I have cryptocurrencies abroad, do I have to declare them?

From 11 July 2021, the obligation to provide information to the Tax Administration on the holding and transactions carried out with virtual currencies (acquisition, transmission, exchange, transfer, collections and payments), as well as the holding of those located abroad, will be established.

This obligation was introduced by Law 11/2021 of 9 July on measures to prevent and combat tax fraud, also known as the Anti-Tax Fraud Law, with the aim of strengthening tax control over taxable events involving these assets.

That said, more than two years after the entry into force of Law 11/2021, the regulatory development has been completed with the publication in the Official State Gazette of Orders HFP/886/2023 and HFP/887/2023, and the declaration forms currently in force have been approved (Forms 172, 173 and 721).

In this article we will briefly explain the reporting obligations linked to the holding and operation of virtual currencies, with an emphasis on those located abroad.

When is a virtual currency considered to be located abroad?

Virtual currencies shall be deemed to be located abroad when the person, entity or permanent establishment holding them, providing services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer such currencies, is not obliged to provide information on them by filing Forms 172 and 173.

What do you need to know about Forms 172 and 173?

• Form 172 is an information return on balances in virtual currencies that is aimed at individuals or legal entities resident in Spain and individuals or entities resident abroad that have a permanent establishment in Spanish territory that provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies, whether this service is provided as the main activity or in connection with another activity. Its purpose is to report the balances as of 31 December of the different virtual currencies (indicating their value in euro) held by the reporting entity, or the last balance held during the financial year in question.
• Form 173 is an information return on transactions with virtual currencies that is addressed to individuals or legal entities resident in Spain and to individuals or entities resident abroad that have a permanent establishment in Spanish territory that provide exchange services between virtual currencies and legal tender or between different virtual currencies, or intermediate in any way in the performance of such transactions, or provide custody services of private cryptographic keys on behalf of third parties, maintenance, storage and transfer of virtual currencies. Its purpose is mainly to report on transactions carried out during the year (purchase, sale, swap, and transfer), receipts and payments made in these currencies.

How can I find out if the entity holding my cryptocurrencies is domiciled or has a permanent establishment in Spain?

Banco de España maintains an interactive register of these entities, which allows anyone to verify where virtual currency service providers are located.

For this purpose, the search tool provided can be accessed via the following link: Register of Institutions (ECB).

How should virtual currencies located abroad be reported?

Virtual currencies located abroad will be reported to the Tax Administration through the filing of Form 721 “Information return on virtual currencies located abroad”, being applicable for the first time for the tax return period referring to the financial year 2023.

To which taxpayers is Form 721 addressed?

This form is intended for natural or legal persons resident in Spain and persons or entities resident abroad with a permanent establishment in Spanish territory that hold virtual currencies located abroad that are owned, beneficially owned, authorised or otherwise under a power of disposal, held by persons or entities that provide services for safeguarding private cryptographic keys on behalf of third parties, for holding, storing, and transferring virtual currencies.

When do I have to file Form 721?

The deadline for filing form 721 is between 1 January and 31 March of each year with respect to the information to be supplied for the previous year.

The return for 2023 shall be filed between 1 January and 1 April 2024, as the 31st is a non-working day.

In which cases does this information obligation not apply?

There is no obligation to report virtual currencies located abroad in the following cases:

• When the owners are entities referred to in article 9.1 of Law 27/2014, of 27 November, on Corporate Income Tax. In other words, they are entities that are fully exempt from corporate income tax.
• When the holders are legal entities and other entities resident in Spanish territory, as well as permanent establishments in Spain of non-residents, and the virtual currencies are individually recorded in their accounts and identified by their denomination, value and custodian entity and the country or territory in which they are located.
• When the holders are natural persons resident in Spanish territory who carry out an economic activity and keep their accounts in accordance with the provisions of the Commercial Code, so that the virtual currencies are recorded in such accounting documentation individually and identified by their denomination, value and custodian entity and the country or territory in which they are located.
• Where the balances as at 31 December of each type of virtual currency abroad valued in euro together do not exceed EUR 50,000, there is no obligation to report any virtual currency. If this combined limit is exceeded, all virtual currencies must be reported.

Is there a penalty for not complying with this reporting obligation?

Failure to comply with the obligation to report virtual currencies located abroad is a tax offence regulated in Article 198 of the General Tax Law and carries a fine of 300 euros for failure to file Form 721 if required by the Administration, as well as a fine of 150 euros for incorrect filing. A fine of 20 euros may also be applied for undeclared or required registration, or a fine of 10 euros for incorrect filing.

Devesa’s Tax Law Department will be pleased to answer any questions you may have regarding your reporting obligations for holding virtual currencies located abroad.

Need advice? Access our areas related to holding and declaring virtual currencies:

• Tax Advice