Controls and Taxes on Cryptocurrencies 2024-03-03 23:02:53

These loopholes allow tax-free passage of huge sums currently being traded and invested by Greek taxpayers in cryptocurrencies and digital assets. On the other hand, these loopholes do not allow legally acting citizens to claim profits from the sale of cryptocurrencies and digital assets to cover the IRS presumptions.

The AADE began several months ago an effort to document the problems that exist in the control and taxation of transactions in cryptocurrencies and digital assets and soon, as part of the operation of a new Working Group that will be set up, it is expected to proceed with the formulation of proposals to the ministry of National Economy and Finance to change the legislative framework in order to make it possible to deal with the specific problems.

In particular, the preparation of a legislative framework that will cover all the gaps in the current legislation for the tax treatment and control of cryptocurrencies and other digital assets is the subject of a Working Group decided to set up by the Ministry of National Economy and Finance. The team has sixteen members and consists of officials from the ministry and the AADE.

Based on the recording already made by the AADE, there are the following loopholes in the tax legislation:

1) It is not expressly provided in article 32 of the Income Tax Code (law 4172/2013) that the sums of money spent by any natural person for transactions with cryptocurrencies and digital assets are a presumption for determining taxable income. These amounts must be considered by the current legislation as presumptive, as is done with the sums of money paid for the purchase of securities in general. However, based on the interpretation of the current provisions “the concept of securities includes bonds, interest-bearing bonds of the Greek State, bank bonds, futures contracts, futures contracts, option contracts, mutual fund shares, shares and in general products that can be traded on stock exchanges and markets’. That is, both Article 32 of the CFE and the relevant interpretative circular do not explicitly mention anything regarding the costs of purchasing cryptocurrencies and digital assets. This loophole can be exploited for illegal enrichment and laundering of black or dirty money.

2) It has not been clearly stated in the Tax Law and the related interpretive circulars what exactly is the tax treatment of income (profit) obtained from investments in cryptocurrencies and digital assets. Indirectly but not clearly, these incomes are taxed as coming from intangible securities, from intangible securities, i.e. with a tax rate of 15%. However, this is not expressly provided for anywhere in the CFE and it is necessary to intervene with a relevant legislative regulation.

3) There is no legislation and, therefore, no directives from the AADE to identify and tax audit those who are systematically active in transactions with cryptocurrencies and digital assets. Therefore, it is impossible for the Greek tax authorities to identify and determine the financial benefits of the taxpayers from these activities.

Moreover, those involved want to be correct and honest and declare in their tax returns the amounts they invested in these digital products as well as the profits they earned, in order not only to be taxed for them but also to use them in the future to cover evidence of purchase of high value assets, such as e.g. real estate, I.X. cars etc. they finally find that they have no option. And this is because they are faced with the fact that, with legislative interventions by the Ministry of National Economy and Finance, the exact way of determining and taxing the income from these products has not been clearly defined, as well as the supporting documents proving that the relevant amounts, as is done with all other categories of revenue, income and expenditure.

Couple found with debt of thousands of euros!

About 1 year ago, a couple of taxpayers were called to pay huge amounts of income tax amounting to tens of thousands of euros, because the competent DOU did not recognize the coverage of presumptive purchase of real estate with the profit from the purchase and sale of cryptocurrencies, totaling 182,500 euros, which the couple claimed in the his tax return. The DOU decided, in particular, that the income shown as income from the transfer of cryptocurrencies (profit from buying and selling cryptocurrencies) does not fall under the provisions of articles 42 and 42A of the Tax Code and for this reason completed the liquidation of the submitted income tax return without taking into account the upper income of a total amount of 182,500 euros. That is, the DOU did not accept that this amount can cover the property purchase expense declared in codes 735 and 736, arguing on the one hand that the income from the transfer of cryptocurrencies abroad does not fall under the above provisions of Articles 42 and 42A of the Tax Code, with which provide for and exhaustively list the securities from the transfer of which a capital gain is considered income, and on the other hand, that sufficient data was not provided to determine in a specific and clear manner the capital gain resulting from the transfer of said cryptocurrencies.

The taxpayers appealed to the TEN, which, however, did not accept their claims and rejected their appeal, fully adopting the reasoning of the competent DOU, which was essentially based on the fact that in the current Income Tax Code (law 4172/2013) there is no explicit reference on how to determine and justify income from cryptocurrency transactions nor on how such income can be taken into account to meet presumptions.

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