A fraudulent investment in cryptocurrencies cannot be declared a capital loss – unless legal proceedings are initiated

Even if more than a year has passed, a complaint alone is not sufficient, according to the DGT.
Cryptocurrencies are an attractive financial asset, but they are also complex and generally not very transparent and are still in the process of being regulated, which is an ideal breeding ground for fraud and inferred tax doubts. This is the case with the binding consultation adopted by the Directorate General for Financial Operations. It states that it is not sufficient to file a complaint to be able to claim losses in income tax for an investment in cryptocurrencies made on a fraudulent platform, as no legal proceedings have yet been initiated despite the fact that a year has passed.

The taxpayer does not state in which specific crypto-assets he invested and which were the subject of the loss, but limits himself to stating that they were cryptocurrencies. However, this is a broad concept that can cover different types of virtual assets, including cryptocurrencies according to the Proposal for a Regulation of the European Parliament and of the Council on markets in cryptoassets and amending Directive (EU) 2019/1937 of 24 September 2020, which defines the term “cryptoasset” in Article 3(1)(2) as “a digital representation of value or rights that can be transferred and stored electronically using decentralised recording technology or similar technology”.

Capital losses
As regards the design of capital gains and losses, the Income Tax Act does not provide that the amount of a loan that is not repaid at maturity is automatically calculated as a capital loss. In this case, the taxpayer has lost an investment in cryptocurrencies that he made on a fraudulent platform in 2021, and the question is whether this loss can be counted in the income tax return, since he filed the relevant report with the National Police.

However, the Directorate General of Taxes rejects this possibility, as the circumstances mentioned in Art. 14.2 k) of the LIRPF do not apply in the present case, as the filing of the complaint cannot be considered as the initiation of legal proceedings to enforce the claim, despite the passing of one year.

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