Tax treatment of cryptocurrencies
What taxes and contributions do we have to pay to the state if we earn income from trading cryptocurrencies?
The transfer of virtual currency has been a topical issue in recent years, so the Romanian legislator has also established a legislative framework for tax purposes. Income earned by individuals from the transfer of cryptocurrency is taxable income, and the provisions of Chap. X – “Income from other sources” of Title IV – “Income tax” of the Tax Code.
Even if the solution of classifying these types of income in the category of income from other sources was a natural one, as this category is not a limitation, Law 30/2019 expressly introduced in Article 114 para. (2) letter m) of the Tax Code, the income category from the transfer of virtual currency.
In principle, it will be possible to calculate the actual income earned after the cryptocurrencies have been converted into conventional currencies and transferred to the beneficiary’s accounts, practically when the person trading virtual currencies receives a substantial income.
Thus, individuals earning income from selling virtual models must:
(1) complete and submit the single declaration on income tax and social contributions owed by individuals;
(2) pay tax on the resulting income;
(3) pay the social security contribution under certain conditions set out below.
Exceptions
Earnings below 200 lei per transaction are exempt from taxation, provided their total in a tax year does not exceed the established ceiling of 600 lei.[1].
Calculation of tax due
The tax is 10% of the positive difference between the sale price and the purchase price, including the amount of all direct transaction costs. This includes the purchase price and the commissions incurred in brokering the transaction.[2]. The sale price of the cryptocurrency is therefore reduced by the purchase price and any commissions paid, and if the result is a positive amount, the tax is calculated, which is 10% of the result.
Health insurance contribution
The contribution is only due if the taxpayer estimates for the current year an income of at least 12 times the gross national minimum wage in force at the time of filing. For the year 2022, the guaranteed minimum gross income is 2,550 Lei. For the estimation, income from other sources, income from self-employment, income from intellectual property rights, income from association with a legal person, income from the transfer of the use of goods, income from agricultural, fishing, and forestry activities, as well as income from investments, are taken into account cumulatively.[3].
Submission deadline
By 25 May 2022, the single return on income tax and social contributions owed by individuals (form 212) for the previous tax year must be completed and submitted in one of the following ways: electronically, physically at the competent tax office, or by post, by letter sent with acknowledgment of receipt.
The deadline for filing the return is also the deadline for paying income tax and contributions. After this date, non-payment of tax and, where applicable, health insurance contributions will incur late payment penalties.
Foreign income
Not only persons earning income in Romania are obliged to file the single return, but also taxpayers earning income from virtual currencies from sources outside the country are obliged to complete the Single Return on income tax and social contributions due by individuals – Chapter I. Data on income earned – Section I.2: Data on tax on income earned abroad within the same period. In this case, the tax calculation and payment will be made in accordance with the double taxation avoidance method[4]. The convention concluded by Romania with the state or states from which the income was obtained, which stipulates how the tax is to be paid, should be consulted.
If you have earnings from virtual currency transactions, pay attention to the calculation and payment of tax, as well as the completion and submission of the single tax return by 25 May 2022 at the latest.
[1] Art. 116 para. 2 lit. c) of Law no. 227/2015 on the Tax Code as amended and supplemented
[2] Idem
[3] Art. 170 para. 1 and 2 of Law No. 227/2015 on the Tax Code as amended and supplemented
[4] Art. 130 para. 4 of Law No. 227/2015 on the Tax Code as amended and supplemented
