The Essential Guide to Crypto Tax in Italy for 2023

Yes, Italy subjects cryptocurrency to taxes. The Agenzia Entrate, Italy’s tax authority, has provided limited guidance on the matter, but crypto may be subject to either capital gains or income tax depending on the nature of your transactions.

Per the 2023 budget announcement, Italian crypto taxpayers pay 26% taxes on all gains over €2,000. This is a significant change, as prior to 2023 this 26% capital gains tax applied only if your cryptocurrency portfolio’s total value exceeded €51,645.69 for more than seven consecutive days during the financial year. 

There is also an option for a “substitute value tax,” through which Italian taxpayers can declare the value of their digital asset holdings as of January 1 each year and pay a 14% tax rate.

Italy may also subject you to income tax on earnings from crypto deemed income at a rate that ranges from 23% to 43%.

In December of 2022, Italy approved new tax rules on crypto gains. Now Italian taxpayers will pay 26% on crypto gains whenever they have more than €2,000 in gains. In the new law, income from crypto is considered “miscellaneous income” instead of being assimilated to capital gains obtained with foreign currencies as it did previously. These new rules also allow you to deduct losses from crypto over €2,000 EUR to offset profits, and carry losses forward.

In addition, there is an option in this new bill for a “substitute value tax,” through which Italian taxpayers can declare the value of their digital asset holdings as of January 1 each year and pay a 14% tax on holdings at that time. This incentivizes taxpayers to declare crypto on their tax returns.

The Agenzia Entrate has yet to release specific guidance for a number of crypto transaction types, including mining and staking. Despite lack of guidance, it’s unlikely these are exempt from tax. Read further for clarification, and when in doubt, our experts at TokenTax are available to assist.

Earnings under €2,000 EUR

Gains from crypto under €2,000 are not subject to Italy crypto tax. Prior to this adjustment, Italian crypto investors only paid tax on gains if their crypto balance exceeded €51,645.69 for more than seven consecutive days during the entire financial year.

Short-term trades when profits exceed €2,000 EUR

Italy does not distinguish between short- and long-term profits from crypto. Whether you hold your crypto for a month or a year will not impact your Italian tax liabilities.

Long-term crypto trades

Italian taxpayers may be motivated to hold their crypto longer to benefit from the “substitute income tax” on 14% of the value of the assets held as of January 1, of next year, rather than the cost at the time of purchase.

Bitcoin mining

Italy has not offered specific guidance on taxes around cryptocurrencies received from mining. It’s likely no tax event takes place at the time the individual receives the cryptocurrencies. When an individual sells their mined crypto, they should likely report this as general income.

If the mining is considered a “business activity,” the sale of the crypto received may be subject to the Italian individual business income tax regime, which means gains on the sale of cryptocurrencies would be subject to the applicable progressive rates from 23% - 43%.

For Italian corporate taxpayers, while there is no official interpretation, mined cryptocurrencies are likely subject to 24% corporate tax on their market value upon receipt.

Crypto staking and lending

As with mining, the Agenzia Entrate has not clarified how cryptocurrency staking rewards or yield from lending are taxed. It’s recommended to treat such income as general income (similar to mining) in your personal tax return.

Agenzia Entrate has yet to give clear instructions in regard to record-keeping for crypto transactions. The announcement of a change to crypto gains tax in the 2023 budget suggests crypto is a focus and investors need to keep thorough records in the event of an audit. 

We suggest you keep the following crypto records:

• Transaction dates

• The crypto involved in your transactionsCryptocurrencies involved in transaction(s)

• Type of transaction

• The amounts involved

• The value of your transactions in EUR

• The gain or loss from transactions

Per the 2023 budget announcement, Italy crypto taxpayers pay 26% taxes on all gains over €2,000, so if you have gains larger than €2,000 during the tax year, you must be prepared to report accordingly.

Italian taxpayers need to use one of two forms, with different deadlines, depending on the nature of their income. The forms are the Modello Redditi PF or the Modello 730.

• Modello 730: This form is for those with employment income, credits or deductions to declare or claim. The deadline is September 30 the following year.

• Modello Redditi PF: The Modello Redditi PF is for those reporting employment income, tax withheld, capital gains (with supplementary Form RT), or foreign income and assets (with supplementary Form RW). The deadline to file the Modello Redditi and Form RT for capital gains is November 30 the following year.

For crypto holders declaring gains from crypto, the Modello Redditi PF is the applicable form.

