CRYPTO ASSET REVALUATION: FEASIBILITY TEST AND EXTENDED DEADLINE TO NOVEMBER 15, 2023
Law No. 197/2022, in effect since January 1, 2023, dedicated 22 sections, in Article 1, to the regulation, revaluation, and regularization of crypto assets.
For the revaluation of crypto assets, Article 1, Sections 133 and 134, provides for the possibility, for taxpayers who hold crypto assets as of January 1, 2023, to replace the purchase cost with the market value as of January 1, 2023, for the purpose of calculating future capital gains.
The taxpayer interested in this revaluation agrees to it by paying a substitute tax of 14% calculated on the revalued value.
The revaluation of the purchase cost is done by assessing the crypto assets on January 1, 2023, using the quotations obtained from the Exchange where the purchase took place, or failing that, from a similar platform where the crypto assets are traded.
If the taxpayer holds crypto assets with different denominations (BTC, ETH, etc.), they must form homogeneous groups by ownership and then determine which group denominations should be revalued and which should not. However, it remains firm that all crypto assets belonging to a group must be revalued, as it is not possible to partially revalue the original cost in relation to the total content.
The draft circular from the Revenue Agency dated June 15, 2023, not yet finalized, stipulates that it is possible to reevaluate the purchase cost of crypto assets held on January 1, 2023, even if they are no longer held at the time of payment of the substitute tax.
It is also clarified that any capital losses resulting from the revaluation cannot be used for the purposes of capital gains derived from crypto assets under Article 68, Section 9-bis of the Income Tax Consolidation Act (TUIR).
To participate in the revaluation of the value of crypto assets, it is therefore necessary to:
1) Track your transactions to reconstruct the balances as of January 1, 2023, and calculate the purchase price of the crypto assets sold.
2) Assess the feasibility of revaluation.
3) Create supporting documents for your revaluation.
4) Pay the substitute tax using the F24 form by November 15, 2023, either in a single installment or in the first of three annual installments, with a 3% interest rate.
The revaluation of the value and the consequent tax obligation are considered completed with the payment of the entire amount of the substitute tax or, in the case of installment payments, with the payment of the first installment. Participation is confirmed through payment.
Let us consider a practical example:
– Mr. Cooper owns 1,000 CryptoX purchased for €3,000 (unit price €3) and intends to revalue them at €11,000 (unit price €11). In December 2023, he sells them for €20,000 (unit price €20).
– The capital gain will be €20,000 – €11,000 = €9,000.
– The total tax charge of €3,880 will be determined as follows:
• €9,000 x 26% = €2,340
• €11,000 x 14% = €1,540
• Resulting in a savings of €540 since regular taxation would have been determined by applying 26% to €17,000, resulting in a tax of €4,420.
If, using the same numerical example, I had sold my CryptoX for €10,000 instead of €20,000, the determined capital loss of €1,000 would not be fiscally relevant (Article 68, Section 9, TUIR).
STS Legal Studio is available to assist its clients in the feasibility analysis, eligibility verification, and determination of the substitute tax.