If you hold cryptocurrencies or are considering investing in them, you might be wondering whether you need to declare and pay taxes on these assets. To help you understand your tax obligations related to these investments, we have outlined the steps you should consider.

Before we begin, please note the following:

CryptoMKT does not provide tax advice. This guide serves as an informational resource. You might need to consult a lawyer or accountant, or have a knowledgeable friend who can guide you further. The responsibility for meeting your tax obligations rests solely with you.

The information in this guide applies only to Chile and is focused on individuals (natural persons).

Let’s get started!

Step-by-Step Guide

If you are not familiar with tax matters and this is your first investment, essentially, to determine whether you need to declare and pay taxes, you should follow these steps:

Step 1: Research the tax regulations in your country.

Step 2: Record your cryptocurrency transactions: date, amount, and price.

Step 3: Calculate your capital gains or losses.

Step 4: Determine if you are required to pay taxes on your gains.

Step 5: Accurately declare your taxes or seek advice from an expert.

Step 6: Keep detailed records of your cryptocurrency transactions for future taxation.

Let’s review each of these steps:

Step 1: Research tax laws in your country: Tax laws vary by country, so it is important to understand the regulations that apply to cryptocurrencies. Investigate whether your country considers cryptocurrencies as a form of currency, asset, or property.

In Chile, cryptocurrencies are considered a digital or virtual asset. This means that, for tax purposes, they are equivalent to a non-physical movable property that can be sold, exchanged, invested, or used as payment, and as such, it is subject to taxes.

But which type of tax?

The general rule is that all residents in Chile are subject to two types of taxes: Income Tax and Value Added Tax (VAT), which you likely know as “IVA.” With this in mind, let's clarify:

From the outset, note that the acquisition, purchase, and sale of cryptocurrencies are not subject to VAT, as they are considered digital or virtual assets without physical form.

Consequently, the tax that may apply to gains from cryptocurrency transactions is Income Tax.

So, the first thing you need to know is that this tax applies to the income (or gains) a person or company generates in a given year.

Within Chile’s Income Tax Law, there are various types of this tax, which apply depending on the activity performed by the individual or company. For example, an employee is subject to Second Category Tax on their salary, while someone who works as an independent contractor and issues payment receipts is subject to Global Complementary Tax, and so on. Regardless of your economic activity, as a Chilean citizen and resident, you are required to declare your income annually.

Now, let’s see how this tax applies to cryptocurrency holdings:

Generally, the tax treatment of cryptocurrency holdings is akin to the treatment of stock movements.

What does this mean? You will need to declare income when you generate a gain (or greater value) from cryptocurrency transactions.

When does this occur? When you sell or liquidate your cryptocurrency, and the amount you receive is greater than the amount you paid for it. For example, if you bought a BTC for CLP 5,000 and later sold or liquidated it for CLP 7,000, you gained CLP 2,000.

In the previous example, should you declare the total amount you received from the sale or liquidation? No, only the gain or higher value, which is CLP 2,000. The gain obtained will be added to your other ordinary income that you need to declare, and you will pay Income Tax on the total amount.

If you made more than one sale and liquidation during the year, do you have to declare each of those operations? No, you should calculate the total amount of all operations conducted during the year. Don’t worry, we’ll help you with that later.

Are there cases where you don’t have to declare gains? Simply put, you are not required to declare when:

1. You purchase cryptocurrencies with fiat money (local currency) and hold them, meaning you don’t sell or liquidate them.

2. You transfer cryptocurrencies from one wallet to another, both of which are owned by you.

Here are more details about various scenarios:

Case

Explanation

You exchange a cryptocurrency for fiat money (local currency) and make a profit
You bought a cryptocurrency for $1, held it, and then converted it to Chilean pesos at $3: You must declare and pay taxes on the $2 profit.

You bought a cryptocurrency for $1, then sold it for $3, and were paid in fiat money
You must declare and pay taxes on the $2 profit.

You buy a cryptocurrency with another cryptocurrency
This is considered a barter, so if a gain or profit is realized in the exchange, you must declare and pay taxes on the gain.

You pay for goods and services with cryptocurrencies
This also constitutes a barter. You need to declare and pay taxes if the price of the goods or services is higher than the price you paid for the cryptocurrency.

You receive cryptocurrencies through mining
The acquisition of cryptocurrencies through mining is considered a patrimonial increase subject to taxes as "capital income,” and should be declared as such in the income tax return.

You are paid in cryptocurrencies
This is also considered a patrimonial increase but is treated as “income from work,” such as wages or fees.

You donate a cryptocurrency to a non-profit entity
Cryptocurrencies do not meet the requirements established by law for donations with tax benefits, so donations of these assets are subject to taxes under the general rules.

You donate or receive a cryptocurrency from someone other than a non-profit entity
If you receive a cryptocurrency as a donation: You do not need to pay or declare taxes until you sell it and realize a profit.
If you donate a cryptocurrency and its value exceeds 5 UTA, you must declare and pay taxes.

