Italy's overall attitude towards crypto assets is open yet cautious.
Written by: TaxDAO
1. Introduction
Italy's overall attitude towards crypto assets is open yet cautious. In 2021, Italy opened up to crypto asset trading, and in the following years, the growth of the Italian crypto asset market has been significant. According to data from 2024, over 3.6 million Italians own crypto assets, and the total market value of crypto assets in Italy has increased by 110% in the past year. At the same time, the Italian government is very aware of the risks associated with the crypto industry and is continuously strengthening the regulation of risks related to crypto assets. The Bank of Italy will soon implement the Markets in Crypto-Assets Regulation (MiCA) to ensure effective regulation of the crypto asset market and protect cryptocurrency holders. Additionally, the Italian government has established relatively friendly tax policies to encourage and promote the development of the financial industry related to crypto assets.
2. Overview of Italy's Basic Tax System
2.1 Italy's Tax System
Italy's tax system is mainly divided into direct taxes and indirect taxes. Direct taxes include personal income tax, corporate income tax, and inheritance tax, while indirect taxes include value-added tax (VAT), property tax, registration tax, customs duties, and others. According to Article 119 of the Italian Constitution, regions, provinces, and municipalities in Italy can enact regional tax regulations within the limits set by the Constitution and laws.
Italy's tax year is the same as the calendar year, and income tax and VAT returns for the previous year must be submitted by September 30 of the current year. Failure to file will result in fines ranging from €250 to €1,000 (for no tax due) or 120% to 240% of the tax due, plus interest for any tax due. If the tax return is submitted within the next year's filing deadline, the fines range from €200 to €500 (for no tax due) or 60% to 120% of the tax due, plus interest (for tax due).
Generally, during each tax period, personal income tax and corporate income tax are paid in three installments. For example, personal income tax is paid through self-assessment, with 40% of the estimated income tax for the previous year due by June 30 of the current year, and 60% due by November 30. The difference between the actual income tax and the estimated income tax paid must be settled by June 30 of the following year. For VAT, monthly filers must pay by the 16th of the following month, while quarterly filers must pay by the 16th of the second month after the end of the quarter. Tax authorities have the right to audit taxpayers' returns within five years after the tax year.
2.2 Main Types of Taxes
2.2.1 Personal Income Tax
According to the Italian Income Tax Code (Testo Unico Delle Imposte sui Redditi, abbreviated as TUIR), Italian tax residents must pay personal income tax on their worldwide income, while non-residents only need to pay tax on income sourced from Italy. The income that must be reported includes employment income, self-employment income, business income, real estate income, investment income, and capital gains. Exempt income includes death benefits, accidental income, qualified long-term investment returns, and profits from the disposal of real estate held for more than five years.
For determining resident taxpayers, Italy considers individuals (regardless of whether they are Italian citizens) as residents if they meet any of the following conditions: registered in the civil registry of the Italian resident population for most of the tax year; or have a domicile or residence in Italy according to Article 43 of the Civil Code. According to Article 43 of the Civil Code, domicile refers to the place where a person habitually resides, while residence refers to the center of a person's main interests (center of vital interests).
In calculating personal income tax, there are currently no other direct deduction items except for alimony, medical expenses related to disabilities, social security contributions, health insurance premiums, and charitable donations. Currently, Italy does not set a basic personal tax exemption amount, but taxpayers can enjoy different tax reliefs based on their family situation.
Italy currently has personal income tax at the national, regional, and municipal levels, with taxes levied on a progressive basis. Starting from the 2022 tax year, the progressive tax rates for personal income tax set by the Italian Revenue Agency are as follows: for annual income not exceeding €15,000, a 23% tax rate; for annual income between €15,001 and €28,000, a 25% tax rate; for annual income between €28,001 and €55,000, a 35% tax rate; and for annual income exceeding €55,000, a 43% tax rate. In addition to the national tax, there is also a regional surtax ranging from 1.23% to 3.33% and a municipal surtax of up to 0.9%. Furthermore, financial professionals' variable compensation (such as bonuses, stocks, options, etc.) exceeding their fixed annual salary is subject to an additional 10% income tax.
