Crypto Tax Legislation & Law in Italy

With the 2023 Budget Law (entered into force from 1 January 2023) Italy has issued specific rules with respect to the income tax treatment of crypto-assets. In October 2023 Italian Tax Authorities (ITA) have published more detailed guidelines (Circular Letter 27.10.2023, no. 30/E).

According to the 2023 Budget Law provisions and ITA guidelines, crypto-assets (which include crypto-currencies without any distinction in the applicable tax regime) are defined as “digital representation of value or rights that can be transferred and stored electronically, using distributed ledger or similar technology”.

Capital gains and other income realised through the redemption or disposal for consideration, exchange or holding of crypto-assets qualify as (if they do not fall in the category of capital income, professional income, nor employment income) miscellaneous income for the purposes of income tax.

As a general rule, the taxable base for capital gains arising from the exchange of crypto-assets for a conventional FIAT currency made by Italian tax-resident individuals not carrying out a professional activity is defined as the difference between the sale price (in case of sale for consideration) or the normal value (in case of sale for exchange) and the purchase price. (For individuals carrying out a  professional activity see Q4 below.)

Capital gains are subject to a substitute tax (26%) at the time of receipt in the hands of the individual (cash basis principle) should they exceed EUR 2,000 in the relevant fiscal year. No deduction of costs is allowed.

• exchange of crypto-assets for goods/services is a taxable event and the same rules described for conventional FIAT currency apply
• exchange of crypto-assets for other crypto-assets of a different nature (e.g. crypto-currency in exchange for NFTs) is a taxable event and the same rules described for conventional FIAT currency apply
• exchange of crypto-assets for other crypto-assets of the same characteristics and functions is explicitly excluded from taxation.

Income arising from transactions with crypto-assets made by Italian tax-resident individuals carrying out a professional activity qualify as professional income for the purposes of income tax and should be included in the taxable base subject to personal income tax (IRPEF) at progressive rates up to 43% (plus local surcharges up to 4%) on an accrual basis principle.

Italian tax provisions do not expressly define a professional activity; however, they refer to the general principles laid down by the Italian Civil Code, according to which an activity is deemed to be of a professional nature should it fall into certain specific categories provided therein and, in any case, when the activity is carried out by means of an organisation in the form of an enterprise. A case-by-case analysis is required to identify indicators of “entrepreneurship” and “continuous activity” such as: number of transactions, magnitude of turnover, lack of other sources of income, short periods between purchases and resales, and pushing sales through advertising.

1. capital losses in excess of EUR 2,000 can offset capital gains
2. same rules described under a) apply
3. not possible.

Capital losses (higher than EUR 2,000) can offset capital gains realised in the same fiscal year, and the excess amount can be carried forward for the following 4 fiscal years (provided that they are disclosed in the tax return of the fiscal year in which they are realised).

Yes. The definition of crypto-assets under Q1 includes in the scope of taxation any type of digital asset including NFTs (except as specified below).

ITA guidelines have specified that income derived from the transfer of NFTs representing the author’s intellectual works qualifies as:

• professional income, if the activity is deemed to be of a professional nature (see Q4);
• miscellaneous income, if the activity is not deemed to be of a professional nature (see Q4).

Neither the Italian tax provisions nor the ITA have issued specific guidance on taxation of mining for individuals. The tax treatment of the income depends on whether a professional activity is currently carried out or not and on the actual agreement in place between the parties (i.e. consideration is contingent upon successful mining or not). Generally speaking:

• if mining activity is carried out by an individual not carrying out a professional activity, the related income should fall in the category of miscellaneous income, therefore taxable at 26%
• if mining activity is carried out by an individual carrying out a professional activity, the relevant income falls in the category of professional income and the same rules under Q4 should apply.

Before the 2023 Budget Law entered into force, the ITA stated that income related to remuneration received by individuals for staking activity by means of crypto-currencies, outside of their professional activity, fell in the category of capital income, subject to a substitute tax (26%) at the time of receipt in the hands of the individual (cash basis principle). Based on the new law provisions, this interpretation may be considered outdated and the same rules described above for mining rewards should apply, including for “proof-of-stake” remuneration.

In particular, ITA guidelines have clarified that any fees retained by the crypto-asset service providers from income related to remuneration received by individuals not carrying out a professional activity for staking activity can not be deducted from the gross taxable base.

Should crypto-assets be used as remuneration for employment/self-employment activities, they would be treated as employment/self-employment income (the taxable amount to be determined applying normal value rules). No specific rule has been issued with regard to other events/models. In general terms, the transfer of crypto-assets to third parties, unless by inheritance or gift, is considered to be a transfer for consideration and is thus relevant for tax purposes (the same rules as described under Q2 and Q4 apply).

Resident individuals must disclose their financial assets, including crypto-assets, in a specific section of their annual income tax return (Quadro RW), regardless of whether they are held abroad or in Italy and how they are archived and stored. Furthermore, a stamp duty, at the rate of 0.2% per annum to be paid in the manner and terms of personal income tax, is due on the value of crypto-assets at year end (credit for any stamp duty incurred abroad might be granted); the stamp duty is directly applied by the Italian tax resident crypto-asset service provider (if any).

As a general rule, the burden of proof regarding the taxable base (i.e. the difference between the sale price, or the normal value, and the purchase price) lies with the taxpayer; failing the proof, the cost relevant for tax purposes is equal to zero. Furthermore, the 2023 Budget Law expressly provides the possibility for an individual not carrying out a professional activity to opt for special regimes that shift to the crypto-asset service providers many of the reporting obligations (i.e. the administered savings regime – regime del risparmio amministrato – and the asset management regime – regime del risparmio gestito) in relation to the income under examination.

In terms of territoriality principles, ITA guidelines stated that income from crypto-assets is deemed to be produced in Italy (and therefore taxed therein) in case the crypto-assets are held through an Italian tax resident crypto-asset service provider (or through (i) the Italian permanent establishment of a foreign crypto-asset service provider (ii) an Italian intermediary or a permanent establishment of a foreign intermediary being object of stable relationship). Otherwise, whether crypto-assets are held through a foreign crypto-asset service provider / intermediary the income is deemed to be of foreign source.

Lasty, whether crypto-assets are directly held and stored by the tax payer by means of electronic or physical support (e.g., cold wallet, paper wallet, etc.) without an Italian crypto-asset service provider / intermediary, income is deemed to be produced in Italy to the extent the electronic or physical support in located in Italy (for Italian tax resident individuals such support is assumed to be in Italy and if it is not the case the burden of proof stands on the taxpayer).