Foto: Monede virtuale (Pexels / Roger Brown)
The introduction of rules for declaring and taxing income from cryptocurrency transactions has led to a collapse in the amounts declared, but also in the taxes collected by the state on these transactions. Twenty-five times fewer taxpayers have declared income from virtual currency transactions year-on-year, and the state’s receipts have fallen 20-fold, data obtained by Economedia from the National Tax Administration Agency (ANAF) show.
Only 1,319 taxpayers declared income from virtual currency transactions in 2020, even though the cryptocurrency market in Romania has grown strongly, both in terms of transactions and turnover. By comparison, in 2019, the number of taxpayers declaring income from cryptocurrency transactions was 33,155, 25 times higher.
The declared revenues also plummeted: from revenues of 2.27 billion lei in 2019, to revenues of 121.48 million lei in 2020. In this context, the taxes collected by the Romanian state on account of these revenues also fell 20 times, from 224.8 million lei in 2019 to 12.15 million lei in 2020.
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The collapse of cryptocurrency income reporting comes as the market boomed last year. According to data provided by brokerage XTB at the request of Economedia, the rising popularity of cryptocurrencies was undeniable last year, both globally and in our country. Thus, in 2020 compared to 2019, large increases were observed: almost 200% in terms of the number of accounts involved in cryptocurrency-backed derivatives transactions, 160% in terms of turnover and 120% in terms of the number of transactions.
According to XTB, last year’s growth is even modest compared to this year’s boom. 2021 came with an exponential explosion compared to 2020. In the first half of 2021 alone, XTB saw 23 times more turnover than in all of 2020, 10 times more trades, and 6 times more clients involved in cryptocurrency-based derivatives trades than in all of 2020.
Why have reported revenues collapsed?
Reported cryptocurrency trading revenues collapsed as virtual currency trading was regulated for the first time in Romania in 2019, through Law 30/2019.
The law introduced provisions in the Tax Code on the taxation of income earned in this way, according to consultants at Deloitte. According to these regulations, income from the transfer of virtual currency falls under the category of income from other sources and is subject to the specific tax regime for this category, with certain particularities. One of the particularities is that the determination of income tax and applicable social security contributions is the responsibility of those who earn the income, not the payers of the income (as is the case for other income in the same category). Even for exchanges made through trading platforms, the reporting obligation remains with the users.
Thus, individuals who derive income from this type of transaction are obliged to declare it by filing a single tax return and to pay the taxes due. This year, the declaration had to be filed by 25 May for income earned in 2020 from cryptocurrency transactions and for income expected to be earned in 2021. For taxpayers with tax residence in Romania, the obligation to declare income from cryptocurrencies through the single return exists regardless of whether it is obtained from Romania or abroad.
Being in the category of income from other sources, gains from the transfer of virtual currency are subject to income tax and social health insurance contribution (CASS), but not to social insurance contribution (CAS).
As regards income tax, the 10% rate applies to the gain from the virtual currency transfer, not to gross income.
Earnings of less than 200 lei/transaction are exempt from the obligation to declare and pay tax, but only if the total earnings in a tax year do not exceed 600 lei.
At the same time, taxpayers who earn income from cryptocurrency transactions can declare this income by marking the option “Income from the transfer of virtual currency referred to in Article 114(2)(m) of the Tax Code” in the Single Tax Return. However, this tick is optional, so many taxpayers may have declared income from cryptocurrency transactions but not marked it separately as this type of income. ANAF itself points out that the Romanian reporting system does not separately highlight income from virtual currency transactions, as it is included in the category of income from other sources.