With Resolution No. 397/2022, the Internal Revenue Service has returned to the issue of holding cryptocurrencies and the taxation of income generated by them. The context for developing the Agency’s reasoning is Article 24-bis, Tuir, which dictates the rules of an optional favorable taxation regime for first-time residents.
In a nutshell, this favorable regime provides for individuals who transfer their tax residence to the territory of the State. In any case, they have not been tax residents in Italy for at least nine out of the ten tax periods preceding the beginning of the period of validity of the option; the possibility of benefiting from income produced abroad from the application of a substitute income tax calculated on a lump-sum basis, regardless of the amount of income received, to the extent of 100 thousand euros for each tax period (25 thousand euros for each family member as per art.433 of the Civil Code).
Exercising the option has the additional effect of exempting the beneficiary from the obligation of tax monitoring (Rw) and the payment of taxes on the value of the real estate and the importance of financial assets held abroad (Ivie and Safe).
The specific case
The case analyzed by the tax authorities concerns a taxpayer who had transferred his residence from Great Britain to Italy in 2020 and who, on the date of the transfer, was the owner of a portfolio of virtual currencies partly deposited on an exchange platform managed by Coinbase (a company under U.S. law) and partly deposited in a cold storage wallet located in the United Kingdom.
In 2021, the taxpayer had previously transferred the virtual currencies deposited in the cold storage wallet to the Coinbase wallet and then sold part of its virtual currency portfolio. They were now needed to assess the advisability of availing themselves of the tax regime under Art. 24-bis, Tuir, the taxpayer, requested confirmation from the Internal Revenue Service that the capital gains generated upon the transfer of the virtual currencies in the Coinbase wallet qualify as foreign source income and, therefore, fall within the scope of foreign income covered by the flat tax under Art. 24-bis, Tuir.
The considerations of the Italian Revenue Agency
Regarding qualification, the Internal Revenue Service confirms the equating of virtual currencies with foreign currencies by recalling response No. 788/2021, in which the tax authorities had stated that, for income tax purposes of individuals holding virtual currencies outside the business activity, the general principles governing transactions involving traditional currencies apply to virtual currency transactions. Based on this equalization, in the Agency’s opinion, forward sales of virtual currencies are always tax-relevant. In contrast, spot sales generally do not give rise to taxable income since the speculative purpose is lacking, except in cases where the currency sold is derived from withdrawals from electronic wallets (wallets), for which the average stock exceeds a counter value of 51 euros. 645.69 for at least seven successive business days in the tax period, by the combined provisions of Articles 67(1)(c-ter) and 67(1-ter. Tutor.
Withdrawal from wallets is equated with a transfer for consideration, and the average stock should be checked against the total number of wallets held by the taxpayer, regardless of the type of wallet (paper, hardware, desktop, mobile, web).
The Agency clarifies that the mere transfer of virtual currencies from the cold storage wallet in the United Kingdom to the wallet held through the Coinbase platform owned by the same taxpayer does not constitute a tax-relevant case.
On the other hand, capital gains realized as a result of the transfer of virtual currencies are subject under Article 5 of Legislative Decree No. 461/1987 to the substitute tax currently established at the rate of 26%.
Concerning tax monitoring obligations, the Revenue Agency again recalls its response No. 788/2021, in which it highlighted the commitment that exists for, among others, individuals resident in Italy who hold investments abroad or foreign assets of a financial nature that are likely to produce taxable income in Italy to indicate in the Rw panel of the Mod. Unico. The same obligation applies to foreign financial assets held in Italy outside the circuit of resident intermediaries (thus, the Agency in its Circular No. 38/E/2013). It follows that the holding of virtual currencies by a resident individual must be subject to tax monitoring because the same currencies constitute foreign assets of a financial nature likely to produce taxable income in Italy. Finally, to the specific issue submitted by the taxpayer (regime under Article 24, Tuir and income from the sale of cryptocurrencies), based on the general considerations carried out preliminarily, the Agency concludes by stating that the capital gains arising from the sale of virtual currencies held in the Coinbase wallet by the neo-resident are qualifiable as miscellaneous income produced abroad and, as such, can be included in the scope of application of the flat tax under Article 24-bis of Tuir. Should the neo-resident not meet the requirements for access to the optional regime required by Article 24-bis, the capital gains realized from the sale of virtual currencies would be subject to the ordinary regime with the application of the 26 percent substitute tax.
Conclusions
While noting that the guidance expressed by the Agency in the recent Resolution No. 397/2022 is particularly favorable for the new resident holders of crypto assets, it is desirable that the legislature intervenes to regulate a phenomenon that has assumed global dimensions and that moves billions of euros. The criteria for taxing income from virtual currencies and other crypto assets must be made available to the tax authorities for interpretation.
