Investors criticise Italy's plan to increase crypto taxes to 42%

Italy plans to raise the capital gains tax on cryptocurrencies, such as Bitcoin (CRYPTO:BTC), from 26% to 42%. 

This move, announced by Deputy Finance Minister Maurizio Leo on October 16, is part of the new budget bill approved by Prime Minister Giorgia Meloni’s cabinet. 

The government cites the growing popularity of Bitcoin as the primary reason for the tax hike.

The proposed increase has sparked criticism from investors and crypto industry advocates, who view it as an excessive burden that could hinder innovation. 

One critic stated, "Italy is in collapse. How can we encourage the proliferation of new realities like Bitcoin and crypto? Raising the already ridiculous 26% tax up to 42%. If you think about coming to live in Italy, please don’t do it."

Many fear that this higher tax rate will push crypto investors to seek friendlier jurisdictions, potentially stunting the growth of Italy’s crypto industry. 

Critics argue that the government’s approach demonstrates a lack of understanding of digital assets and warn that such heavy taxation could drive capital and talent out of the country.

Previously, in December 2022, Italy introduced a 26% tax on crypto profits exceeding €2,000 annually, while smaller profits were exempt. 

This latest tax increase would make Italy one of the highest-taxed countries for crypto investors globally.

In contrast, the United Arab Emirates (UAE) is moving in the opposite direction by exempting digital asset transactions from its 5% value-added tax (VAT). 

Starting November 15, 2024, this exemption will apply retroactively to all crypto transactions since January 1, 2018, positioning the UAE as a more crypto-friendly destination.