Spain's Crypto Tax Overhaul Sparks Exodus Fears and Regulatory Chaos

Spain's left-wing Sumar parliamentary group has proposed a sweeping overhaul of cryptocurrency taxation that could push the country to the forefront of the EU's most stringent regulatory regimes. The plan, now under review by the Congress of Deputies, seeks to reclassify crypto gains from non-financial assets into the general income tax bracket, raising the top marginal rate to 47% from the current 30% savings tax rate. Corporate taxpayers would face a uniform 30% rate on crypto-related profits according to reports. The proposal also mandates a "crypto traffic light" risk system, requiring the National Securities Market Commission (CNMV) to issue color-coded warnings on investor platforms based on regulatory oversight, liquidity, and asset backing according to analysis.

The changes mark a significant shift in how Spain treats digital assets. Currently, individuals report crypto gains under the savings tax base, taxed at up to 30%, a structure similar to traditional investments like stocks. By shifting crypto to the general income tax bracket, the policy effectively reclassifies digital assets as ordinary income rather than investment income. Economists and legal experts have criticized the move, calling it a "clearly go against Bitcoin, Ethereum, and other cryptocurrencies". José Antonio Bravo Mateu, a tax advisor, warned that the amendments risk driving investors offshore, echoing India's experience after it imposed a 30% tax on crypto gains in 2022, which led to a shift in trading activity to foreign exchanges.

The proposal also faces practical challenges. One element seeks to label all cryptocurrencies as seizable assets, expanding rules that currently apply only to EU-regulated tokens under the Markets in Crypto-Assets (MiCA) framework. However, legal specialists argue this is unenforceable for assets like Tether's USDT, which are not held by local custodians. Chris Carrascosa, a lawyer, noted that such measures could force Spain's crypto service providers into impossible compliance scenarios. The plan's critics also highlight the difficulty of seizing self-custodied assets, which require private keys for access.

Spain's tax authority (AEAT) has increasingly targeted crypto holders, sending 620,000 warning notices in 2024 alone. Yet, the proposed reforms risk exacerbating existing confusion. Lullius Partners, a Spanish tax firm, noted that current legislation lacks clear guidelines on taxable events, complicating compliance. Meanwhile, a competing proposal by tax inspectors Juan Faus and José María Gentil advocates a separate, lighter tax regime for Bitcoin, potentially distinguishing it from other tokens.

If enacted, the amendments could reshape Spain's crypto landscape, potentially deterring investors and service providers. Critics warn of "absolute chaos in the entire crypto tax regime" and a mass exodus of high-value investors. With the proposals now under parliamentary review, Spain's digital-asset sector awaits clarity, uncertain whether the changes will bring regulatory certainty or deepen the confusion that has long defined the country's approach to crypto taxation.