Italian Parliament Approves 26% Crypto Gains Tax Under 2023 Budget

Crypto traders will be subject to Italy's 26% capital gains tax starting in 2023, according to a new budget that won parliamentary approval on Thursday.

Italian Prime Minister Giorgia Meloni's 2023 expansionary budget – which was finalized in a rush before the end of the year – features 21 billion euros ($22.3 billion) in tax breaks to assist businesses and households face the ongoing the energy crisis, Reuters reported Thursday.

In Italy, where crypto remains largely unregulated, the 387-page budget legitimizes crypto assets by defining them as "a means a digital representation of value or rights, which can be transferred and stored electronically, using the technology of distributed ledger or similar technology."

Italy (and most recently Portugal's) move to introduce capital gains tax on crypto comes ahead of the implementation of the European Union's landmark Markets in Crypto Assets (MiCA) regulation that promises passportable licensing frameworks and stringent operational requirements for crypto service providers in the 27-member political and economic union.

The 26% rate applies to gains from crypto trading if they exceed 2000 euros per tax period. As incentive for declaring their crypto, the new bill also sets a "substitute income tax," for investors at 14% of the value of the assets held as of Jan. 1, 2023 (instead of the purchase cost or value).

According to the new rules, any capital losses from crypto investments "are greater than the capital gains, for an amount greater than 2,000 euros, the excess is carried forward as a deduction in full from the amount of capital gains for the periods following, but not later than the fourth, provided that it is indicated in the declaration of income relating to the tax period in which losses have been realized."

However, investors may require some additional guidance on what qualifies as a taxable event as the document also says, "the exchange between crypto-assets having same characteristics and functions," does not constitute a fiscal event.

Read more: Italy Hasn't Vetted the 73 Crypto Firms It Approved This Year