A decentralized finance (DeFi) investor in Spain faces a bill of 9 million euros ($10.5 million) due to back taxes linked to a crypto-backed loan, as reported by local media.
In a Thursday report, Periodista Digital noted that the investor had already reported all cryptocurrency transactions and paid $5.84 million in taxes.
Three years later, authorities issued an additional bill based not on undeclared gains, but on the act of depositing assets into a DeFi protocol for a loan. The assets remained unsold, and no profit was realized, according to the report.
A tax adviser mentioned in the report remarked that the local tax agency “has taxed something that, from any economic or legal perspective, is not income.” The adviser further stated that the asset movement in the DeFi protocol was considered realized gains, which is “an interpretation with no legal basis in Spanish or European law.”
The report indicated that the Spanish Agencia Estatal de Administración Tributaria (AEAT) classified stablecoin loans as capital gains and considered token transfers to protocols like Beefy or Tarot as taxable events.
Critics argue that this classification contradicts Article 33 of Spain’s Personal Income Tax Law, which requires actual economic benefit and a net worth variation for capital gains.
The situation highlights an issue within the local tax enforcement system.
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Spain’s crypto tax enforcement
For years, Spain’s tax agency has been alerting crypto holders about tax obligations, sending out 328,000 warnings for the 2022 fiscal year in 2023, followed by 620,000 similar notices in the following year. Also, local regulations mandate that crypto users declare foreign holdings by the end of March 2024.
Recent reports state that the AEAT can access and seize crypto assets if tax obligations are not fulfilled. The report suggests that Spanish citizens lack a fair recourse if the tax agency makes errors.
Related: Spanish bank BBVA recommends clients allocate 7% to crypto
For tax disputes, Spain’s first line of appeal is the Tribunal Económico-Administrativo Central (TEAC), an administrative body under the Ministry of Finance. In 2020, the European Court of Justice (ECJ) ruled that TEAC is not considered an independent “court or tribunal” under EU law.
The report noted that TEAC operates as an administrative tribunal under the local Ministry of Finance’s authority. The government appoints the tribunal’s officials, who are consequently dependent on the same authority whose decisions they assess, according to the ECJ.
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