Cryptocurrency Precautions: Avoiding Blunders in Your Income Declaration (Mentioning Bitcoin, Ethereum, and WorldCoin)
The Spanish tax authority, Agencia Tributaria, has issued a new requirement for taxpayers who have earned cryptocurrencies by allowing their retina to be scanned as part of WorldCoin's biometric cryptocurrency project. From January to March 2024, many individuals participated in this initiative, and the tokens obtained through iris recognition must be declared for the 2024 Income Tax Declaration. It is crucial to note that only cryptocurrencies with which sales or exchange operations have been carried out must be declared, regardless of whether gains or losses have been obtained. These digital assets, considered as part of the 'Gains and losses from the transmission of other assets', will be subject to the FIFO (First In, First Out) method for accounting purposes. The gain or loss will be calculated by subtracting the value at which the cryptocurrency was sold or exchanged from the value at which it was acquired. Taxpayers are advised to maintain a precise record of all crypto operations they have conducted, detailing the date and prices of purchase, sale, or exchange, including those related to WorldCoin's iris-scanned cryptos. This meticulous documentation is essential to ensure compliance with tax regulations. While crypto exchanges, even if they did not involve a conversion to euros or another traditional currency, must be declared as they are considered exchanges that affect the patrimony, it is important to manage Hacienda information correctly, especially when it comes to sections covering the digital economy, such as cryptocurrency transactions. Errors in the Income Tax Return can lead to fines or claims from the Tax Agency (AEAT). Therefore, it is vital to be diligent and accurate when declaring these digital assets. It is also essential to remember that the process of calculating the gain or loss from these transactions follows the FIFO method, using the initial value at which the cryptocurrencies were acquired as the basis. It is worth noting that the Spanish Data Protection Agency issued a precautionary measure in December 2023, leading to the deletion of all stored iris codes. However, the transactions carried out before this date still need to be declared. Lastly, it is important to clarify that the capital loss from selling these tokens at a value lower than the original can only be offset against the savings base, not against already paid taxes in the general base. In conclusion, taxpayers who have earned cryptocurrencies through WorldCoin's biometric cryptocurrency project during the first quarter of 2024 must declare them for the 2024 Income Tax Declaration, ensuring thorough documentation and compliance by filing the corresponding tax forms by the deadlines established by the Spanish tax regulations.
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