Spanish tax authorities clarify how current tax law applies to Bitcoin losses

Spain’s tax authorities have clarified how the country’s current tax law should apply to users who lose money due to the collapse of a bitcoin exchange, a scam or bankruptcy.

The Spanish General Tax Directorate (DGT) received a letter of inquiry from a Bitcoin enthusiast who claimed to have lost a large amount of Bitcoin.

The person deposited his Bitcoin funds into a third-party loan service platform in 2013. However, at the end of 2013, the administrator of the platform claimed to him that his deposited Bitcoins had been stolen, so his deposit could not be returned. The entire identity information of the administrator of the platform was only a nickname and a public key.

The platform then offered to refund 5% of the person's Bitcoin deposit, on the condition that the person waived his claim for a full refund and could not take legal action.

The person began to suspect that the platform might be a scam, so he rejected the platform's request and complained about his experience to the Spanish police and the relevant department where the website might apply for registration, but it turned out to be of no use because the claimant was Spanish and fell under the jurisdiction of Spanish law.

clarify

In response to this question, the Spanish General Tax Administration pointed out that this situation is in line with the existing personal income tax law regulations. In order for the loss to qualify as a capital loss for tax purposes, one of the following conditions must apply:

1. The reduction of the debt was approved by the judge.

2. The debtor has a reduction in debt during the bankruptcy process or the letter of credit is not recovered after the bankruptcy proceedings.

3. Unrestored credit remains good one year after formal proceedings commence.

Attorney Alejandro Gomez de la Cruz founder of Bitcoin Law, told CoinDesk:

“I think the case has been legally correctly interpreted at this point. Whether it’s positive or negative, I think those interpretations will be welcomed by the Bitcoin community.”

When asked about the impact of the Spanish Tax Administration's clarification, he said that it would allow Bitcoin companies to see that Spain is a Bitcoin-friendly country, clarify doubts, and ensure certain judicial protections.

Spain’s attitude towards Bitcoin

This case is not the first time that Spanish authorities have made their stance on Bitcoin clear.

Earlier this year, the Spanish Bitcoin community celebrated the Spanish Ministry of Finance’s decision to exempt digital currencies from VAT.