful as it allows you to plan.

 

Maintaining a detailed record of your movements is critically important. A clear history of your transactions—from sales to exchanges and any conversions into euros or other currencies—will simplify the tax declaration process and protect you in case the Spanish Tax Agency (AEAT) requests evidence of your transactions. Think of this as a way to safeguard your gains and avoid unpleasant surprises.

 

What Happens If I Don’t Declare?

Many believe that because cryptocurrencies are decentralized, the greatest value generated through transactions does not create a taxable event or need to be declared. This is incorrect, as any change in your assets must be declared, especially if it has resulted in an increase.

 

In Spain, the consequences of not paying taxes vary depending on the severity of the offense and the specific laws violated. These can include fines of up to five times the amount not declared, among other penalties.

 

With this in mind, it’s essential to understand that you must declare any gain or income from cryptocurrencies, in addition to your overall net worth. Tax evasion penalties can be substantial.

 

How Is It Calculated?

For this, it is necessary to review each transaction and determine its Acquisition Cost in contrast with the Benefit to calculate whether you achieved a gain or loss.

 

Simply put:

Gain or Loss = Benefit - Acquisition Cost

 

• Acquisition Cost refers to how much the cryptocurrency you are alienating has cost you. Its calculation depends on what are known as Valuation Methods or Inventory Methods.
• Benefit is what you received from selling your cryptocurrencies, whether in cash, another cryptocurrency, products, or services.

 

Valuation Methods

If you bought different quantities of cryptocurrencies at various times and sold only a portion, you might wonder which amount and price are considered: the first you bought? The last? Or an average of all purchases? These are known as Valuation or Inventory Methods, the most common being FIFO, LIFO, and CPP.

 

• FIFO (First In, First Out): You sell the first cryptocurrency you purchased.
• LIFO (Last In, First Out): You sell the last cryptocurrency you purchased.
• CPP (Average Purchase Cost): You sell at the average cost of all purchases.

 

In Spain, only the FIFO method is allowed. This means it is understood that the cryptocurrencies sold in a particular transaction are those acquired at the oldest date.

 

Example

Suppose that in 2022, the following occurs:

• On January 4, you deposit €2,500 in an exchange to buy BTC.
• On January 5, you purchase 1 BTC for €1,000.
• In February, you buy another 1 BTC for €1,200.

 

Now, in August, you want to sell 1.5 BTC for €2,000. What is the acquisition cost for those 1.5 BTC?

 

• First, the acquisition cost for the first 1 BTC is €1,000 (from January).
• Next, you sell 0.5 BTC from the February purchase, which costs €600 (half of €1,200).

Thus, the total acquisition cost for the 1.5 BTC sold is €1,600 (€1,000 + €600).

 

The profit from this sale is calculated as:

€400 = €2,000 - €1,600

 

This profit must be declared using Model D-100 for IRPF.

 

Net Worth

After completing all transactions, you find that by December 31, 2022, you still own 0.5 BTC. This must be valued at the market price of BTC on that date.

 

For example, the closing price of BTC on December 31, 2022, is $16,620, and the exchange rate on January 2, 2023, is 1 EUR = 1.0683 USD. Therefore:

7,778.78 EUR = (16,620 USD × 0.5 BTC) ÷ 1.0683 USD

 

You must declare this in the Virtual Currency Balances section of Model 714 for Net Worth.

 

To make all this easier, you can use LedgiFi, which synchronizes and organizes your transactions, consolidates your cryptocurrency portfolio in one place, and keeps you updated with your gains and losses for tax purposes.

 

For more information, check our complete guide at learn.ledgifi.com/espana, and register on LedgiFi to stay informed and never miss our content.

 

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