The Italian Parliament has approved a 26% tax on cryptocurrency gains in the budget year 2023.

According to a new budget approved by parliament on Thursday, cryptocurrency traders would be liable for Italy’s 26% capital gains tax beginning in 2023.

According to Reuters, Italian Prime Minister Giorgia Meloni’s 2023 expansionary budget, which was finalized in a rush at the end of the year, includes 21 billion euros ($22.3 billion) in tax incentives to help businesses and individuals deal with the current energy crisis.

In Italy, where crypto is mostly unregulated, the 387-page budget defines crypto assets as “a means of a digital representation of value or rights, which can be exchanged and kept electronically, using distributed ledger or similar technologies.”

The move by Italy (and, more recently, Portugal) to impose a capital gains tax on cryptocurrency comes ahead of the European Union’s landmark Markets in Crypto Assets (MiCA) regulation, which promises passportable licensing frameworks and stringent operational requirements for crypto service providers in the 27-member political and economic union.

Gains from cryptocurrency trading are taxed at 26% if they surpass 2000 euros every tax period. As an incentive for declaring their cryptocurrency, the new bill imposes a “substitute income tax” on investors equal to 14% of the value of their assets as of January 1, 2023. (instead of the purchase cost or value).

Any capital losses from crypto investments that “are greater than the capital gains, for an amount greater than 2,000 euros, the excess is carried forward as a deduction in full from the amount of capital gains for the periods following, but not later than the fourth, provided that it is indicated in the declaration of income relating to the tax period in which losses have been realized,” according to the new rules.

However, investors may need more clarification on what constitutes a taxable event, as the paper also states that “the exchange of crypto-assets with the same characteristics and functionalities” does not constitute a fiscal event.

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