Italy adopts the LIFO ( Last In First Out) cashout method to calculate capital gains and capital losses.
This is how it works.
In this method the last assets bought are the first to be sold, starting from the most recent and going back chronologically.
Example:
user A buys 0.5 BTC in May (BTC price 20.000€ - price charged 10.000€)
user A buys 0.5 BTC in June (BTC price 15.000€ - price charged 7500€)
user A buys 0.5 BTC in July (BTC price 10.000€ - price charged 5000€)
user A sells 1 BTC in September (BTC price 15.000€ - proceeds from sale 15.000€)
the transactions to be sold are the ones from July and June
The calculation formula of profit/loss is:
(15.000*1BTC) - [(10.000*0,5BTC)+(15.000*0,5BTC)]
a profit of €2500,00 has been made
Below are the various categories of cryptocurrencies and the criteria for whether a capital gain is generated or not, in accordance with the October 2023 regulations of the Italian Revenue Agency.
It is important to remember that for years prior to 2023, if the threshold of 51 thousand euros of average balance for a total of 7 working days was exceeded, the following categories will not apply, but every exchange between cryptocurrencies is considered a capital gain event.
Category 1
Unbacked: cryptocurrencies without any underlying asset
ART (asset reference token): represent real-world assets in digital form
E-money: considered as electronic money
Category 2 (economic purpose)
Utility token: tokens with specific functions within a blockchain
Security token: tokens representing traditional investment instruments in digital form
Payment token: tokens used for payments
NFT: non-fungible token
Category 1
| unbacked | art | e-money |
unbacked | NO capital gain | NO capital gain | capital gain |
art | NO capital gain | NO capital gain | capital gain |
e-money | capital gain | capital gain | NO capital gain |
As visible from the table above, capital gains are only generated when exchanging e-money tokens with unbacked or ART tokens, and vice versa.
Category 2
| utility | security | payment | NFT |
utility | NO capital gain | capital gain | capital gain | capital gain |
security | capital gain | NO capital gain | capital gain | capital gain |
payment | capital gain | capital gain | NO capital gain | capital gain |
NFT | capital gain | capital gain | capital gain | NO capital gain |
From the second table, it is visible that all exchanges between these tokens generate capital gains, except for exchanges between tokens of the same category.
If two tokens belonging to the same category 1 are exchanged, but differ in category 2, a capital gain will be generated.
The same happens for the reverse cases where the tokens belong to the same category 2 but differ in category 1.
In general, if one of the two categories does not coincide, a capital gain is generated.
Here are some examples:
Trade BTC / ETH - No Capital Gain
BTC (unbacked/payment) - ETH (unbacked/payment)
Same category 1 and 2
Trade USDT / SOL - Capital Gain
USDT (e-money/payment) - SOL (unbacked/payment)
Different category 1, same category 2
Trade PAXG / ADA - Capital Gain
PAXG (ART/payment) - ADA (unbacked/payment)
Different category 1, same category 2
Trade LINK / MATIC - Capital Gain
LINK (unbacked/utility) - MATIC (unbacked/payment)
Same category 1, different category 2