Italy: taxed also the capital gains from crypto payments

Artificial intelligence is rapidly revolutionizing every sector, from healthcare to finance, including marketing and public administration. But who oversees these systems? How can we ensure that AI does not violate fundamental rights?

It is from these questions that the EU AI Act originates, the first legislation in the world that regulates the development, distribution, and use of artificial intelligence according to a key principle: risk.

 

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What does the EU AI Act foresee?

Approved in 2024, the European Regulation on Artificial Intelligence introduces a risk-based approach. AI systems are classified into four main categories:

🔹 AI at minimal risk
🔹 AI at high risk
🔹 AI prohibited
🔹 Models for general purposes (GPAI)

Prohibited Practices: AI That Will Have No Future

Some uses of artificial intelligence are considered ethically unacceptable or dangerous and will be banned starting from February 2, 2025.

Examples of prohibited AI:

  • Social score (style “Black Mirror”): evaluating people based on their behavior, with consequences in real life.
  • Psychological manipulation: systems that push users to make harmful or unaware decisions.
  • Scraping of faces from the Internet for biometric databases.
  • Recognition of emotions in schools and workplaces (except for health or safety reasons).
  • Real-time biometric surveillance by law enforcement, except in exceptional authorized cases.

Capital gains on crypto payments

The key issue in this case is therefore only related to the potential realization of capital gains.

The government’s response specifically mentions the crypto law approved in Italy at the end of 2022 and entered into force in 2023, according to which in the case of an exchange of crypto-assets with other goods, the difference between the consideration received and the tax value contributes to the formation of income.

In other words, this means that when cryptocurrencies are used to pay for the purchase of a good, and thus the condition of exchanging crypto-assets with other goods occurs, the event is fiscally relevant.

Being fiscally relevant, in the case of realization of capital gains, these are taxable, specifically at 26%, which however starting from January 1, 2026, will be increased to 33%.

To calculate the capital gains when using crypto to pay for the purchase of goods and services, it is necessary to subtract the purchase cost of the crypto from the euro value of the purchased goods, or calculate the profit, starting from the concept that receiving goods or services by paying in cryptocurrencies is a fiscally relevant event.

Therefore, if the value in euros of the goods purchased is equal to or less than the purchase cost of the crypto used for the payment, no capital gains are realized, and therefore taxation does not apply.

The fiscally significant events

It should be noted, however, that Italian law specifies that exchanges between cryptocurrencies with the same characteristics and functions are not fiscally relevant.

Therefore, if one uses a cryptocurrency, such as Bitcoin, to purchase another similar cryptocurrency, such as Ethereum, the event is not considered fiscally relevant by Italian law. This means that any capital gains are not taxed.

If instead one sells a cryptocurrency, such as Bitcoin, Ethereum, or similar, to cash in stablecoin redeemable in fiat, such as USDC, the taxation of any realized capital gains is triggered. This criterion also applies to the purchase of goods or services with payment in crypto.

The problem lies in the fact that if cryptocurrencies like Bitcoin or Ethereum are used to purchase goods and services, the purchase cost to be subtracted from the value of the purchased goods for the calculation of any capital gains must be traced back to the first moment when cryptocurrencies were acquired by paying with assets having different characteristics and functions.

This involves a significant difficulty in calculating any capital gains if many transactions have been carried out.

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For example, if a good or service is paid in DAI, which is not considered a stablecoin but an asset-referenced token with characteristics similar to cryptocurrencies, the calculation of any capital gains becomes complicated if the DAI were not purchased in fiat currency or stablecoin, but for example through a sale of ETH. And if the previous purchase of ETH was made with a payment in BTC, the situation becomes even more complicated.

“`

In this specific case, one should trace back to the first purchase of cryptocurrencies made in fiat or stablecoin, or other assets with characteristics and functions different from these cryptocurrencies, and do all the calculations. It turns out to be so complicated that it is strongly suggested in these cases to use the appropriate software that has been designed for this type of operations.

All this in fact favors the sale of cryptocurrencies into stablecoin, before proceeding with purchases of goods or services paid in crypto, because proceeding in this way simplifies the calculations of the software.

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Deploying smart contracts on the Ethereum blockchain

First of all, one or more developers must obviously create the smart contract by writing the appropriate lines of code, and then they must send it to the Ethereum network.

In technical terms, publishing it on the Ethereum blockchain means making all the nodes in the network receive and execute it. Once published, all instructions in it will always be executed by all nodes in exactly the same way.

Therefore, not only its publication but also the execution of instructions is irreversible once it is published on the blockchain.

Therefore, what really matters are the instructions it contains – which can be the most diverse – and how many people use it. Indeed, in order for the instructions of a smart contract to actually be executed, there must be one or more transactions that invoke them.

It is also worth remembering that these instructions generally involve the use of resources, such as data or tokens, so for them to actually be executed, all the conditions set as necessary must be met. 

Sometimes this data comes from outside, thanks to so-called oracles, while sometimes it simply comes from transactions on the blockchain.

Usually, the transaction that triggers the execution of the instructions contained in a smart contract involves the payment of a fee in ETH, and in many cases in order to actually trigger the execution also involves the payment or sending of tokens specific to the smart contract itself, or other smart contracts.

Technically, smart contracts are a type of account on the Ethereum blockchain, “controlled” by the network rather than a central entity. They can store ETH or tokens, and can also send transactions on the network autonomously.

A contract in the Solidity language would be like a kind of union of a code (the functions) and data (its state) located at a specific address on the Ethereum blockchain. Each contract contains declarations of state variables, functions, function modifiers, data structures and events.

The MiCA regulation, which came into force with the aim of uniformly regulating the cryptocurrency sector within the European Union, imposes new conditions that particularly concern:

  • – The mandatory authorization of crypto service providers
  • – The transparency of whitepapers
  • – The reserve requirement for stablecoin issuers
  • – Surveillance on systemic risks

One of the main impacts is precisely on stablecoins, like USDT, which will have to demonstrate that they have solid, transparent, and accessible reserve assets.

The platforms that wish to maintain the trading of these tokens within the European market will need to ensure that the assets are fully compliant.

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