A Spanish decentralized finance (DeFi) investor was charged with 9 million euros ($10.5 million) in overdue taxes for obtaining a crypto-backed loan, as per a local media article.
In a Thursday report, the Spanish news organization Periodista Digital claimed it acquired documents illustrating that the investor had already reported all cryptocurrency transactions and settled $5.84 million in taxes.
Three years afterwards, officials issued an additional invoice linked not to unreported gains, but to the act of depositing assets into a DeFi protocol for a loan. The assets were not liquidated, hence no profit was generated, the article noted.
A tax consultant mentioned in the article stated that the local tax agency “has taxed something that, from any economic or legal standpoint, does not qualify as income.” The consultant further remarked that the asset movements within the DeFi protocol were categorized as realized earnings and represented “an interpretation lacking any legal foundation in Spanish or European law.”
The article indicated that the Spanish Agencia Estatal de Administración Tributaria (AEAT) categorized a stablecoin loan as a capital gain and token transfers to protocols such as Beefy or Tarot as taxable occurrences.
This classification, critics contended, contradicts Article 33 of Spain’s Personal Income Tax Law, which defines capital gains as necessitating an actual economic advantage and a change in net worth.
According to the article, this situation highlights a problem within the local tax enforcement system.
Related: BBVA receives regulatory approval to provide Bitcoin and Ether trading in Spain
Spain’s crypto tax regulation
Spain’s tax agency has been notifying crypto holders about tax obligations for several years, sending 328,000 warning notifications concerning crypto taxes for the fiscal year 2022 in 2023, followed by 620,000 similar notifications a year later. Local regulations also mandated local crypto users to declare their foreign crypto assets by the end of March 2024.
As per June reports, AEAT can access and seize crypto assets if tax responsibilities are not fulfilled. The article suggested that Spanish citizens lack a fair recourse path when the tax agency commits an error.
Related: Spanish bank BBVA advises clients to allocate 7% to crypto
Spain’s first level of appeal in tax disagreements is the Tribunal Económico-Administrativo Central (TEAC), an administrative entity under the Ministry of Finance. In 2020, the European Court of Justice (ECJ) determined that the TEAC is not an autonomous “court or tribunal” according to European Union law.
The article further declared that TEAC is an administrative tribunal under the jurisdiction of the local Ministry of Finance. The government assigns the tribunal’s officers, who are selected by and reliant on the same authority whose rulings they evaluate, the ECJ remarked.
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