One of the worst nightmares for those dealing with cryptocurrencies in Italy is fulfilling the obligation to declare cryptocurrency assets in the form of RW for income tax returns; that is, complying with the so-called supervision obligation.
The lack of specific legislation and a range of alternative interpretations makes life difficult and puts those who hold cryptocurrencies today and those who held them in the past at risk of penalties.
Spanish law and Italian obligations
However, a recent judgment of the CJEU (January 24, 2022 in C-788/2019) has ruled that Spanish law imposes obligations very similar to those of Italy in the area of tax supervision, declaring foreign accounts and financial assets held abroad and determining that such legislation is contrary to the principle of free movement of capital of goods and persons within the EU.
Moreover, according to the European judges, the penalties provided by the law would violate the principle of proportionality.
What makes the news interesting is that the principles of the judgment may put pressure on the Italian provisions on RW formal reporting obligations: in fact, the content and structure of the Spanish legislation on tax supervision obligations is similar to the Italian legislation.
Articles 29 and 93 of Spanish Tax Law 58/2003, which establish the obligation to declare assets and capital held abroad, are virtually indistinguishable in nature and content from the reporting obligation under Italian Art. 4, paragraph 1, of Legislative Decree No. 167 of 1990 (as amended).
In other words, the Spanish Form 720 is a close relative of the Italian RW Form.
However, the CJEU also made other observations on the basis of its decision: firstly, that Spanish law essentially provides a mechanism which effectively prevents the expiry of the statute of limitations for any violation. The second is that the penalties provided by Spanish law (150% of the tax evaded and possibly a series of additional lump sums) violate the principle of proportionality.
The Court therefore concluded that Spanish law violated Article 63 of the TFEU and Article 40 of the EEA Agreement.
According to the European Court of Justice, the fact that the structure of the set of obligations declared in the Form 720 and the sanctions that will be imposed in case of non-compliance with these obligations create differences in treatment between Spanish residents, depending on the place of residence. Their assets and financial relationships have the potential to dissuade, discourage or restrict residents of member states from investing in other member states.
If this is the case, the Italian situation has many things in common.
In the meantime, we start with a framework of obligations, which, as already said, are exactly similar in both countries.
The obvious change between the two systems is the system of restraint and confiscation: in Italy, these systems are exaggerated, but not unlimited as stated in the Spanish system.
In Italy and Spain, using cryptocurrencies to evade taxes is punishable
In contrast, there is less variation in sanctions.
Indeed, there are some important mechanisms between the two countries' existing mechanisms. Nevertheless, at the end of the day, even in the Italian system, the numbers are still high. Here, in particular, although the percentages are nominally lower, the determination of sanctions is not based on the amount of tax evasion (as happened in Spain), but on the "total amount" of investments held abroad.
Now, if the issue were to be raised in the same court, it is by no means certain that the Italian provision would pass the test of resisting the principle of proportionality set out in European law. Among other things, such cases do not necessarily need to be decided and require a ruling from the European Court of Justice. Indeed, the national judge, at least on paper, is entitled to oppose the domestic rule of law if he sees an irreparable contrast between it and European principles.
Of course, a choice of this magnitude requires a great deal of legal expertise and boldness, so any tax commission would be suspicious of the Pope's troubles with a decision that has such implications.
It is no coincidence that the judgment against Spain was triggered by the European Commission's initiative to appeal directly to the Court. Moreover, it is worth remembering that the Commission has already dealt with Italian regulatory provisions in the past and has also initiated a series of infringement procedures against Italy. The proceedings were terminated because in 2013 the government decided to make a series of regulatory changes precisely to avoid a blow from Brussels.
However, the Court's recent ruling suggests that we should reconsider our compliance with the European principles of the regulatory framework in force in Italy today.
In any case, many professionals have sounded the alarm, although it remains to be seen if or when and in what way this issue will come up in the discussions at the European Court of Justice, obviously.
New Regulations of the Italian Exchange
That said, the search for the identity of anyone holding cryptocurrencies will continue in other ways and at other levels: just in the last few days, Minister Daniele Franco signed the long-awaited ministerial decree on virtual currency transactions, imposing the obligation on operators to communicate to the OAM and therefore to the MEF a large amount of data related to the operations performed. This means that, thanks to the provisions contained in the ministerial decree, the identification data of customers and the nature of the operations carried out by the exchanges registered in Italy will be systematically transferred to the MEF and the police will have access to the same data and law enforcement agencies.
But that's another issue to which we will return with some special considerations.
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