Italy is considering raising the capital gains tax on investments in digital assets from the current 26% to 42% in 2025. The Danish tax council proposes a principle of inventory taxation, taxing even unrealized gains.
As soon as you enter Malpensa airport in Milan, several advertising screens welcome tourists with a Binance ad: “Binance creates, connects, shapes, innovates, supports, guides.” At first glance, Italy would appear to be a crypto-friendly country. However, this is not true. In recent weeks, the Deputy Minister of Economy, Maurizio Leo, has proposed raising the capital gains tax on crypto investments. He wants to raise the rate from 26% to 42% in 2025. They will approve the measure in the coming weeks in parliament. If so, it will unleash the wrath of a sector. They think it will dampen investment interest in the country. Along with Italy, in Denmark, the Fiscal Council has suggested adopting a system of inventory taxation. It would even unrealized gains at up to 42%.
In the case of Italy, the increase in capital gains tax affects both those obtained by transfer and those coming from staking activity [the equivalent of a deposit]. They do not mention a tax exemption limit: They levy the tax on income above 2,000 euros. In a technical document, officials detail they expect to collect an additional 16.7 million euros yearly. The number adds to the 27 million collected annually. If they approve the initiative, Italy becomes the country that most aggressively taxes gains from digital assets, notes Ana Mayo Rodriguez, Tax Partner at finReg360.
European tax uniformity
“At the European level, there is no uniformity, and each country establishes its rules. But in the European Union, no state has established this tax rate,” she assures. Drawing a picture of crypto taxation in Europe is not simple. As the expert explains, it depends on the transactions that the states decide to tax: gains, crypto transfers, swaps, and conversion to fiat currency. Generally speaking, Portugal sets a rate of 28%; the United Kingdom, 20%.
In France, he says, conversion to fiat currency is taxed in particular, but there is no taxation among crypto operations. Among the European countries with more benevolent taxation is Switzerland. There, “in principle, there are operations not taxed on income. They only tax assets at a rate of 1%. In Spain today, everything related to crypto transfers, swaps, and conversion into fiat currency is considered a capital gain. The tax rate is up to 28%, with the possibility of it rising to 32%,” he explains.
Denmark’s case
Italy is not the only country making tax moves on cryptocurrencies. In recent weeks, in Denmark, the Fiscal Council proposed a new tax on digital assets to ensure greater control over investors’ holdings. Ana Mayo explains that this system would affect digital assets, equities, and fixed income. They propose to make an inventory and tax the unrealized capital gains.
They would add and tax holdings only for the change in value from one year to the next. In this system, gains on cryptos could be offset against losses on traditional financial products and vice versa. The trick would lead to annual taxation on changes in value even in not transferred assets.
The crypto sector is on fire
The industry’s anger is palpable. In particular, the debate is being incendiary in Italy. In this country, almost two million users invest in crypto, worth some €2.2 billion, according to OAM, the body of brokers and mediators. Some thirty professionals and entrepreneurs have sent a letter to the Ministry of Economy showing their rejection and concerns about a rule they consider discriminatory and unfair. Among them is Ferdinando Ametrano, CEO of CheckSig, a platform that offers custody, broker, and tax withholding agent services. “With such a disproportionate tax rate, the Italian market would be less attractive for international firms and would harm Italian companies,” he asserts. Ametrano believes that large capitals would move to countries with more flexible regulations, such as Switzerland.
In the case of small capitals, direct holding of cryptocurrencies would become less attractive. “Instead, owning cryptos through ETFs, equivalent products, or derivatives would be more convenient. It would be shifted to these products, taxed at 26%, like all other financial income. Thus, the treasury has nothing to gain, but it would destroy a company like ours,” he warns.
Loss of competitiveness
The loss of competitiveness in the Italian market would not be limited, according to the signatories to crypto companies. It would also affect the technological ecosystem related to these currencies. Startups and investors in blockchain, DeFi, and smart contracts could prefer other countries. The new situation would leave Italy behind in building innovative projects. They’ll have difficulty attracting capital and a possible brain drain to other countries. Especially in the IT, cryptography, and digital law sectors, essential human resources for the country’s digitization process. Javier García de la Torre, director of Binance Spain and Portugal, has no doubts about this. “If companies perceive the regulatory environment as too complex, they might also consider moving their operations elsewhere, which would reduce job creation and innovation in the affected markets.”
Massimo di Rosa, head of Bitpanda Italy, agrees with this view. For the Austrian broker, Italy represents the fifth largest market. The approval of this measure could lead the firm to re-evaluate its forecasts for 2025 with a significant impact on trading volumes. Di Rosa adds other elements to the fiscal unfairness. “For one, it would have a negative impact among young people, where interest in crypto investment is growing,” he says. A recent YouGov survey for Bitpanda reveals that they have become the first source of investment among those under 43 years old: 16% of millennials declare having invested in digital currencies, compared to 13% of Generation Z. Seventeen percent of each group plans to invest in the next 12 months.
Investor Risks
It warns of risks for investors and crypto markets. On the one hand, this regulation could incentivize savers to use unauthorized operators. It could provoke market distortions, with investors holding assets until the end of 2024 to sell them shortly before the measure’s enforcement in 2025.
From the sector, they explain that there have been contacts with the Italian government and that they plan to open a dialogue table to discuss aspects of the measure. They reveal that the regulation does not bring the majority of the executive in agreement. When asked about a possible dialogue with the industry, the Italian Ministry of Economy did not reply to this newspaper. Moreover, some people consider that this fiscal rigidity is a response to the regulators’ rejection of the crypto ecosystem. Andrea Ferrero, CEO of the Italian exchange Young Platform, blames the regulatory authority for playing against innovation in the financial sphere. For his part, Ametrano highlights the hostility of both Consob (the Italian CNMV) and the Bank of Italy towards the crypto ecosystem.
Over the years, these authorities made public their opposition to these assets. In June 2022, the Bank of Italy invited financial institutions and other authorized subjects not to encourage the use of digital assets. They want banks “to communicate to customers that the Bank of Italy advises against operating with this type of crypto assets.” Its governor, Fabio Panetta, published an article in the Financial Times in which he considered that digital currencies lacked a “social or economic” function. He stressed the speculative nature of crypto and that they should treat it as “gambling activities.”