Does Binance report you to the Spanish tax office? Mistakes, controversies and how to avoid trouble with Hacienda

More and more Spanish investors use Binance to buy and sell cryptocurrencies — and just as many are increasingly landing on the radar of Hacienda, Spain’s tax authority.

This makes one thing clear: anyone who still believes that digital money is “invisible” to the tax office is deeply mistaken. Hacienda knows who holds cryptocurrencies and actively reminds taxpayers of their reporting obligations, thanks to the data it obtains from banks and crypto platforms.

During Spain’s 2023 Income Tax Campaign (filed in 2024), the Spanish Tax Agency announced that it would send nearly 948,000 warning notices to taxpayers with cryptoassets. Many call them “fear letters,” because they essentially say: “We know you have crypto — now declare it.”.

Common mistakes that can cost you dearly

One of the most frequent mistakes is failing to report crypto transactions because you assume Hacienda (Spain’s tax authority) cannot track them. For years, some investors believed: “as long as I don’t convert my bitcoins into euros, no one will know.” Wrong. Today, Hacienda has multiple tools to identify crypto movements, including Form 721 (foreign-held assets) and Form 172 (exchange-held balances).

Another common misconception is thinking that, because Binance is a foreign platform, you don’t need to report anything. If, at year-end, you hold more than €50,000 in cryptocurrencies custodied by foreign exchanges (non-Spanish entities), you are generally required to file Form 721.In Binance’s case, the situation is more nuanced because there is a Spanish subsidiary registered with the Bank of Spain. This means you must check (with your tax advisor) which entity is acting as the actual custodian before deciding whether your holdings fall under Form 721.

Not reporting your Binance gains in your income tax return (IRPF) is treated as undeclared income. Penalties range from 50% of the unpaid tax (minor cases) to 150% (serious cases). And if you hide more than €120,000, it becomes a criminal tax offense, which can carry a prison sentence.

For example: if you failed to report €10,000 in crypto gains, Hacienda could demand the full €10,000 plus €5,000–€15,000 in penalties.

Online forums are full of stories of users who, after a few trades on Binance, received intimidating letters from Hacienda. And it’s not surprising: the Tax Agency has repeatedly stated that it “knows the names” of those operating on platforms like Coinbase or Binance.

This environment has pushed some crypto investors to drastic decisions, such as considering moving abroad to escape the so-called “Spanish tax hell.” But beware: running away after evading taxes only makes your legal problems worse - and today, trying to hide crypto is virtually impossible. With Spain’s expanding reporting obligations (Forms 721, 172, 173) and international data-sharing frameworks, anyone who thinks “Hacienda won’t find out” is playing with fire.

Binance and Hacienda: partners… against you?

Let’s look at the big question: Does Binance report to Hacienda?The answer is yes. Since 2024, crypto service providers registered in Spain (or operating in a way that triggers Spain’s Forms 172 and 173) are required to report customer balances and transactions to the Spanish tax authority. Binance Spain, S.L., being registered as a VASP with the Bank of Spain, falls squarely under this reporting framework.

This means Binance must send Hacienda detailed information on the balances and trading activity of Spanish users. In other words, Hacienda can obtain your Binance history directly from the exchange, regardless of what you choose to declare. For the tax office, Binance has effectively become another information source.

This has generated mixed reactions across the crypto community. Some see it as a “betrayal” of the original ethos of financial privacy - a platform that once championed freedom now cooperates with the very system many users wanted to avoid. Others take a more pragmatic view: if Binance wants to operate in Spain (and the EU), compliance with local regulations is simply the price of mass adoption.

And the trend is global: in 2025, Spain approved the law transposing the EU’s DAC8 directive, with full effect expected from 2026. This framework will require all crypto-asset service providers (CASPs) in the EU to automatically report user balances and transactions to tax authorities.

From 2026 onward, with Spain’s reform of the General Tax Law linked to DAC8, Hacienda will even have a clearly regulated power to seize cryptoassets, including those custodied on exchanges, to recover unpaid taxes.

Of course, Binance also offers tools to help users comply, such as downloadable gain/loss reports (its “tax report”) to assist with annual filings. The company has even published guides reminding users to declare their crypto properly - an almost ironic gesture coming from a giant once associated with anonymity.

In any case, one thing is clear: Binance is not going to cover for you. If you don’t declare, you can’t blame the exchange. The responsibility (and the penalties) will fall entirely on you.

