Italy is set to introduce a significant change to its cryptocurrency tax policy. The government has announced plans to increase the Italy capital gains tax on Bitcoin and other cryptocurrencies from 26% to 42%.
This move of Italy Capital Gains is part of Italy’s broader effort to raise revenue for its 2025 budget and modernize its tax system. The increase was revealed by Deputy Finance Minister Maurizio Leo on October 16, 2024, during a press conference at Palazzo Chigi.
Why Is Italy Raising the Tax?
The Italian government’s decision to raise the Italy capital gains tax on Bitcoin stems from the growing popularity of cryptocurrencies in the country. According to Minister Leo, the “phenomenon is spreading,” and with more people investing in digital assets like Bitcoin, the government believes it’s time to ensure they contribute more to public funds.
Italy is trying to tap into the booming digital asset market as part of its strategy to generate more income for public services like healthcare and support for citizens. By increasing the tax rate on Italy Capital Gains, the government aims to close gaps in the taxation system and make sure investors pay their fair share as cryptocurrencies continue to grow.
Impact on Italy Capital Gains
For Italian cryptocurrency investors, this change will be impactful. The jump from 26% to 42% is a big one, and it means that investors who have made substantial gains in recent months will face much higher tax bills. Those who hold large amounts of Bitcoin or other cryptocurrencies could see a major cut in their profits.
The increase in the tax rate could also encourage some investors to seek alternative ways to manage their cryptocurrency portfolios. This could mean using more tax efficient strategies or even moving to countries with lower taxes on digital assets.
It’s also important to note that this tax hike is not limited to Italy. Several other countries around the world are either considering or have already introduced similar measures to capture more revenue from the rapidly expanding cryptocurrency market. This reflects the growing recognition of cryptocurrencies as a legal investment and the need for governments to regulate and tax them appropriately.
Digital Services Tax (DST) Changes due to Italy Capital Gains
Alongside the increase in Italy capital gains tax, Italy is also looking to expand its digital services tax (DST). Introduced in 2019, the DST currently applies to companies earning at least €750 million ($817 million) globally and €5.5 million ($5.9 million) from digital services in Italy. The new budget proposal plans to remove these revenue thresholds, meaning more companies will be subject to the tax, regardless of their size.
This adjustment to the DST is part of Italy’s broader efforts to modernize its tax system and ensure that digital service providers, including tech giants, contribute fairly to the country’s economy. By eliminating these thresholds, the government aims to ensure a more consistent tax collection from digital businesses operating in Italy.
Bitcoin Price Stays Strong Despite Italy Capital Gains
Interestingly, despite the announcement of the tax hike, the price of Bitcoin has remained strong. Bitcoin has seen a week over week gain of more than 12%, with its price nearing $68,000, the highest since July. This suggests that while the tax increase may worry some Italian investors, the overall market remains optimistic about Bitcoin’s long-term potential.
What’s Next for Italy and Cryptocurrency?
Italy’s decision to raise the Italy capital gains tax on cryptocurrencies is a bold move that could set a mark for other countries. While the government aims to raise funds for public services, it risks driving some investors to countries with lower tax rates, such as Portugal, which has no taxes on cryptocurrency gains.
As of now, Italy’s crypto investors will have to adjust to the higher tax burden. As the 2025 budget moves closer to being finalized, all eyes will be on Italy to see how the cryptocurrency community responds to these changes.