2.2.2 Corporate Income Tax
The subjects liable for corporate income tax in Italy include joint-stock companies, limited partnerships (excluding resident partnerships, whose income must be allocated to partners for taxation), limited liability companies, cooperatives (including profit-making non-profit cooperatives), commercial entities, and other forms of companies. Notably, non-resident partnerships only need to pay corporate income tax directly.
For determining resident enterprises, Italy's standard is that if more than half of the time during a financial year is spent in Italy at the registered location (the place specified in the company's articles of association), actual management, or main business, then the enterprise is considered a resident enterprise.
Resident enterprises must pay corporate income tax on their income both within and outside Italy but have the right to apply for tax exemption on income obtained through foreign permanent establishments. The corporate income tax rate has been reduced from 27.5% to 24% since 2017, and after the implementation of the 2019 budget law, it was significantly lowered to 15%. Additionally, financial intermediaries (excluding asset management companies and brokerage firms) and the Bank of Italy must pay an additional 3.5% income tax surcharge.
2.2.3 Value-Added Tax
According to the Italian Value-Added Tax Law, the taxpayers of VAT include entrepreneurs, artists, and professionals. Goods imported from countries (regions) outside the EU are also subject to VAT. According to the Italian VAT Law, all transactions of goods and services conducted within Italy, as well as goods imported from abroad, are subject to VAT. VAT is applied at a standard rate and reduced rates, with the current standard rate set at 22%, and reduced rates categorized into 4%, 5%, and 10%.
It is noteworthy that Italy offers tax incentives for the financial and related industries. The VAT Law exempts certain services from VAT, including credit transactions and related services of banks and other credit institutions (including credit secured by stock options and similar guarantee transactions); management services for mutual investment funds by banks and credit institutions; related services for foreign exchange and foreign currency credit transactions; damage insurance, life insurance, and reinsurance business and intermediary services; and related services for stocks, bonds, and other non-commodity securities, although their input VAT cannot be deducted.
2.2.4 Financial Transaction Tax
The financial transaction tax stipulates that ownership transfers of shares and participatory financial instruments issued by companies registered in Italy are subject to a financial transaction tax, typically set at 0.2%. Additionally, if the main underlying securities of derivatives are stocks or participatory financial instruments issued by Italian companies, or if they are closely related to the value of these securities, then transactions of such derivatives are also subject to the financial transaction tax. Unless specific exemptions or exclusions apply, the financial transaction tax will be levied at a fixed amount, which varies based on the nature and nominal value of the derivatives. For over-the-counter transactions, the tax amount is capped at €200. However, transactions conducted on regulated markets or multilateral trading facilities may receive a reduction, typically to one-fifth of the normal amount. It is important to note that both parties to the transaction are required to pay this tax, and the payment is usually handled by financial intermediaries. This tax policy provides valuable references for the tax management of cryptocurrencies and the crypto industry, laying a solid foundation for the improvement of crypto asset tax policies.
2.2.5 Digital Transaction Tax
This tax applies to advertising targeted at users on digital interfaces; providing users with multilateral digital interfaces that allow them to connect and interact with other users, facilitating the direct provision of potential goods or services; and transmitting collected user data and data generated from user activities on digital interfaces, with total revenue (excluding VAT and other indirect taxes) not accounting for any costs, taxed at a rate of 3%. Revenue obtained from providing digital services to entities controlled by suppliers, service-controlled entities, or entities under the same control as suppliers is exempt from the digital services tax. This tax law will help create a fairer and more orderly market environment, providing strong legal support and guarantees for the future development of Italy's financial industry and the crypto industry, promoting high-quality development.
2.2.6 Financial Asset Tax
The financial asset tax stipulates that starting from 2020, Italy imposes a tax on foreign financial assets held by resident individuals (also covering simple partnerships and non-commercial entities). This tax targets financial assets such as financial products, bank accounts, postal accounts, and savings accounts held abroad, with a tax rate of 0.2% of their value. If these financial assets are managed by Italian intermediaries, an additional stamp duty must be paid. Specifically, according to Article 19 of Law No. 201 of 2011, Italian residents must pay tax on their foreign financial assets. The tax amount is calculated based on the market value of these assets; if the market value cannot be determined, the nominal value is used. For bank accounts, postal accounts, and savings accounts, a fixed tax of €34.20 is due for each account. The financial asset tax provides valuable guidance for the tax management of cryptocurrencies and has a significant impact on building a more comprehensive tax policy system for crypto assets.
