How the self-employed should be taxed if they use cryptocurrencies or Bizum

Cryptos coin

The State Agency of Tax Administration (AEAT) started the 2021 Personal Income Tax return campaign (IRPF 2021) last April 6. All self-employed persons are obliged to file the 2021 income tax return, with the only exception of those with an annual income of less than 1,000 euros. As for the rest of taxpayers, the deadline for filing the self-employed income tax return is June 30, either in person, electronically or by telephone.

The self-employed and small companies are in the spotlight of the State Agency of Tax Administration in view of this income tax return campaign. This was made clear in the Tax Control Plan for 2022, published by the AEAT last January The public body has increased vigilance over commercial operations, such as collections and payments, carried out with cryptocurrencies or other new payment methods, as is the case of Bizum, with the aim of preventing tax evasion and tax fraud. In fact, the Tax Agency has included box 1626, whose title is ‘Balances in virtual currencies’, in the income tax return forms for self-employed people to declare the amount of digital currencies they own.

Declaration of income obtained through cryptocurrencies

The Tax Agency defines cryptocurrencies (also called virtual currencies) as follows: “immaterial goods, computable by units or fractions of units, which are not legal tender, but are used as a means of payment as they can be exchanged for other goods, including other virtual currencies, rights or services if accepted by the person or entity that transmits the good or right or provides the service” The popularity of cryptocurrencies has grown exponentially in recent years. More and more freelancers invest in cryptocurrencies or support them as a means of payment in their businesses.

In this guide prepared by Declarando on the taxation of cryptocurrencies in Spain, we have all the information about how cryptocurrencies are taxed in our country. In this article we will answer the main questions about the declaration of cryptocurrencies in the income tax.

is it mandatory to declare cryptocurrencies in the 2021 income tax?

All self-employed who have the obligation to file the 2021 income tax return must declare cryptocurrencies, regardless of the volume of gains or losses. Once included in the income, self-employed professionals will always be obliged to declare this type of gains. In the case of freelancers with an annual income of less than €1,000, they have to declare digital currencies when they have earned €1,500 or more. As for losses, it is not mandatory to declare them, as long as they do not exceed 500 €. All commercial operations carried out with cryptocurrencies by the self-employed, both in Spain and abroad, are considered as capital gains or losses or income from movable capital, so that they are taxable.

The self-employed must include the movements made with cryptocurrencies (swap, sale, mining, airdrops, forks and lending) in box 1626. In the event that they have obtained interest or income derived from cryptocurrencies, both for exchanges between cryptocurrencies during the year and for conversions of cryptocurrencies to euros, they have to declare them as a capital gain or loss.

what are the Treasury fines for not declaring cryptocurrencies?

The Tax Agency establishes penalties of 5.000 € for self-employed individuals who do not declare cryptocurrencies or make mistakes when doing so, due to the fact that it is considered an infraction according to the taxation of virtual currencies in Spain.

Declaration of collections and payments through Bizum for freelancers

Bizum is a fast payment service, implemented by numerous banks in Spain, allows you to send and receive money instantly. This system has become the most used payment method by many freelancers to charge for their products or services. Despite its popularity, many doubts arise about the declaration of collections and payments through Bizum for freelancers.

who is obliged to declare receipts and payments from Bizum?

All self-employed individuals are obliged to declare the income and payments they receive through Bizum in the income tax. In this way, any income obtained by this means that involves an economic benefit must be declaredas is the case with other similar operations such as bank transfers, since it is an economic benefit derived from a professional activity.

is there a limit to be declared to the tax authorities?

The Tax Agency establishes a maximum of 10,000 euros per year that can be sent through Bizum. This means that self-employed individuals who do not carry out movements above this amount are not obliged to include the collections and payments made through this system in the income tax return.

what are the Treasury fines for not declaring income and payments from Bizum?

In the case of not declaring income and payments made through Bizum, the self-employed can face fines of between 20 and 30% of the surchargeplus interest for late payment.

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