Spending crypto on goods or services triggers a taxable event and subjects you to the usual Italy crypto tax implications. 

For example, if you purchase €10,000 ETH and it appreciates to €20,000, which you then use to purchase a vehicle, you would trigger €10,000 in gains and be subject to crypto taxes on that amount.

Agenzia Entrate has not given specific guidance around utility tokens. It’s recommended to treat income from the use of utility tokens as general income (similar to mining) in your personal tax return.

The issuance of ICOs in the form of utility tokens likely does not constitute a taxable event. Corporate income tax would be due on income deriving from the supply of goods or services related to the token, for the token issuer.

According to the new Italy crypto tax rules, losses of over €2,000 from crypto investments can now be deducted from profits and be carried forward for up to five years. This means it may be possible to use a crypto loss harvesting strategy to lower your taxes due year over year.

Italian income tax is comprised of three different taxes: municipal, regional and national. The national income tax makes up the majority of the total tax that Italian taxpayers need to pay on their income. Here are the 2022 income tax brackets for individual Italian taxpayers.

Note most gains from crypto in Italy are considered “miscellaneous income” and subject to a flat 26% Italy crypto tax on all gains over €2,000. There is also a “substitute income tax” option with which taxpayers pay a lower rate: 14% of the value of the assets held as of January 1.

Last in, First out (LIFO) applies to cryptocurrency transactions in Italy. With last-in first-out, the most recent coins you acquire become the first coins you sell.

There are a number of ways to reduce your crypto tax obligations in Italy.

• Hold your crypto and wait to sell. If you don’t sell, you aren’t subject to gains.

• According to the new Italian crypto tax rules, losses of over €2,000 from crypto investments can now be deducted from profits and be carried forward for up to five years.

• Make a tax-deductible donation. Individual and corporate donors may deduct contributions from their income tax in the amount of 10% of their declared income, up to a maximum of €70,000 per tax year.

• Leverage the “substitute value tax,” option and pay a 14% tax on holdings as of January 1 of each year.

If you need assistance to calculate your Italian crypto taxes, look to TokenTax, which is both a comprehensive crypto tax calculation software platform and a full-service crypto tax accounting firm.

With our tools at TokenTax, when it’s time to calculate crypto taxes in Italy, you simply import data from every crypto exchange, blockchain, protocol, and wallet and sync your transactions via API or upload them in a supported CSV format. 

TokenTax takes the challenges out of your crypto tax Italy filing and guarantees accuracy and thoroughness. And if you have any questions at all about your Italy crypto tax, our experts will be happy to assist.

Gains on the sale of cryptocurrencies should be included in the taxable base for Italian corporate income tax purposes. Any tax loss may be offset against gains realized in the same year. If losses exceed gains, they may be carried forward in subsequent years, subject to a limit of 80% of the related income.

Italian corporate entities are subject to a corporate income tax, known as imposta sul reddito sulle società (IRES) as well as regional production tax, known as imposta regionale sulle attività produttive (IRAP). The rates are:

• 24% for IRES

• 3.9% for IRAP

If a business engages in the creation of NFTs, no taxes are due upon creation. Any costs to create NFTs should be included in the taxable basis of the creator.

Here are answers to some frequently asked questions about crypto taxes Italy.

When will you pay tax on crypto in Italy?

In principle, crypto taxes in Italy are paid through the individual’s tax return using a “self-assessment” method:

• Two advance payments (June 30 and November 30 of the current year).

• One final tax balance (June 30 of the following year).

Amounts due are as follows:

• First advance payment = (100% of the income tax balance of the previous year) x 40%.

• Second advance payment = (100% of the income tax balance of the previous year) x 60%.

• Balance = Actual income tax - Advance payments.

When is the tax deadline in Italy?

If filing form Modello 730, the deadline is September 30 the following year. If filing form Modello Redditi PF, the deadline is November 30 the following year.

What happens if I don't file my cryptocurrency taxes in Italy?

Failure to file crypto taxes in Italy will result in penalties, either a fixed sum or a percentage (related to the avoided or evaded tax), ranging from 120% to 240% per cent of the amount of unpaid tax. 

Is cryptocurrency legal in Italy?

Yes, crypto is legal in Italy.

Where can I find the Italian cryptocurrency regulation?

The Italian Ministry of Economy and Finance (MEF) is responsible for overseeing crypto tax regulations.