Frequently Asked Questions from Crypto Investors About Spain’s Tax Return

It’s completely normal to have questions when facing Spain’s tax return (la declaración de la renta) with cryptocurrencies for the first time. Here are the most common ones - and the straight answers.

“If I didn’t withdraw the money from the exchange, do I still have to report it?”

Yes. Every sale, swap, or use of cryptocurrency is a taxable event, whether or not you convert it into euros.If in 2024 you swapped ETH for BTC on Binance and made a gain, that gain must be included in your 2024 Spanish income tax return (filed in 2025).Only buying and holding is non-taxable — but the moment there is a gain or loss, you must report it.

“Does Hacienda really know what I have on Binance?”

Practically, yes.With the new Form 172 (exchange-reported balances) and Form 173 (reported transactions), platforms send your crypto data directly to Hacienda.And Form 721 requires you to declare foreign-held crypto over €50,000.

On top of that, Spain now shares and receives information through systems like DAC7 and DAC8.By 2025, the Spanish Tax Agency is receiving highly automated data on crypto balances and transactions — even from foreign exchanges in cooperating jurisdictions.

“I have net losses — do I still owe anything?”

You still have to declare them.Losses don’t generate tax, but reporting them is beneficial because you can use them to offset future gains.

Also, if your capital gains not subject to withholding (such as many crypto transactions) exceed certain thresholds — in practice, around €1,000 — you will likely be required to file a tax return even if your employment income is very low.

And remember: if your crypto wealth is high, you may need to file Wealth Tax (Impuesto sobre el Patrimonio) or Spain’s Solidarity Tax on Large Fortunes, applicable above €3 million, simply for holding crypto — even without selling.

“What if I entered something wrong or forgot a transaction?”

Don’t panic. Spain recognizes a “right to make mistakes.”If you correct your tax return before Hacienda contacts you, there is no penalty.

Just file a corrective return (declaración complementaria) as soon as you notice the error and explain the correction.

If, however, Hacienda notifies you first, the issue becomes an inspection and penalties may apply — although cooperating usually reduces them.Being proactive is key.

“What if I never declared my crypto in previous years?”

Then the best move is to regularize your situation as soon as possible.

You can file late returns for previous years (one per year) including the missing crypto gains. You’ll need to pay the unpaid tax, interest, and a time-based surcharge:

• 1% + 1% extra per full month of delay up to 12 months

• After 12 months: 15% fixed surcharge + interest

But doing it voluntarily is far better than waiting for an inspection: you avoid the heavy penalties for concealment, which are the real financial killer.

As the saying goes: Better to pay late (and a bit more) than to wait for fines.

How to Avoid Tax Inspections (and Sleep Peacefully)

The big question is how to avoid attracting unwanted attention from Hacienda. There’s no magic formula, but there are best practices that significantly reduce your chances of problems:

Report everything you’re supposed to report

It sounds obvious, but this is the foundation. Include all your crypto gains in your annual Spanish tax return (IRPF). And if your crypto held on foreign exchanges exceeds the reporting threshold, make sure you file Form 721 on time.

Keep detailed records

Maintain an organized history of all your transactions — dates, purchase/sale values, commissions, etc. Use spreadsheets or specialized tools to consolidate your activity from Binance and other wallets.This will allow you to justify cost basis, gains, and the origin of funds if Hacienda asks. Spanish law requires you to keep documentation for at least four years.

Review Binance’s tax report

Binance provides a downloadable report summarizing your annual transactions. Download it and compare it against what you plan to declare to avoid missing anything.If you used multiple platforms, you’ll need to consolidate everything (e.g., Binance + Coinbase). Any major discrepancy between what exchanges report and what you declare can trigger an alert.

Don’t ignore small gains

Many people think that because the gain was small, it doesn’t matter. Wrong.Hacienda has made it clear: even €1 of gain must be declared.And with data-sharing systems in place, even small undeclared amounts can surface. Being transparent from the start prevents a tiny gain from becoming a hefty penalty.

Get advice if things are complex

If you made hundreds of trades, use DeFi, staking, liquidity pools, NFTs, or multiple exchanges, your tax situation can get complicated fast.A crypto-savvy tax advisor can make a huge difference — optimizing within the law (e.g., using losses to offset gains) and ensuring everything is filed correctly.Paying for good advice is far cheaper than facing 50–150% penalties for filing incorrectly.

In short

If you follow the rules, document your activity properly, and correct mistakes quickly, your tax return will most likely pass unnoticed among the thousands Hacienda processes — and you’ll be able to keep investing in crypto with peace of mind.

See you in the next Zenblock post!