DefinitionsIn July 2021, Stock market regulator of Spain (Comisión Nacional del Mercado de Valores; Hereinafter: “CNMV”) released a public consultation to respond to advertising of Cryptoassets’. Although this proposal is not legally binding, it enlightens the government's potential oversight on regulation of the crypto-assets advertising. The document provides a normative definition of the crypto asset which is a “digital representation of an asset or right that can be electronically transferred or stored by using distributed ledger technologies or other similar ones”.
Although, the cryptocurrency is not considered to be legal tender in the country, as pursuant to Law 46/1998 of 17 December, euro shall be the sole unit of account in legal instruments and have the status of legal tender in the kingdom of Spain.
Initiating mandatory registrationSpanish parliament has recently adopted a Royal Decree-Law 7/2021 of 27 April, which amended earlier Law 10/2010 on the prevention of money laundering and terrorist financing (hereinafter:- "AML Law") to apply EU's 5th Anti Money-Laundering Directive in its jurisdiction. The amended law brought some important changes on the regulation of operators engaged in virtual currency exchange and provision of e-wallet custody services. The law has mandated these operators to comply with AML law and be subject to the supervision by the Commission for the Prevention of Money Laundering (hereinafter:- "SEPBLAC").
Physical and legal entities despite their citizenship status, place of incorporation and management who offer virtual exchange service and provide e-wallet custody service must register in a special registry by the Bank of Spain starting from October 2021. The following mandatory documents are needed to apply for a registration:
- registration form for currency exchange service provider/e-wallet custody service provider;
- document accrediting registration as a self-employed worker if applied as a physical person;
- form for evaluating the suitability for providers of virtual currency exchange services for virtual currency exchange and custody of electronic wallet;
- criminal record certificate which has the issuance date no older than 3 months from the date of application;
- identification document;
- manual for the prevention of money laundering and terrorist financing;
- risk analysis document.
In case the virtual asset service operators conduct such activities (even though the service is carried out once or on an isolated basis) without registration, they will be found guilty and subject to fines up to EUR 10 million. All existing operators in Spain are obliged to be registered before January 29, 2022, while all those who are planning to provide aforementioned services in Spain must register before commencing their activities. Establishment of such a regime for virtual asset service operators is believed to be a driving force to regulate providers of emerging businesses of financial service as they have the same legal obligation and status applicable to credit institutions.
Taxation of transactions with virtual currenciesAlthough the tax regime and reporting obligations in relation to virtual currencies are at an early stage, the Spanish tax agency has also issued binding rules concerning taxation of undertakings with virtual currencies.
- Income tax and VAT
Moreover, the income derived from Mining of virtual assets is treated as a business income. 25% of income tax rate applies to corporate entities, while non-resident income tax rate is 24%, the tax rate will be 19% in case when the taxpayers reside in any other EU or EEA member state.
The Spanish tax authority exempted appliance of VAT on virtual assets (binding tax rulings V1274-30 of 6 May and V1748-18 of 18 June) the approach is harmonised with the EU court of Justice decision in the case Skatteverket v David Hedqvist, which ruled that VAT does not apply to purchase and sale of bitcoins.
- Net wealth tax and reporting obligations
- Declaring obligations
Concluding remarksUnder the new regime, crypto-to-fiat exchanges, crypto exchanges, and e-wallet providers have become regulated businesses, subject to mandatory registration. along with taxation and reporting requirements, it can be seen that Spain has chosen to record and keep an eye on every operation carried out with virtual currencies, from the sale to its custody and storage. Commercial banks in Spain, who are already big players in the supervised industry, have also shown an intent to offer crypto services to their customers, thus should duly adapt their AML policies and file registration accordingly. Albeit, outgrowths of the legislative developments remain to be seen in the near future, as proposed EU regulation of crypto-assets to be introduced in the future might also change the course of events in the crypto-assets market.
The content of this article is intended to provide a general guide to the subject matter, not be considered as a legal consultation.