Crypto Tax Proposal
The newly elected Italian Government has prepared a draft budget for the year 2023 which is currently under consideration and debate.
The draft budget proposes that capital gain tax (CGT) should be collected @ 26% on gains derived from crypto trading.
On the other hand, tighter compliance has been put in place for obtaining full disclosures from taxpayers regarding their crypto holdings.
It is expected that disclosure compliance and CGT taxation will come into force soon after the acceptance of the budget. The Italian Government wants to collect more tax from wealthy crypto traders and holders.
Contents of Draft Budget
One of the provisions contained in the draft budget suggests that a levy of 26% as CGT shall be imposed. However, the CGT shall be levied @ 26% only when the gains are over and above 2,000 Euros (i.e. $2,080).
The proposal for collecting CGT on crypto gains has been authorized by the Italian premier, Giorgia Meloni.
The government in charge took the reign of power through the elections held in September this year.
The newly elected Italian Government has furthermore proposed that taxpayers should ensure full compliance with crypto holding disclosures.
It said that taxpayers must ensure disclosures of their crypto holdings in their annual statements on or before 1st January 2023.
After the disclosures, the Government will collect an additional tax under the head of CGT @ 14%.
The objective behind this is to encourage Italian taxpayers to file their annual statements mentioning therein crypto spending and profits earned.
Present Taxation Setup
Under the existing taxation setup in Italy, cryptocurrencies are regarded as ‘foreign currency. Resultantly, a very small percentage of tax is collected from the taxpayers in respect of their foreign currency holdings.
The draft proposal, which is still under debate and consideration by the Italian Parliament, may be subject to various modifications.
However, the law does put on obligations such as crypto disclosures upon the taxpayers. In addition, the law also proposes charging stamp duties on digital currencies.
As per the data provided by ‘Triple A’, around 2.3% or roughly 1.3 million of Italy’s population are crypto owners.
While Italy’s neighboring countries like UK and France are ahead of Italy with a percentage of 5% and 3.3% respectively.
Italian Premier’s Crypto Stance
Meloni has been the first woman who had been elected as the country’s Prime Minister. She has been a member of the political party namely ‘Brothers of Italy’.
Prior to taking over the charge of Italy’s premier, Meloni ran a campaign in which she had advocated for lesser taxes. However, she had always been stricter when it comes to digital currencies and assets.
However, it seems that she had been influenced by one of the key member states of the region namely Portugal.
Portugal is known for being one of the most crypto-friendly states in the world. Yet the Portuguese Government had recently implemented a short-term crypto gain levy @ 28% which shall be collected in 2023.
Crypto Industry Crisis
One of the major reasons why in various jurisdictions crypto regulations are tightening could be the bankruptcy surge in the crypto industry.
FTX is going to collapse in a few days. Though FTX had been one of the world’s biggest crypto trading platforms yet the financial implications took over the firm.
Since then, the entire cryptocurrency industry has faced one crash after another. The FTX collapse has triggered a contagion, which does not seem to be coming to an end any time soon.
Almost every week, a cryptocurrency firm once linked with FTX is filing bankruptcy or pausing their withdrawal access for the users.
Nowadays, a platform halting its withdrawal service means that it is facing a financial crisis due to its connection with the FTX exchange.
Consequently, worldwide governments are concerned about their citizens putting their stakes into digital currencies.