Hacienda extends crypto oversight to Model 720

Hacienda wants to know how many cryptocurrencies you have and where you keep them

Are you required to declare your bitcoin to Hacienda? Until now, the honest answer was a shrug. The reform being prepared to update Ley 7/2012 changes the framework: it introduces virtual currencies, inside and outside Spain, into the tax agency's information machinery. And not just balances held in custody. Also every acquisition, transmission, exchange, transfer, collection and payment. That is, the complete trail of operations. The official excuse: fighting fraud. The practical consequence: one more form.

What exactly does the reform of Ley 7/2012 require?

The text extends Model 720, the declaration of assets and rights located abroad, to virtual currencies. Taxpayers must report holdings and operations, whether the coins are in Spain or abroad and affect a Spanish tax resident. In addition, information will be required on balances and holders of coins held by a third party.

The list of operations subject to information reporting is broad: acquisition, transmission, exchange, transfer, collections and payments. Translated: every time you move something, someone may be watching. It's not a new tax, it's a reporting obligation. But we all know that in this house, paperwork comes before the receipt.

Is it new or is Hacienda late?

There is division there. Some argue that this is nothing new: cryptocurrencies have been subject to Model 720 for years if you have more than 50.000 euros in assets outside Spain, and converting to cash in an account is a capital gain just like selling shares. Under that reading, the change is cosmetic.

The other reading points to the opposite. What's coming now is not Model 720, which already existed, but a web of information forms that cover practically all operations. The qualitative leap is in the detail: moving from monitoring the balance to monitoring the movement. And moving is what everyone does.

Do exchanges report to Hacienda?

It's worth getting into specifics. Kraken is headquartered in San Francisco, but operates the SEPA zone through Swiss and German banks, with non-Spanish IBANs. The question is whether those entities report to the Agencia Tributaria. The answer circulating among daily traders: not necessarily, because an exchange is not a classic financial institution and the automatic exchange of information system (CRS) does not apply to it in the same way.

With exchanges based in Spain, the story is different, as argued in the thread: there, data would indeed be supplied. And in practical terms, the most reliable trail, according to traders, is not the exchange but transfers from Spanish banks. Money entering or leaving a domestic account leaves a trace.

Then there's the philosophical problem that no one at the Agencia Tributaria seems to have solved. What does it miccionan to have cryptocurrencies "outside Spain"? The blockchain is not in any country and is in all of them. Everyone keeps their private keys where they want: in a hardware wallet, in an encrypted file, or on a piece of paper. If they're not your keys, they're not your coins; if they are your keys, there's no border that situates them.

Own wallet, "lost" keys and gift cards

From those cracks comes the repertoire of tricks that is shared. The core idea: buy on a market that reports to Hacienda and move the coins as soon as possible to your own wallet. From there, two exits. The first, argue that the coins are not abroad, because the network also has Spanish nodes. The second, brazen it out and declare that in the transfer you got the address wrong and lost them, with the corresponding capital loss to offset.

To this are added shortcuts outside monitored circuits: ATMs that don't ask for verification, services that exchange bitcoin for department store cards and fuel without going through KYC, or prepaid cards up to 500 euros with high fees. The conclusion that is repeated is the usual one: while one country closes the door, another opens the window. Portugal, as claimed in the debate, does not tax cryptocurrencies.

The poker precedent and Hacienda's real power

The episode that hovers over the entire conversation is that of online poker. Back then, Hacienda claimed half a million euros from a professional player and lost, because it only counted profits and not the overall balance. That failure is what today gives hope to those who antiestéticar they'll look at the entire balance instead of the gain.

The hope has fine print. The Agencia Tributaria doesn't need to be right to start: it's enough for it to suspect. First comes the assessment and the penalty; proving it was wrong is up to the taxpayer, with lawyers and years ahead. The presumption of truth plays on its side, not yours.

In short, the administration is preparing to demand detailed accounts of an asset that, by its own criteria, is both inside and outside the country, in one place and in none. The Agencia Tributaria may not fully understand the blockchain. What it understands, and very well, is how to fill out a form in triplicate.