3. Italy's Crypto Tax Policy
3.1 Overview of Italy's Crypto Tax Policy
In the 2023 budget announcement, the Italian tax authorities issued a tax regulation specifically targeting cryptocurrencies. This new regulation clearly defines crypto assets as "a digital representation of value or rights transferred and stored electronically using distributed ledger technology or similar technology," which encompasses almost all types of digital assets, including stablecoins, NFTs, governance tokens, utility tokens, and more. Notably, in 2023, the Italian budgetary framework also welcomed significant changes, with new regulations on capital gains tax and the introduction of an alternative value tax specifically for cryptocurrency gains, marking a new era in Italy's tax management of cryptocurrencies. These two taxes are the main taxes that crypto assets must pay, and in Italy, crypto assets are not subject to VAT.
3.2 Cryptocurrency Tax System
3.2.1 Income Tax
The following are taxable events as defined by Italian tax law: selling crypto assets in exchange for fiat currency, converting between cryptocurrencies, using cryptocurrencies for consumer payments, receiving cryptocurrencies as consideration for goods or services, gifting cryptocurrencies, obtaining cryptocurrencies through mining, receiving salaries paid in cryptocurrencies, earning income from staked crypto assets, and receiving airdrops of cryptocurrencies. Additionally, selling investment cryptocurrencies for profit also falls within the taxable category.
Capital gains/income must be classified as miscellaneous income. Italy identifies the taxable objects for capital gains tax as any digital assets derived from blockchain technology, with profits exceeding the €2,000 threshold being subject to taxation. The capital gains tax rate is uniformly set at 26%, and the taxable capital gains are calculated based on the difference between the sale price of the cryptocurrency and its purchase price. Furthermore, if capital losses exceed €2,000, this portion of the loss can be fully deducted from capital gains in subsequent accounting periods, but the deduction period cannot exceed four periods. However, taxpayers must record costs or purchase values in a clear manner; otherwise, the related costs will not be recognized and will be treated as zero.
Regardless of whether the income is obtained through trading, mining, or staking, as long as it exceeds the specified limit, it will be subject to the same tax treatment. It is noteworthy that this tax obligation arises only when the crypto assets are actually disposed of, such as through sale or exchange; unrealized capital gains are not included in the immediate taxable base. According to relevant regulations, exchanging between cryptocurrencies does not constitute a taxable event. For crypto assets obtained through mining or staking, Italy has not yet provided a specific tax framework, so they may be treated as "miscellaneous income" along with other crypto assets.
3.2.2 Alternative Value Tax
To actively encourage cryptocurrency holders to enhance transparency in reporting crypto assets, the Italian government introduced an innovative alternative value tax policy in 2023. This policy aims to guide crypto asset investors to more proactively report their crypto assets by providing more favorable tax rates as an incentive.
According to the specific provisions of the alternative value tax policy, crypto asset investors have received significant simplification in tax treatment. They no longer need to keep detailed records and report each cryptocurrency transaction throughout the year; instead, they can simply report the current valuation of their portfolio at the beginning of each year (i.e., January 1). This transformation undoubtedly alleviates the tax processing burden for crypto asset investors, allowing them to manage their tax affairs more conveniently.
It is important to note that the standard tax rate specified by this tax policy is 14%. This rate is specifically applied to the appreciation portion realized by investors in their portfolios during the year, rather than on the overall value. This means that investors only need to pay taxes on the appreciation portion of their portfolios over the year, without needing to tax the entire value of the portfolio. Compared to the previous policy, the tax rate under the alternative value tax policy is significantly more favorable, creating a more relaxed and beneficial tax environment for crypto asset investors.
Additionally, the implementation of the alternative value tax policy further enhances Italy's international competitiveness in crypto asset regulation. By providing a more flexible tax treatment approach, Italy attracts more crypto asset investors to invest, thereby promoting the prosperous development of the country's cryptocurrency market. Overall, the introduction of the alternative value tax policy represents an important innovation by the Italian government in the tax treatment of crypto assets, bringing tangible benefits to crypto asset investors.
