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Revaluation of cryptocurrency: when and how to pay

Paragraph 133 law 197/2022 It provides the opportunity to re-evaluate the purchase price of your cryptocurrencies. What’s it about? This is the possibility of the purchase value of your assets being recalculated as of January 1, 2023.

What amount should be redetermined? At the normal value of assets held at that date. The will of the legislature is clear: to encourage the emergence of all potential taxable income, which in recent years has never had an adequate regulatory framework to be incorporated. The reward that the law provides to taxpayers who decide to use this opportunity consists of the possibility of paying replacement tax on the value obtained from the revaluation of cryptocurrencies at the rate of 14% of their value. Let’s go into more detail and see how this opportunity can be taken advantage of.

The replacement tax on the revaluation of cryptocurrencies was originally due to be paid by June 30, 2023 as follows:

  • in one solution;
  • or in three installments with 3% annual interest applied;
  • Its feature is that this redetermined amount cannot be considered valid in determining capital losses.

Paragraph 133, quoted at the beginning, is characterized by three main limitations:

  • The entire amount of cryptocurrency owned must be revalued. It is not possible to arbitrarily choose which assets to revalue, excluding some of them;
  • allows taxpayers to reduce the replacement tax by up to 14% by requiring them to conduct an eligibility assessment of potential asset sales by June 30, 2023;
  • As stated in the last circular of the Revenue Administration dated 27 October 2023 and dated 30/E, this opportunity is reserved for “diligent” people, that is, those who regularly fulfill their tax follow-up obligations in accordance with Article 4 of the Decree Law No. 167/1990. In other words, it involves completing the RW portion of the tax return. As is known, this article applies to natural persons and non-commercial legal entities (in addition to ordinary companies) “investments abroad or foreign activities of a financial nature.

Here we will not delve into the logic that leads to assigning cryptocurrencies a precise geographical location abroad, not to mention the confusion that arises when possession of private keys equates to a current account or safe deposit box record.

The first item in the list shown above specifies the taxpayer’s obligation to revaluate all of his assets. The Revenue Administration circular in question underlines that if the taxpayer owns more than one crypto asset and decides to benefit from the redetermination of their cost or purchase value, he must redetermine all assets at the same value. For example, if the taxpayer holds 10 bitcoins and 20 ether on January 1, 2023 and decides to revalue only the bitcoins, he or she must revalue all 10 bitcoins he or she holds.

Having established this, what value should I take into account to apply my 14% replacement tax? Again, we learn this from the circular.”The value of the crypto asset to which the replacement tax must be applied must be recorded by the exchange platform where the purchase takes place.” In the case of crypto assets being purchased on decentralized platforms (or even on exchanges that have closed their doors), how can the purchase be justified?

The agency’s own circular tries to help us with this problem. Actually if “As of January 1, 2023, it is not possible to determine the value from the platform where the crypto asset was first purchased. This value can be determined from a similar platform where the same crypto assets are open to negotiation or from sites specialized in recording the market. their own values.“For the avoidance of doubt, we remind you that the value of the purchase is documented by the taxpayer with specific and precise elements, in the absence of which the cost is zero. At this point of reasoning, another question arises by itself. When does a site “specialize” in detecting market values ​​of cryptocurrencies? ” can be considered?

In all cases, the redetermined value can be used for the purpose of determining capital gains in the event of redemption or transfer of the crypto asset. Or even in the case of exchanging for other cryptoassets with different properties and functions: this is the case of, for example, purchasing an NFT with a cryptocurrency. We remind you that assuming a redetermined value as the purchase value of crypto assets does not allow for capital losses to be realized.

Replacement tax must be paid via form F24 with tax code “1717”. Replacement tax can be paid in installments of up to three equal installments per year. Interest will be paid at the rate of 3% annually on the amount of the installments after the first installment, to be paid simultaneously with each installment.

With the 2nd article of the Decree Law No. 132 dated 29/9/23, intervention was made by extending the payment period of the 14% replacement tax. As of the time this content was written, the deadline had actually been extended to November 15, 2023, compared to the original deadline of June 30. However, the possibility of the taxpayer taking advantage of the so-called active leniency in order to benefit from the reduction of sanctions for violations of the law is still confirmed.

We state that the payment of the replacement tax will be deemed completed in two cases. First, if the full amount is paid by November 15, 2023; The second is to pay the first of three installments. In both cases, the investor taxpayer will be able to immediately take into account the new purchase value to calculate capital gains.

Now let’s try to analyze some specific cases in the practice of revaluation of one’s cryptocurrencies.

  • First example. A taxpayer who no longer holds the cryptocurrencies for which he or she wishes to benefit from revaluation. Well, in any case, this person will be able to take into account the value of his assets as of January 1, 2023 and pay the relevant 14% replacement tax, even if he no longer holds them on the payment date.
  • Second example. What happens if the investor has paid the tax debt or one or more installments but has not taken the revalued value into account when determining capital gains? What would happen? In this case, the taxpayer will not be able to request a refund of the amount paid. If you choose to pay in installments, you will need to pay the remaining installments.
  • Third example. Let’s assume that you are a late taxpayer, that is, someone who continues to pay the tax (or one of the installments) only after the deadline. In this case, you will not be able to use the revalued value as the basis for calculating capital gains, but you will be able to request a refund of the replacement tax you paid. The active repentance option mentioned above remains valid.

As a result, revaluation of cryptocurrencies can be particularly useful if taxpayers plan to liquidate assets that could generate significant capital gains. The revaluation of cryptocurrencies on January 1, 2023 could actually mitigate the impact of the 26% rate applied to capital gains.

Giammarco Brega (Studio Brega) is a Certified Public Accountant and Legal Auditor, born in 1988. He deals with tax and financial advice, business planning and subsidized financing.
In 2015, together with a friend, he founded CB Digital Company Srl, a company dealing with social media marketing, with two goals: to support multinational brands in developing communication strategies and to promote the digitalization of SMEs.
He loves discussing innovations: for several years now, blockchain technology and the dynamics of the token economy have been his passion, and promoting their use by SMEs is one of his goals.

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