Italy Crypto Tax

Italy is the world’s 8th largest economy and particularly innovation-oriented, since the government spends over 25 billion EUR annually on the research and development of various initiatives, which turns it into the 4th leading investor in R&D in Europe. Such financial support could be claimed by crypto companies, too, together with a range of other tax reliefs.

The The Revenue Agency is the body in charge of ensuring tax compliance on Italian territory. Its activities aimed at countering tax evasion include the collection of tax revenues, services, and assistance, assessments, and inspections. Crypto-specific taxation has not yet been introduced at the moment in Italy, and thus general rules apply.

Tax residents are taxed on the income sourced both in Italy and abroad, while the non-resident companies pay the tax only on the income sourced in Italy. A company is considered a tax resident of Italy if one of the following alternatives occurs in Italy for the greater part of the financial year: its registered office, its place of effective management, or the principal business activities. The latter also encompasses the case when a foreign company holds the controlling participation in an Italian company, and is, in its turn, controlled by an Italian resident, or managed by Italian residents representing the majority of its board of directors.

Tax Reliefs

With the purpose of creating an equal and competitive business environment, Italy has signed more than 90 international agreements on the avoidance of double taxation of income and capital. Where the tax applied is higher than the conventional basis, non-resident taxpayers have the right to claim the full or partial refund of the taxes paid when not due according to conventional provisions. Although agreements provide the rules governing the taxation of each income category, claims can be submitted for dividends, interest, royalties, and any other type of income.

These include tax incentives available in the form of capital grants, soft loans, and tax credits. Their availability varies according to type. Some tax incentives are automatically available in Italy, if certain conditions are satisfied. Others must be applied for, or even negotiated.

Besides, the Italian government also offers various kinds of tax reliefs to attract more and more FDI, such as employment tax credits for female/younger employees, reduction of tax rates on income from certain intangibles, as well as tax breaks about energy efficiency. This high level of R&D support means that 25% of tax credits are available for private R&D investments, going up to 50% if the projects are carried out in universities or research institutions, and to 15% of investments concerning machinery and capital goods. Benefits differ across regions. For example, in the South of Italy, more public support is provided.

Corporate Income Tax and Regional Production Tax

There are two taxes on corporations in Italy: the Corporate Income Tax IRES, levied at 24%, and the Regional Production Tax, at a 3.9% rate. Annual returns for both shall be submitted electronically no later than 11 months after the end of the financial year. Advance payments of corporate taxes are made twice. The first installment is 40% of the amount of the taxes that have to be paid in the previous year. Whereby the second installment is 60% of the previous year’s tax. A company generally has to make these advance payments by the end of the 6th month and by the end of the 11th month of the financial year.

In relation to the application of corporate taxes to crypto activities, the Revenue Agency has given the following interpretation:

• Profits from cryptocurrency trading have to be included in the company’s financial statements owing to their subjection to Corporate Income Tax and Regional Production Tax.
• Any tax loss can be offset against gains realised in the same financial year, and to the extent tax losses exceed gains, they can be carried forward in subsequent years, subject to a limit of 80% of the related income.
• Cryptocurrencies received from mining will be subject to Corporate Income Tax on their market value upon receipt.
• Security issues in the form of utility tokens are not a taxable event.
• The Corporate Income Tax shall fall due regarding the income sourced from supplying products or services related to utility tokens.
• There is no special tax treatment for security tokens.

It is interesting to note here that, for Italy, this legal framework of the EU also extends to the regulation of the treatment of cryptoassets. If you wish to learn more about the EU-wide regulation that impacts the Italian taxation system, then please do not hesitate to contact our team, and we will be delighted to provide you with detailed advisory and actionable insight.

Withholding Tax

The regime of Withholding Tax has different applications and rates, depending on several factors. Usually, dividends paid out to a resident individual are subject to a 26% Withholding Tax. Dividends, interest, and royalties paid by a resident company to a non-resident individual or to a company with no permanent establishment in Italy are generally subject to a final outbound Withholding Tax at a 26% rate.

This tax amount can be reduced or eliminated under relevant international double taxation agreement provisions or under the relevant EU directives if the non-resident company is a resident of another EU country. A domestic final Withholding Tax of 1.2% is levied on dividends distributed to shareholders that are companies resident of an EU or EEA country.

Capital Gains Tax

In December 2022, the Italian Senate approved new tax regulations concerning crypto gains. From 2023, should an individual’s gains exceed 2,000 EUR, a 26% tax is imposed. A capital gain or loss arises when a cryptoasset is disposed of or when there is a change in the ownership of the cryptoasset. Working out a capital gain or loss may apply to a range of different types of transactions that are considered as a disposal.

Such cases include, but are not limited to:

• The exchange of cryptoassets for fiat currency;
• A swap of one cryptocurrency for another cryptocurrency or other such cryptoassets, stablecoins, or NFTs;
• The use of cryptocurrencies to pay for goods or services.

Value-Added Tax

The standard VAT rate in Italy is 22%. It is charged on products and services supplied in Italy, as well as on imports. There are limited circumstances where intra-Community acquisitions could also be subject to VAT. For specific crypto-related activities, VAT liability does arise; the Revenue Agency nonetheless complies with a decision given by the CJEU a few years ago by excluding that crypto exchange services were outside the scope of VAT because of the currency exemption.