So, when is there no obligation to declare income? Very simply, you have no obligation to declare when:

1. You purchase cryptocurrencies with fiat money and hold them, meaning you do not sell or liquidate them.

2. You transfer cryptocurrencies between wallets, both owned by you.

At this point, you should have a good idea of whether you need to declare or not. Now, it's important to understand that having an obligation to declare your gains does not necessarily mean you have to pay taxes. Let’s proceed with the next steps to understand if, based on what you declared, you will need to pay taxes.

Step 2: Determine when you bought or sold cryptocurrencies: It is important to keep a detailed record of your cryptocurrency transactions. Note the date you bought and sold the cryptocurrencies, the amount, and the price for each transaction. This will help you identify the amount you need to declare for a given year. Remember, if you are declaring in 2023, you need to report your income for the year 2022.

Here’s how you can obtain this record from the CryptoMKT platform:

1. Go to our platform at http://cryptomkt.com and log in to your account using your registered email and password. Make sure to have your second factor of authentication handy.
   

And that’s it! With the information contained in that file, you have enough details to determine how much you bought and sold.

Step 3: Calculate your capital gains or losses: Capital gain or loss on cryptocurrencies is calculated by subtracting the purchase price from the selling price. If the selling price is higher than the purchase price, there is a capital gain. If the selling price is lower than the purchase price, there is a capital loss.

For the calculation, consider the following:

Purchase prices need to be adjusted according to the Consumer Price Index (CPI) between the month prior to the purchase date and the month in which the sale takes place. For example: if you bought a BTC in July 2022 for CLP 15,000,000 and then sold it for CLP 17,000,000 in October of the same year, the calculation would be:

• Purchase price/acquisition of BTC - July 2022: CLP 15,000,000
• % CPI adjustment between June and October 2022: 4.0%
• Adjusted purchase price/acquisition: CLP 15,600,000
• Selling price of BTC - October 2022: CLP 17,000,000
• Gain (higher value): CLP 1,400,000

Then, for your declaration, you also need to adjust your gain according to CPI between October and December 2022. This will give you your net profit as of December 31, 2022.

You need to perform this calculation for each transaction of this nature carried out during a calendar year, which will result in either a gain or a loss for each transaction.

Next, sum up all these gains and losses, and the result will indicate whether you are obligated to include these amounts in your declaration. In simple terms, if the result is positive, you need to declare it; if it’s negative, you have no such obligation.

Step 4: Determine if you are required to pay taxes: Depending on the country you live in, you may be required to pay taxes on your cryptocurrency capital gains. Consult your country's tax regulations to determine if you need to pay taxes.

In most cases, tax laws (especially for individuals) set certain annual income thresholds below which you do not have to pay taxes on your income. For example, in Chile, you need to pay taxes only when your total annual net income (i.e., everything you earned in the year from any source, such as fees, dividends, etc., including gains from cryptocurrency transactions) exceeds CLP 8,700,000.

Moreover, depending on how frequent your cryptocurrency transactions are, some of your gains may be exempt from taxes due to certain tax benefits applied to capital gains.

Step 5: Declare your taxes: If, after everything we’ve covered, you conclude that you are required to declare and pay taxes, make sure to declare them correctly. Depending on your country, you can do this through an online tax declaration or with the help of an accountant.

In Chile, you can file your declaration through your personal portal on the SII website (http://sii.cl). The declaration is made through a document called "Formulario Nº 22." Here’s how you can access it:

1. Log in to your SII portal using your tax key or unique key.
   

purchases and sales to the SII (Chilean Internal Revenue Service). CryptoMKT does not provide this information because the platform is not Chilean, serving only as an intermediary between Chilean users and the foreign platform.

Now, let’s continue. Once you have reviewed and verified that the information is correct, go back and press “continue.”

5. The Form Nº 22 for income declaration will appear, where you need to include the information that is not automatically generated by the SII system. The gains from your cryptocurrency transactions should be declared in line 10 or 11, regarding other income from Chilean or foreign sources subject to IA (Income Tax) or IGC (Global Complementary Tax). If you only operated on CryptoMKT or another foreign exchange, they will be considered foreign-source income. If you only used Chilean exchanges, they will be considered Chilean-source income.
   

And that's it! If your declaration is complete, you just need to submit it and pay taxes, if applicable.

Remember: If you are unsure how to proceed, seek advice from an expert.

Step 6: Keep a detailed record: We’ve reached the final step! To facilitate future taxation, it’s important to keep a detailed record of all your cryptocurrency transactions. We recommend keeping track of the dates of purchase and sale, the prices, and the quantities of cryptocurrencies.

We know that paying taxes can often be a significant hassle, but we urge you to get informed and fulfill your tax obligations. Declaring your cryptocurrency income can have great advantages when it comes to proving your income and accessing financial benefits more easily.

We hope this guide has clarified things for you!