Spain’s political party Sumar (Unite), which formed a coalition government with the majority party PSOE in 2023, has proposed four changes to Spain’s tax laws regarding Bitcoin and other digital assets.
The proposal, if passed, would have a large financial impact on individual crypto investors and businesses across Spain as they would have to pay higher tax rates when realizing crypto gains.
For the proposal to become law however, it would need the backing of PSOE (the majority party) which has traditionally been cautious about raising crypto tax rates.
How Much is Crypto Taxed in Spain?
Spain has two tax systems which are relevant here, one is the general income tax rate and the other is the savings tax rate. Currently, cryptocurrency gains fall under the savings tax rate which works on a sliding scale and reaches a maximum of 30% at the highest tax rate, for any amount over 300,000 Euros, per PWC data.
What Sumar are proposing is changing the law so that crypto gains would instead be taxed under the general income tax rate, not the savings rate, which can reach as high as 47%. Sumar appears to view crypto gains as ordinary income rather than savings, but it’s more likely a tactic to increase tax revenue.
What Else is Sumar Proposing?
Sumar is also proposing that businesses pay a corporate tax rate of 30% on crypto-related profits, 5% higher than the current 25%.
They are also asking for a traffic light system to be shown on Spanish investment platforms which would rate cryptocurrencies based on their level of risk. It is not clear how this risk level would be decided. According to Criptonoticias, a Spanish crypto news website, it would take into account factors such as official registration, support and liquidity.
Finally, they are proposing that all crypto assets can be subject to seizure by the state under certain conditions, such as unpaid tax debts.
Reaction to the Proposal
The proposal has been met with significant pushback in Spain, with critics stating that it might encourage investors and businesses to move to countries with a more favourable tax rate, Japan for instance is planning to change its crypto tax rate to 20%, less than half of what is being proposed in Spain.
Spanish tax advisor José Antonio Bravo Mateu labelled the proposed changes as “useless attacks against Bitcoin” as Bitcoin investors with their own self-custody wallets own their private keys therefore it wouldn’t be possible for the state to seize these assets.
How Investors Can Protect Their Assets with a Self-Custody Wallet
As crypto tax rates potentially become more severe across Europe, investors are looking for solutions to keep their assets under their own control rather than on exchanges which are subject to European taxation laws.
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