The cases of Silicon Valley Bank and Credit Suisse have set off a wake-up call and sounded the alarm on the banking system not only overseas, but also on the old continent, and there is already talk in the circles of traders and in major industry publications of a widespread crisis in the banking sector.
By contrast, in the crypto finance sector, the markets have held up remarkably well to the impact of the collapse of some major exchange platforms (from FTX to Italy’s The Rock Trading), and the prices of major assets such as Bitcoin, continue their upward race.
What’s more, a framework of increasingly clear rules is gradually emerging: from the first package of rules on the tax treatment of income from crypto-assets, to the now imminent adoption of MiCA (Markets in Crypto-Assets), the European regulation of the cryptocurrency sector from which important protections for savers are expected.
Furthermore, these days saw the approval of a decree-law on tokenization, that is, on the issuance and circulation of stocks, bonds, debt securities and other financial instruments through distributed ledger technologies.
Is this the first step toward building a large-scale market for alternative, competitive, and commonly accessed cryptographic services to conventional banking and finance for individuals and businesses?
What kind of future can we expect to see for cryptocurrencies?
We talked about it with Gianluca Massini Rosati, founder and chairman of Allcore S.p.A. Group, listed on the Italian stock exchange, a leading player in the business and tax consulting sector, which has experienced tremendous growth in recent years.
Massini Rosati has believed from the very beginning in the potential of decentralized assets and technologies.
It has done so to the point of investing in the creation of a blockchain-based corporate treasury services platform and, more recently, a brand new division, Crypt&Co, which specializes in crypto-related tax and legal support and consulting for non-professionals and others: one of the main missions is to accompany companies in a transition in which the use of crypto assets will become a crucial tool for strategic, financial and tax planning.
Q: In light of the regulations introduced with Finance Act 2023, what are the main changes regarding cryptocurrency tax obligations?
A: With Law 197, effective 1 January 2023, the impetus was finally given to fill those long overdue legislative gaps in the area of crypto taxation. First of all, cryptocurrencies were given a classification as virtual assets, the obligation to declare assets held was established, and the “events” that give rise to taxation instead were defined.
Q: Declaratory obligation and taxation: let’s clarify these two aspects.
A: On the declaratory aspect, all holders of cryptocurrencies or digital assets are now required to fill in the 2023 income form, specifically, the so-called RW form, that is, the document dedicated to the monitoring of foreign wealth investments and financial assets.
On the other hand, as far as the tax framework and the RT form are concerned, certain transactions of buying and selling or transferring cryptocurrencies, defined as crypto-assets by the legislation, may result in a tax to be paid. The same regulation also says that the exchange between crypto-assets having the same characteristics and functions is not considered a taxable transaction, and therefore is not subject to tax.
Q: Are there any aspects of particular importance in this new regulatory and tax framework for crypto holders?
A: The calculation of taxable capital gains is based on the difference between the consideration received and the cost or purchase value. Capital losses, on the other hand, can be taken as a full deduction for amounts over €2,000.
There is to be considered that the cost or purchase value must be documented with certain and precise elements by the taxpayer. In the absence of these, the cost is zero.
In case of purchases by inheritance, the purchase cost is equal to that declared for inheritance tax purposes. In contrast, on crypto donation, the purchase cost of the donor is assumed.
Finally, any transfer to parties other than the intestate owners of the source report, unless the transfer was by inheritance or gift, is considered cashout.
Q: Coming back to the obligations on the part of a user who has been holding cryptocurrencies for some time, but in previous years has never declared his cryptocurrencies or digital assets, what should he do to regularize his position with the tax authorities?
A: To regularize their position, users who have not reported crypto-assets as of 31 December 2021 in their tax returns can, in the case of no income to declare, meaning without ever having made any cash out, pay a penalty for failure to declare in the reduced amount of 0.5% for each year of holding on the value of the undeclared assets.
On the other hand, in case of income to be declared, i.e., as a result of cash out, regularization can be done by paying a substitute tax of 3.5% of the value at the time of realization and a penalty for failure to declare in the reduced amount of 0.5% for each year.
There is an opportunity to be highlighted in this regard: there is a revaluation of the value of crypto-assets held as of 1 January 2023 by assuming the value as of that date through the payment of a substitute income tax of 14%, payable in 3 annual installments, with the first installment to be paid by 30 June 2023.
However, this opportunity is to be evaluated according to convenience with respect to the revaluation itself and based on previous activities. In this case specific advice on the individual case is necessary: advice that at Crypt&Co. [cryptandco.com] we provide to our clients.
Q: Recently, the Decree-Law No. 25/2023 on the adaptation of national legislation to European standards on the “tokenization” of financial assets was enacted. Is this a step toward a change that will increasingly lead to decentralized finance? On the fiscal side, what might this entail for investors?
A: The ability to turn financial instruments into tokens will allow peer-to-peer trading of instruments such as stocks, bonds and debt securities, taking advantage of blockchain technology and all the decentralization aspects it entails.
One of the most interesting aspects will be the disintermediation of this sector, which, at least in theory, will change hands from financial institutions to technology platforms, effectively changing forever the face of the financial system we have always known. It could lead to a system that self-regulates and cleans itself of the excesses we have been experiencing for the past 20 years, moving us from the debt economy to the value economy.
Certainly for both individuals and companies, it will be interesting to be able to evaluate different investment aspects that rely on new technologies. In this case, sound tax planning will be a game-changer of a proper investment project, and availing of experts in this innovative field would benefit individuals who, while intending to approach disintermediated finance, will be able to remain secure in their relationship with the IRS.
