Commentary on Circular no. 30/e, October 27, 2023, on the tax treatment of crypto assets

The Circular Letter of the Italian Revenue Agency dated October 27, 2023, No. 30/E, provides operational guidelines on the tax treatment of crypto-assets in response to the provisions of Article 1, paragraphs 126-147, of the 2023 Budget Law.

Crypto-assets are defined as digital representations of value or rights that can be electronically transferred and stored using distributed ledger technology or similar technology, classified into various types such as payment tokens, security tokens, utility tokens, and non-fungible tokens (NFTs).

Capital gains resulting from the sale, redemption, exchange, or holding of crypto-assets may generate different incomes under Article 67, paragraph 1, letter c-sexies, of the Income Tax Consolidation Act (Tuir), with the application of a substitute tax rate of 26%. The Circular specifies that the exchange between crypto-currencies with the same economic function is not tax-relevant, while the exchange between NFTs and crypto-currency is considered tax-relevant.

The determination of capital gains follows Article 68, paragraph 9-bis, of the Tuir, with the taxable base calculated on the difference between the consideration or fair value at the time of sale and the acquisition cost. The deduction of capital losses is allowed only under certain conditions.

Administrated Savings and Managed Savings regimes are extended to crypto-assets holders.

Individuals, non-commercial entities, and Simple Partnerships resident in Italy are subject to tax monitoring obligations, having to indicate in the RW Box of the Income Tax Return the crypto-assets held abroad.

For taxpayers holding crypto-assets as of January 1, 2023, there is the possibility to redetermine their cost or purchase value as of that date, with the cost or value subject to a substitute tax of 14%. This option is granted even if the crypto-assets are no longer held at the time of the substitute tax payment.

Regarding indirect taxes, the Circular refers to international best practices for VAT. Crypto-currencies used exclusively as means of payment in transactions subject to VAT follow VAT rules. Some operations on crypto-currencies are exempt from VAT, such as the exchange between virtual currencies or mining.

Stamp duty is applied to periodic communications related to crypto-assets. In case of non-application by the intermediary, a tax on the value of crypto-assets is applied.

To determine the taxable base on which inheritance and gift tax will apply, it is necessary to refer to the fair market value at the time of succession or donation.

For individuals who have not declared crypto-assets in the RW Box of their Income Tax Return, there is the possibility of regularization by November 30, 2023, with reduced penalties. Regularization is also extended to undeclared income derived from crypto-assets.

Finally, clarifications are provided on the territoriality of crypto-assets, establishing criteria to consider income produced in Italy in relation to the location where access keys to crypto-assets are held.