The Spanish Tax Administration Likely to Enforce Crypto Taxation

The Spanish Crypto Taxation Scenario

Considering the year-over-year growth in the number of crypto holders in Spain, the reported taxable transactions were moderate. The reason for this can be linked to the gradual spread of the news concerning…

Spanish Tax Agency is planning operations regarding crypto and might increase the crypto exchanges’ obligations next year. 

If this goes as planned, the taxpayers will receive notices in their tax documents, including the information helping them to file their taxes, how to access the taxable crypto transactions, and the tax slab on these transactions. 

The data is gathered from the crypto or financial entities to get the information for the issuance of crypto-related notices. Enhancing on the statement, CoinLedger CEO David Kemmerer assumes that the Spaning government might have obtained the data from the crypto exchanges and companies operating in the country. 

Speaking to the media, Kemmerer said that in their recent study, the Spanish government learned that tax compliance is noticeably low among taxpayers compared to other assets. These warning letters are supposed to enforce compliance among crypto investors. 

In February 2022, the Spanish agency said they are willing to strengthen their actions against hidden crypto assets available for seizure. The warning against the crypto users came after that. In their statement, the agency said that their Customer Surveillance Service is supposed to develop an investigation plan which would allow them to track the assets linked to criminal activities like money laundering, terror funding, drug funding, human trafficking, etc.

Co-founder and CEO of ZenLedger, Pat Larsen, said that Spain issued a requirement list for crypto exchanges some time ago, asking them to comply with the European Union’s directives for anti-money laundering. This compliance would make it difficult for the exchanges to maintain the anonymity of their investors. 

It should be noted that the recent innovations in data analytics and blockchain forensics technologies have made it easier for the tax authorities to identify crypto traders and tax them accordingly. Moreover, these blockchain forensics companies are working with the EU government. 

The Synopsis of Crypto Taxation

The recent actions favoring crypto taxation are not indigenous to Spain, the U.S. Internal Revenue Service (IRS) has sent letters and notices to crypto taxpayers since July 2019. The agency plans to send around 100,000 letters to educate and help the crypto taxpayers file their earnings and returns. Plus, they would also learn the filing obligations and their previous mistakes. 

The IRS employed the John Doe summons against crypto entities like Coinbase in 2016 and Kraken in 2021 to gather the regarding non-compliance. It should be known that the tax agency have issued more letters, known as Notice CP2000, in 2020, educating the masses. 

The Notice CP2000 specifies the amount owed to the IRS. This is issued when the agency notices an inconsistency between what the taxpayer paid and what they owned as part of 1099-Ks. However, the IRS can receive increased funding, which may lead to stricter enforcement and auditing. 

In the U.S., the crypto exchanges are yet to comply with the 1099-Bs, this form is used to report taxpayers’ capital gains and losses after selling select assets to the IRS. The scenario will change in 2023, and Lemmerer thinks the crypto tax compliance scenario could boost tax compliance. 

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only, and they do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

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