Original Post: "Vuoi usare i bitcoin? Ecco cosa ne pensa il Fisco in Italia e in Europa" in http://www.econopoly.ilsole24ore.com/2015/09/01/vuoi-usare-i-bitcoin-ecco-cosa-ne-pensa-il-fisco-in-italia-e-in-europa/ written by Massimo Chiriatti (Twitter @massimochi)
The disruptive nature of cryptocurrencies and bitcoin generates a series of questions on taxation for who intends using them in their business.
Some Countries, including USA, Canada, Francia, Regno Unito and Australia, have published studies and multidisciplinary reports, paying attention to the usefulness and innovative content, and local tax authorities enacted guidance.
The Italian Government and Parliament have not stated anything (official or unofficial) with consequent uncertainty, since there are no official studies or guidance, except a public hearing at Montecitorio (Parliament).
The sole Public Institution that enacted an interpretation was the Bank of Italy that explained: "in Italy the purchase, use and acceptance in payment of virtual currencies is a lawful activities, the parties are free to undertake to pay sums also not expressed in legal tender".
At the moment, tax consultant have been trying to legally qualify cryptocurrencies under tax law. For this purpose, We analyze the applicable rules on VAT and Direct Taxes.
VAT
The Member States of the European Union had different positions on VAT and bitcoin: some argued for the VAT exemption (Spain, UK, Belgium, Finland), others argued fot VAT liability (Estonia, Poland); others did not express any position.
Sweden (Case C-264/14), resolved to submit a preliminary ruling if the exchange of virtual currency with “fiat” currency constitute a supply of service under VAT Directive, and exempt from VAT.
In this proceeding, the European Commission is supporting the VAT exemption as for the document of the VAT Committee "VAT treatment of Bitcoin". On July, 16, 2015, the General Attorney at the European Court of Justice supported VAT exemption assimilating (for the sole purpose VAT) to foreign currencies.
In Italy, however, a ruling that proposing tax exemption is lying to the local Tax Authority.
So, using bitcoin in the European Union is presumably exempt from VAT. The business will be able to accept and sell them VAT-exempt, together with the ordinary rules for the supply of goods and services.
For example, in the sale of goods with bitcoin payment, the merchant will invoice normally (eg: € 200 + 22% VAT) and accept as payment 1 bitcoin. The dealer will exchange bitcoin against euro in VAT exemption for their market value.
Direct taxes - personal income tax
The Italian Income Tax Act enacts the category of “other incomes of capital gain” (art. 67) if there is a difference between the purchase and sale of goods or securities.
In particular, for bitcoins, it will concern the difference between the purchase cost (euro paid for the cryptocurrency) and the income (euro received for the sale of the cryptocurrency). These differences must be declared in UNICO (tax filing form).
Capital loss can be deducted from capital gain for the following tax years but not beyond the fourth year. Capital loss are deductible from income of the same nature. The net capital gain will be taxed in UNICO with a flat rate of 26 percent.
The taxpayer must have and keep the documentation, and in any case he must follow the rule of "cash", ie that are income and cost are considered at the time of the transaction.
For examples, in the year 2015 taxpayer buys 1 bitcoin at 200 EUR, sells out at 300, he buys again 2 bitcoin at 250, and it sell 1 at 200.
In this case, the taxable income will be 100 (first transaction) - 50 (second transaction) = 50 of taxable income (to be declared and taxed at 26%), with 1 bitcoin with value recognized of 250 euro.
Companies - Direct taxes
The entity must keep transaction in cryptocurrencies in its books and represent them in the financial statements; also in this case, with the exception of Spain and Finland, no State has indicated relevant GAAP. It must be analyzed case by case basis to identify appropriate solutions for the respect of the principle of substance over form.
Each entity will keep to be on their books purchases and sales of cryptocurrency: who accepts payment must account (similar to foreign currencies) the differential to be considered in profit and loss. In the case that the dealer holds cryptocurrency at end of the year, he must give adequate information in the financial statement, taking into account the fair value or the current value.
For examples, in 2015 the entity buys 2 bitcoins at 250 euro, and sells 1 at 300 Euros and at the end of the year the bitcoin has a value of 220 euro.
The 2015 EBIT will be: 50 (sale) - 30 (write-down of the end of the year non-tax deductible) = 20 €. Instead, the taxable income will be 50 euro since the gain/loss are tax relevant only if realized.
The bitcoin will have a tax value of 250 euro (purchase cost) regardless of end-year.
Article written with Stefano Capaccioli, author of a monography and articles on this subject, a chartered accountant in Arezzo and co-founder of assob.it
Disclaimer
The matter is still subject to free interpretation. We believe that in-depth studies are necessary, with the issuance of rules of interpretation to provide a stable legal framework for operators.