Cryptocurrency mining in Spain

The advent of cryptocurrencies, NFTs, and virtual currency mining hasn’t exactly been welcomed with open arms by the Spanish Tax Agency. But how do you approach crypto mining from a legal perspective, and what are your tax obligations if you decide to do it? We’ll tackle this and more in this article.  

The good news is, it is legal to mine crypto in Spain. However, the practice is largely unregulated, meaning you’ll need to do your research to make sure you’re fully complying with the law.

According to Spanish law, all business activities carried out in Spanish territory by natural or legal persons are subject to Business Tax (IAE), regardless of the business sector or profits made. So, if you’ve decided to mine crypto, the first thing you’ll have to do is register with the Spanish Treasury as a cryptocurrency miner, specifying the activity undertaken. If you generate revenue from your mining, then you’ll have to register as self-employed. You may also need to file a Business Tax Declaration to the Spanish Tax Agency (if applicable), submit form 036/037, and pay taxes on profits you earn. 

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Before we discuss the laws surrounding cryptocurrencies in Spain, let’s briefly define them. Cryptocurrencies are digital currencies that use cryptography as a way to verify transactions. Transactions are verified through decentralized digital accounting ledgers called blockchains. Miners are responsible for issuing the cryptocurrencies, meaning that—unlike government-issued fiat currencies—they aren’t subject to an intermediary like a bank. The euro, for example, is regulated by the European Central Bank.

 According to new regulations in Spain, if you earn revenue greater than €1,000 in a single crypto transaction, this revenue counts toward your tax base on your Personal Income Tax (IRPF) and must be declared in the capital gains and losses section of your return.

To calculate the tax base on which Personal Income Tax (IRPF) will be levied, you’ll need to subtract the purchase value of your virtual currencies from their sale value. The tax rate on which profits on cryptocurrency investments are levied varies depending on the profits generated from investments you’ve sold. Revenue of €6,000 or under is taxed at 19%, revenue between €6,000 and €50,000 is taxed at 21%, revenue exceeding €50,000 is taxed at 23%, and revenue above €200,000 is taxed at  26%. 

Mining virtual currencies consists of verifying transactions carried out in a given network and issuing new cryptocurrencies through consensus and data mining algorithms.

 To earn profits, the miner or community of miners must try to find a solution to a cryptographic puzzle corresponding to a block in the blockchain. The computer or group of computers that solves the puzzle is then rewarded with a virtual currency incentive. The quantity varies depending on the type of cryptocurrency being mined.

If you plan on entering the mining business, it’s worth noting that in order to be profitable, you’ll first have to invest a large amount of money in computers, IT equipment, and above all, electricity. Then, you’ll have to decide which virtual currency to mine and join a pool or community of miners, as it's practically impossible to mine as an individual. Profits are then divided between the pool members’ cryptocurrency wallets, where they can be accessed through private keys.

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