Spain's Left-Wing Party Proposes 47% Crypto Tax in a Bid Against Bitcoin

Spain's Sumar parliamentary group has introduced amendments targeting the taxation of cryptocurrencies, proposing significant changes that could affect how crypto profits are taxed in the country. The new regulations could lead to a sharp increase in the tax rate on these profits, alongside requirements for investor transparency and asset classification.

Key Takeaways

The proposed amendments aim to increase the tax rate on crypto profits from 30% to 47%.
A new visual risk assessment system for cryptocurrencies is to be set up by the National Securities Market Commission (CNMV).
All cryptocurrencies might be classified as attachable assets, fueling controversy over enforceability.
Critics view the proposals as detrimental to Bitcoin's adoption and investment in Spain.
Japan is looking to lower its crypto tax to a flat 20%, contrasting Spain’s proposals.

Spain’s Left-Wing Party Proposes 47% Crypto Tax in a Bid Against Bitcoin

Proposed Tax Changes for Cryptocurrencies

The Sumar parliamentary group in Spain has put forth amendments to three main tax laws that impact the cryptocurrency sector: the General Tax Law, the Income Tax Law, and the Inheritance and Gift Tax Law. This initiative seeks to modify how profits from cryptocurrencies are taxed. If implemented, gains from crypto assets will shift from being treated as non-financial instruments to being included in the general income tax bracket, elevating the tax rate from 30% to 47%. Corporate crypto holders would be subject to a flat tax rate of 30%, as reported by CriptoNoticias.

In addition, the left-wing party's plan mandates the National Securities Market Commission (CNMV) to establish a “risk traffic light” system for cryptocurrencies, which would be visible on platforms used by investors. Another contentious aspect involves classifying all cryptocurrencies as assets liable for seizure, despite legal opinions suggesting this approach might be unenforceable. Lawyer Cris Carrascosa highlighted that certain tokens, like Tether’s USDt, cannot be easily held by regulated custodians under existing rules.

Cris Carrascosa discusses the implications of the new proposal. Source: Cris Carrascosa

Criticism: An Attack on Bitcoin?

The proposed changes have drawn sharp criticism, with economist and tax consultant José Antonio Bravo Mateu branding them as “useless attacks against Bitcoin.” He argues that the proposals reveal a fundamental misunderstanding of decentralized assets. According to him, Bitcoin held in self-custody is not subject to the same seizure and monitoring methods as traditional financial assets. He warned that such regulations might only prompt Bitcoin holders in Spain to consider relocating to escape the unfavorable political climate when its value increases significantly.

In contrast, some tax inspectors, Juan Faus and José María Gentil, have advocated for a more favorable tax regime specifically for Bitcoin investors. Their suggestion allows taxpayers to separate wallets and choose between FIFO (first-in, first-out) or weighted-average methods for asset valuation, making it easier to manage taxes proactively.

Spain’s tax agency has been actively informing crypto holders about their tax obligations, having sent around 328,000 warning notices related to crypto taxes for the 2022 fiscal year alone, with another 620,000 also dispatched the following year.

Japan's Opposite Direction on Crypto Tax

While Spain is considering a steep increase in crypto taxation, Japan's Financial Services Agency (FSA) is proposing reforms aimed at easing the tax burden on crypto investors. Instead of categorizing crypto earnings as “miscellaneous income” with tax rates that can soar to 55%, Japan plans to introduce a flat capital gains tax of 20%. This move is intended to align the taxation of digital assets with that of equities, enhancing competitiveness for traders and businesses operating in Japan.

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