Spanish Tax Agency keeping tabs on 15,000 taxpayers who use cryptocurrencies

The Spanish Tax Agency is monitoring 15,000 taxpayers who have used cryptocurrencies over the last year to make sure they declare all profits made through the use of these digital means of exchange.

The taxpayers were identified as part of a campaign launched by tax authorities last year to crack down on the highly unregulated sector. In its yearly plan, the Tax Agency warned that the emergence of new technologies “such as blockchain, and especially cryptocurrencies,” were providing a loophole to commit tax fraud.

Criminal organizations’ employment of cryptocurrencies is one of today’s greatest challenges

Spanish Tax Agency

Last April, it sent information requests to 16 big banks, either headquartered or with offices in Spain, a dozen intermediary businesses (exchange offices, pay platforms and firms linked with ATMs) and 40 businesses that accept bitcoin and other digital currencies.

The National Fraud Investigation Office (Onif) studied the information and filtered out 15,000 taxpayers who had used cryptocurrencies. These taxpayers will be monitored to ensure they declare the profits they have made off the digital currencies. They will also check that they declare profits in their 2018 tax return. Tax authorities will carry out inspections by selecting high-risk profiles from the list.

Profits made on cryptocurrencies are subject to the savings tax base, which ranges from 19% to 23% depending on earnings. Increasing scrutiny on these new digital transactions is not intended to significantly increase the public coffers but rather to curtail unregulated and nontransparent financial activities. Tax authorities cannot see who owns bitcoins and it is almost impossible to trace bitcoin trades without operations like the one it launched this year.

The added scrutiny is aimed at stopping unregulated and nontransparent financial activities

Buying and selling cryptocurrencies tends to take place on websites from other countries and it is very difficult to obtain information on these digital markets. This has made them popular with criminal groups who use digital currencies to hide illegal activities. Tax authorities say they will look closely at the records of the 15,000 taxpayers and begin proceedings for money laundering if any criminal activity is detected.

In its annual plan, the Tax Agency warned: “Criminal organizations’ use of the deep web to traffic and trade in illicit goods, and the employment of cryptocurrencies such as bitcoin as a method of payment, is one of today’s greatest challenges. To face this threat, the investigative units of the Tax Agency will be using new technologies to gather and analyze all types of information on all kinds of networks.”

New law against fraud

To tighten control on the new digital economy, the government has included in its new anti-fraud bill (which was greenlighted by the Cabinet a month ago) a series of measures to strengthen tax control and stop digital currencies from being used to launder money. As part of these measures, Spanish taxpayers must file three new forms on the ownership and operation of digital currencies.

Banks and other financial platforms that operate in Spain must inform the Tax Agency about the holders and beneficiaries of cryptocurrencies, and the amounts held, when they save the ownership keys of a digital currency. Taxpayers must also inform authorities about digital currencies kept abroad; failure to do so can entail fines of up to 150% of the undeclared amount.

English version by Melissa Kitson.