Regulatory Challenges: Spain Proposes 47% Crypto Tax

Spain's Sumar parliamentary group has proposed amendments to reform three major tax laws that will significantly impact cryptocurrency taxation. This proposal, reported on October 24, 2023, would change how profits from cryptocurrencies are taxed, moving gains from non-financial-instrument assets into the general income tax bracket.

Currently, the top rate for savings is 30%, but the new plan aims to raise it to 47%. For corporate holders of cryptocurrencies, a flat tax rate of 30% would be implemented. The Sumar party, a left-wing political alliance with 26 of the 350 seats in Spain's Congress of Deputies, is a junior partner in the governing coalition alongside the Socialist Party.

In addition to the tax changes, the proposal includes a requirement for the National Securities Market Commission, known as CNMV, to implement a visual risk traffic light system for cryptocurrencies on investor platforms.

Another contentious aspect of this proposal is the classification of all cryptocurrencies as attachable assets, making them eligible for seizure. Legal expert Cris Carrascosa criticized this measure on X, stating it is unenforceable for tokens like Tether's USDT, which cannot be held by regulated custodians under the Markets in Crypto-Assets Regulation, or MiCA rules.

Economist and tax adviser Jose Antonio Bravo Mateu also voiced strong opposition, calling these amendments unnecessary attacks on Bitcoin. He explained that Bitcoin held in self-custody cannot be seized or monitored like traditional financial assets, potentially prompting holders in Spain to relocate their assets when Bitcoin's value rises.

In stark contrast, Spain's tax agency has been proactive, sending out 328,000 warning notices regarding crypto taxes for the 2022 fiscal year, followed by 620,000 similar notices in 2023. Meanwhile, Japan's Financial Services Agency is pursuing a tax reform aimed at reducing the burden on crypto investors, proposing a flat 20% capital gains tax, in stark contrast to Spain's proposed increases.

This juxtaposition highlights the varying regulatory landscapes across nations and the challenges Spanish crypto investors may face going forward.