The Revenue Agency also explained that, in any case, ICOs are subject to the same VAT treatment applied to vouchers; hence, the issuance of tokens under an ICO is not taxable for VAT purposes. When using the token, the VAT will be charged.

It would be important to mention at this point that in 2022, the VAT Committee of the European Commission discussed value-added tax liabilities derived from cryptoassets, such as payment, security, and utility tokens. Mining, forging, airdrop, and any type of token modification remain out of the scope of VAT. As for taxing crypto wallets, they constitute the scope of VAT in those situations where crypto wallet services are provided against compensation. Supplies of goods or services paid for in cryptocurrencies should be treated in the same way as the supply paid for in fiat money.

Social Security Contributions

The rules for paying Social Security Contributions depend mainly on the employment relationship, whereas crypto companies are especially supposed to consider rules with regard to staff and executives. As a rule, the contributions are jointly paid by employers and employees. In Italy, registration of the employer with the Italian Social Security Administration is necessary in order to be able to pay the contributions.

The total social security rate is approximately 40% of the gross salary of an employee, out of which the employer has to pay 30% and the employee is obliged to pay 10%. While 33% of the total rate goes to the National Pension Scheme, the remaining goes principally for the unemployment fund, maternity fund, social mobility fund, sickness fund, and temporary unemployment compensation fund.

The New Global Tax Transparency Framework

Italian owners of crypto businesses should pay attention not only to the Italian taxation landscape but also to the international one, since Italy is obliged to abide by so many international rules that are changing continuously. The Organization for Economic Cooperation and Development introduced not so long ago a new international tax transparency framework; it called it Crypto-Asset Reporting Framework, or CARF, whereby it intends to raise standards with respect to crypto taxation and tax reporting through the introduction of automatic tax reporting and taxpayer information sharing between international authorities.

The CARF standards will cover organisations and persons providing services, which constitute crypto-to-crypto, crypto-to-fiat-money, and fiat-money-to-crypto exchange transactions for or on behalf of customers and also transfers of cryptocurrencies, including retail payment transactions. In such a case, all Italian owners of crypto businesses should be prepared to duly report the information connected with taxation to the Revenue Agency authorised to share information about crypto-transactions and taxpayers with foreign tax authorities.

How to Pay Taxes on Crypto in Italy in 2024

In 2024, taxation of cryptocurrency income is one of the hottest topics that generates much interest among both investors and users of these digital currencies in Italy. Italian tax law varies with the evolution of cryptocurrencies; therefore, knowledge of such changes is an important issue to allow for proper declaration and payment of income. Below, we will provide a detailed description of the practices and duties concerning the taxation of income from cryptocurrencies in the territory of Italy.

Main provisions for Cryptocurrencies taxation

Income realized on Italian territory with cryptocurrencies is qualified, according to its origin, in capital gain, self-employment or other types of income and, therefore subject to different tax rates and conditions.

Taxation of Capital Gains

Contrarily, if cryptocurrency is sold at a profit, then the difference between the sale price and the purchase price shall be included in an individual’s income as a capital gain and thus shall be taxable. Normally, in Italy, capital gains are taxed at a 26% rate; consequently, from the income taxation viewpoint, capital gains obtained in the case of selling, exchanging, or using cryptocurrencies to pay for goods and services will be included.

Income declaration in cryptocurrency involves having each taxpayer present a tax return annually, in which there should be a comprehensive rundown of various transactions made in cryptocurrencies. In fact, all the transactions made in the cryptocurrencies need to be recorded with dates of transaction, quantities purchased and sold, value at the time of purchase and selling, to have accurate returns.

Tax deductions and losses

Those losses on cryptocurrency transactions can be used by the taxpayers to offset capital gains tax from other investments. The losses can be carried forward and can be deducted against future capital gains.

Features for professional traders

If the trading of cryptocurrencies is the main activity of the taxpayer, the resultant income can be qualified as self-employment and may be subject to progressive taxation based on the amount of income. In this case, the taxpayer must keep records of all their transactions and may even be obliged to pay social security contributions.

Tax Compliance

This will help the companies meet their required tax obligations in the country since all transactions dealing in cryptocurrencies in Italy will be accurately recorded. Also, the companies should be consulting tax advisors quite often regarding changes in legislation and guarantee timely filing of tax returns to avoid potential fines and penalties due to non-compliance with tax laws.

Income from cryptocurrency in Italy is a delicate task and needs to be approached with a full understanding of this tax legislation. This becomes even more important in connection with the dynamic development of the cryptocurrency market and changes that are being made to the tax legislation itself. Still, it is the responsibility of taxpayers to regularly follow news and best practices in order to develop the most optimal position concerning their tax liabilities for 2024.

Table of main tax rates – Italy – 2024: Individuals, corporate tax, VAT and capital gains tax rates applicable to crypto-currencies income.

Should you want to dive deeper into the Italian taxation system and have your own crypto project analyzed in-depth, the team of experienced, quality-driven legal consultants at Regulated United Europe (RUE) will be happy to assist you with customized, added-value services. Apart from structuring taxes in conformity with the applicable legislation, we form crypto companies, provide crypto licensing, and financial accounting services. Contact us now to schedule a personal consultation.

In addition, lawyers from the Regulated United Europe will offer protection of crypto projects and adaptation to MICA regulations.