How to declare cryptocurrencies and NFTs in your income tax

Although there are still a few months left before the income campaign begins, which usually takes place at the beginning of April, it is important to keep in mind that the personal income tax tax period comes to an end on December 31. For this reason, before ending this year it is important to take into account how the tax returns may affect the tax return. operations carried out with cryptocurrencies or NFTs this year, especially considering that more and more people decide to choose this type of financial assets.

Cryptocurrencies such as bitcoin are digital currencies that are used as a means of payment, although the vast majority of people use them as form of investment, which causes it to have effects on personal income tax.

In fact, currently more than 4 million Spanish citizens invest or have invested in cryptocurrencies, all this despite the fact that there is still a great lack of knowledge on the matter, mainly regarding the supervision and taxation to which they are subject.

Of all the people who have invested in cryptocurrencies, 70.6% of them have made investments of more than 1,000 euros, while more than a quarter of those who invest have invested more than 6,000 euros.

However, there is still a significant lack of knowledge about the tax implications of this type of instruments; and more than 41% of citizens think that you will not have to pay any type of tax for your cryptocurrency earnings; and a 28.4% You don’t know if you should include it or not in your tax return..

How to declare cryptocurrencies in your income tax return

Investors who have bet on cryptocurrencies and who have sold them later this year must include your operations in your income tax return; and these are taxed in a manner similar to that of other capital gains.

Rates on capital gains

The capital gain is calculated by subtracting the acquisition value and the expenses inherent to the operation from the transfer value. The corresponding tax rate is applied to this gain according to the following criteria:

• 19% for those cases in which there is a capital gain of 0 to 6,000 euros.
• 21% for those cases in which there is a capital gain of 6,000 to 50,000 euros.
• 23% for those cases in which there is a capital gain of 50,000 to 200,000 euros.
• 26% for those cases in which there is a capital gain of more than 200,000 euros

Regarding cryptocurrency mining, although the Treasury has not commented specifically on the matter, it should be understood that it can be considered an economic activity; and this means that the amounts that have been received from this activity have to be declared in the personal income tax as income derived from the economic activity. In this case, one could deduct the expenses derived from the activity.

How to declare NFTs

The regulation of NFTs is still under development and is scarce, although little by little progress is being made in its legislation. At the legislative level, it is contemplated that those companies that are responsible for the management of cryptoassets must report this to the authorities.

This is reflected in Law 11/2021 on measures to prevent and combat tax fraud, in which «an obligation to provide information on the balances maintained by holders of virtual currencies is introduced.»

Furthermore, one must consider that The sale of an NFT must be included in personal income tax. If an artist uses them, he is carrying out an economic activity; and if the author is an individual it would be a financial gain. Taxation would range between 19 and 26%.