In line with the prevailing trend of evolving regulatory frameworks across the EU, Italy has implemented a revised set of laws pertaining to the taxation of crypto.
Previously Italian authorities took a notoriously lax approach to monitoring crypto activity. For the 2023 fiscal year, however, the updated regulations make crypto subject to significant taxation and stricter enforcement.
This comes as no surprise as other countries such as Portugal that had been previously considered tax havens have begun to levy strict taxes on crypto transactions.
Additionally, the number of Italians invested in crypto has continued to steadily rise, attracting further government attention; by the end of 2022, 4.8% of the population was reported as holding or trading crypto.
Overview of Crypto Taxes in Italy
Italy’s budget underwent major changes in regards to the taxation of crypto after the passing of the Budget Law for 2023. Now crypto gains exceeding €2,000 are taxed at a flat rate of 26%.
This is a significant shift from the previous crypto tax law which levied a 26% flat-rate tax on crypto gains for those whose investment portfolios were above €51,645.69 for seven consecutive days.
In the wake of the recent dramatic tax increase, Italy has introduced attractive incentives to encourage individuals to declare their crypto holdings. An alternate option for Italians is the “substitute value tax” which offers a reduced tax rate of 14% for those who declare their crypto holdings by January 1st of each year.
Taxable Crypto Transactions
- Using crypto to pay for goods or services
- Receiving crypto as payment for goods or services
- Capital gains on crypto exceeding €2,000 during the fiscal year
- Trading crypto for crypto
- Selling crypto for euros
Non-Taxable Crypto Transactions
- Yearly crypto gains under €2,000
- Holding crypto
- Transfering crypto between personal wallets
- Crypto bought with euros
Income Tax on Crypto
For those who earn income in crypto, the standard Personal Income Tax rates apply, which can range from as low as 23% to as high as 43%. In order to calculate what is owed on one’s crypto income, it is first necessary to determine the fair market value in euros of the crypto on the date of its receipt.
Once the fair market value has been ascertained, the corresponding tax bracket and tax rate can be applied. In Italy, Personal Income Tax is broken down into three taxes which include a national, regional and municipal income tax.
Taxes will then be owed depending on the region and municipality in which the recipient is based. Regional Income Tax ranges from a low of 1.23% to a high of 3.33%, and Municipal Income Tax is between 0% and .9%.
National Income Tax is based on a progressive tax rate and can be calculated with the following breakdown:
- 0 - €15,000: 23% Tax Rate
- €15,001 - €28,000: 25% Tax Rate
- €28,001 - €50,000: 35% Tax Rate
- Over €50,001: 43% Tax Rate
Capital Gains on Crypto in Italy
Capital Gains on crypto are classified by the Agenzia Entrate, the Italian tax authority, as “miscellaneous income”. In Italy, profit made on the disposal or exchange of crypto is treated as capital gains. Capital losses in Italy can be used to offset capital gains in the year that they are incurred and for up to five years in the future.
The new body of regulation obligates those invested in crypto assets to report their transactions, including those which result in capital losses. This enables the potential for the aforementioned capital losses to be carried forward to offset future gains.
Crypto Taxes for Corporate Entities
Profits made by corporate entities from the selling, trading, or receipt of crypto will be taxed under the Corporate Income Tax bracket. Similar to the treatment of an individual’s capital gains, capital losses can be used to offset gains from the same fiscal year, or can be carried over to offset future gains.
Corporate Income Tax in Italy ranges from as low as 24% to as high as 53.2%. The standard corporate tax rate, known as the IRES, is 24%, however regional corporate taxes will also be levied on corporate income and are subject to variation depending on the region in which a company is based.
Due to the fact that the payment of goods or services in crypto is considered a taxable event, for companies that pay employees and contractors in crypto, those wages will be subject to taxation as well.
Paying Contractors in Crypto with Rise
Italy’s new laws regarding the taxation of crypto usher in a heightened level of enforcement and regulation. Now more than ever, avoiding the harsh penalties of noncompliance is of utmost concern when compensating contractors in crypto.
Rise is a payroll and compliance solution that offers next-level instant and automated global crypto payments.
Supporting both traditional companies and web3-native organizations alike, Rise’s infrastructure is designed to simplify the process of onboarding, managing, and paying local and international contractors while ensuring full compliance.
Rise leverages the advantages of blockchain technology to support organizations in streamlining payroll and scaling global teams. The dual payment infrastructure offered by Rise Pay enables flexible payment schedules and automated payments while unlocking efficient routing between fiat and cryptocurrency.
At present, Rise supports 100 unique cryptocurrencies. Whether a company holds a crypto treasury in a digital wallet or a fiat treasury in a traditional bank account, Rise offers a payroll and compliance solution to cater to both scenarios.
Schedule a demo today to learn how Rise can streamline your crypto payroll in Italy while ensuring total compliance.