Regulations concerning cryptocurrencies are gradually falling in place in many countries across the world. While a lot of them are yet to implement cover-all regulations or laws, the Spanish tax authorities have labeled cryptocurrency mining operations as an economic activity. This new classification makes cryptocurrency mining a taxable activity.
The latest notice from the National Directorate of Taxes of Spain also requires individuals and companies involved in cryptocurrency mining operations to register themselves with the proper authorities. While this move adds credibility to cryptocurrencies as mainstream financial instruments, it may also end up affecting the profitability of mining operations, forcing miners to quit.
According to a Spanish economist and tax advisor Jose Antonio Bravo Mateu, cryptocurrency mining operations may end up attracting anywhere between 10% to 47% taxes on profits. A Spanish online cryptocurrency magazine has quoted Mateu on the potential benefits of the new taxation regime saying,
“As the new regulation classifies cryptocurrency mining as a wealth-creating economic activity, the mining community should take advantage of any applicable tax deductions on expenses related to electricity consumption and mining equipment.”
Miners, in order to continue profitable mining operations, will have to constantly upgrade their equipment. The increasing mining difficulty will also lead to increased power consumption. In such a situation, whether these tax deductions will act in favor of profitable mining, or not is a growing concern at the moment.
The Spanish government contests that these regulations are being introduced to curb illegal activities associated with digital currencies. With these regulations yet to be implemented, the country’s cryptocurrency community has also expressed concerns about the effect of taxation on innovation and development of blockchain technology.
Also, the implementation of new tax regulations in Spain may influence the other European Union and Latin American countries to follow the suit. Spain has been quite receptive to the emergence of cryptocurrency economy. It is one of the first European countries to exempt cryptocurrency transactions from VAT. Whether the new taxes will create a similar impact, is yet to be seen.
Ref: CriptoNoticias | Image: BigStock