Investors scoff at Italian government’s decision to raise cryptocurrency taxes to 42%

Italy intends to increase the tax on Bitcoin capital gains from 26% to 42%.

During a press conference at Palazzo Chigi on October 16, Deputy Finance Minister Maurizio Leo discussed the country’s new budget bill, which has been approved by the Council of Ministers. He noted that the cabinet of Prime Minister Giorgia Meloni took this step in response to the growing popularity of Bitcoin.

Italy crypto tax hike

The proposed increase in tax rates could place Italy among the top countries in terms of cryptocurrency taxes worldwide. The latest decision has sparked a major backlash from both investors and industry advocates.

Many have even ridiculed the Italian government for its proposed tax hike on cryptocurrencies, arguing that the rationale for imposing heavy taxes simply because these assets have gained popularity is absurd and short-sighted.

One user said:

“Italy is collapsing. How can we encourage the proliferation of new realities like bitcoin and crypto? Raise the already ridiculous tax from 26% to 42%. If you are thinking of coming to live in Italy, please don’t Every day that passes I always find another reason to leave.”

Critics also pointed out that this approach not only reflects a lack of understanding of the evolving crypto industry, but also risks alienating investors. As the tax burden intensifies, crypto players may seek to relocate or explore alternative investment opportunities in friendlier jurisdictions, which may stifle innovation and investment in Italy.

The Italian government had previously introduced a 26% tax rate on cryptocurrency trading profits in December 2022 for local investors who earn more than €2,000 a year. However, individuals earning less than this threshold for trading Bitcoin or altcoins were exempt from the proposed tax legislation.

Contrasted approach from the United Arab Emirates

As Italy increases its crypto tax, the United Arab Emirates (UAE) is taking a very different approach. In fact, the United Arab Emirates has decided to exempt digital asset transactions from its 5% Value Added Tax (VAT) in an attempt to position itself as a crypto-friendly jurisdiction. According to an official document, this change will take effect on November 15, 2024 and will apply retroactively to transactions dating back to January 1, 2018.

As such, all crypto-related activities, including transfers and conversions, will no longer be subject to VAT in the UAE.

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