4. Dynamics of Italy's Crypto Regulatory Framework
The Bank of Italy categorizes cryptocurrencies into two main categories: one is stablecoins, and the other is "unsupported" cryptocurrencies. Compared to stablecoins like USDT, Bitcoin and Ethereum are considered cryptocurrencies without reserve assets. Given the unique nature of the crypto industry, holders of crypto assets are at risk of falling into financial fraud or making unwise investment decisions, and the significant price volatility of cryptocurrencies, coupled with a lack of intrinsic value, makes effective regulation of crypto assets particularly important.
Italy has consistently maintained a prudent attitude towards regulating crypto assets. To strengthen macroprudential regulation, Italy has taken a series of measures, such as expanding the responsibilities of the established macroprudential policy committee to the crypto asset sector, enhancing coordination and information exchange efficiency among various crypto asset regulatory agencies. To better regulate the cryptocurrency market, the Italian government plans for the Bank of Italy to work jointly with the market regulator Consob, based on the European regulatory framework, to impose fines ranging from €5 million (approximately $5.4 million) to €50 million (approximately $54 million) for illegal activities such as insider trading, illegal disclosure of insider information, and market manipulation, thereby maintaining financial stability in Italy and ensuring orderly market conditions.
In 2022, the Italian government gazette (Gazzetta Ufficiale della Repubblica Italiana) also published the latest anti-money laundering (AML) rules for cryptocurrency companies. These AML rules detail the registration and reporting requirements for virtual asset service providers (VASP), which are largely consistent with the EU's fifth anti-money laundering directive and the Financial Action Task Force (FATF) guidelines for cryptocurrency companies. According to these new regulations, any company wishing to provide services related to digital assets in Italy must register on a specific registry. It is noteworthy that the AML rules in Italy include a special requirement that does not fully align with the EU's VASP passport licensing system.
Specifically, to qualify for registration on Italy's special VASP registry, all entities must comply with Article 17 of Italy's 2008 directive on credit contracts. According to this provision, VASP from other EU countries must establish a permanent establishment or stable organization in Italy, which is typically interpreted by Italian lawyers as requiring the establishment of a branch or subsidiary. In other words, for VASP established in other EU member states, if they wish to collaborate with Italian clients, they must establish a branch or subsidiary in Italy; for VASP established in third countries, they must establish an Italian subsidiary. In addition to registration requirements, these new regulations also require VASP to report all information compliant with anti-money laundering regulations to the agency responsible for overseeing the VASP registry (Organismo Agenti e Mediatori) at the end of each quarter. The VASP registry will be officially established within 90 days of the publication of the specified documents. Under this dual regulatory framework of registration and reporting, Italy has not only strengthened its regulatory efforts in the cryptocurrency market but also provided strong support for the long-term stable development of the financial market.
5. Summary and Outlook
At the level of the tax system, Italy has implemented a capital gains tax policy for the disposal of crypto assets based on a profound understanding of the current tax framework and introduced an alternative value tax mechanism aimed at reasonably reducing the tax burden on cryptocurrency traders. This series of innovative measures not only demonstrates the Italian government's relentless efforts to build a comprehensive and fair tax system for cryptocurrencies but also reflects its firm commitment to promoting the healthy and sustainable development of the crypto industry.
At the regulatory level, Italy has not only strengthened regulation through fines but has also introduced the latest MiCA regulatory framework, aiming to ensure that the Italian crypto industry can adapt to the ever-changing complex environment while creating a safe and transparent market environment for crypto asset investors. In the future, Italy may actively absorb advanced international experiences in cryptocurrency regulation and work together with countries around the world to promote the progress and development of the crypto regulatory system.
We believe that Italy will continue to deepen and improve its tax legal system regarding crypto assets in the future, which is an inevitable step in the development of Italy's crypto industry. At the same time, Italy will also continuously improve its regulatory system, strengthen its regulatory capacity in this field, and maintain the stability of financial and market order. Italy is moving towards creating an environment conducive to the healthy development of cryptocurrencies, which will undoubtedly add new vitality to the country's economic prosperity and sustainable development.
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