Algorand (ALGO): Taxation of participation and governance rewards

Algorand uses a Pure Proof of Stake (PPoS) consensus mechanism that distributes rewards directly to ALGO holders. Unlike Ethereum or Cardano, active staking was not required: simply holding ALGO in a compatible wallet automatically earned you participation rewards. This unique mechanism has specific tax implications.

How Participation Rewards worked (until 2022)

Until Algorand's protocol change (which gradually phased them out starting in late 2022), the mechanism worked as follows:

• Each block distributed ALGO among all holders proportional to their balance.
• Simply holding ALGO in an Algorand wallet (even on exchanges) accumulated rewards.
• Rewards were automatically credited to your balance.

Tax treatment:

• Analogous to staking → investment income.
• Value: ALGO price in EUR on the day each batch of rewards was credited.
• If rewards are credited continuously, it is practical to use the monthly or quarterly average value.

Algorand Governance: commitment periods

Algorand's governance system operates quarterly:

1. At the beginning of each quarter, you lock a certain amount of ALGO in the governance portal.
2. During the quarter, you vote on proposals from the Algorand Foundation.
3. At the end of the quarter, if you meet the requirements (maintaining the committed balance + voting), you receive governance rewards in ALGO.

Requirements to receive rewards:

• Commit X ALGO for the quarter.
• Your balance must never fall below X during the quarter.
• Vote on all proposals for the quarter.

Tax treatment of governance rewards

Governance rewards are payments for active participation in the protocol's governance:

• Classification: investment income (equivalent to interest or deposit remuneration).
• Accrual: at the moment they are credited to your wallet at the end of the quarter.
• Valuation: ALGO price in EUR on the credit date.
• Tax base: savings base (rate 19%-28% in 2025).

The act of committing ALGO for the quarter (commitment) is NOT a transfer or taxable event. It is similar to a fixed-term deposit.

Impact of the protocol change in 2022-2023

Algorand eliminated direct participation rewards and centralized them in the governance system. This change had tax implications:

• Automatic rewards (without user action) disappeared.
• Governance rewards are more active and require commitment and voting.

For users who held ALGO on exchanges during the automatic rewards period:

• If the exchange distributed the rewards → the exchange generated and credited them → whether the user received anything depended on the exchange's policy.
• Binance, for example, distributed ALGO staking rewards on its platform.

The Algorand Foundation token: ALGOB and other issuances

The Algorand Foundation has issued various additional tokens (e.g., for ecosystem projects). If you have received tokens from the Algorand ecosystem via airdrops or participation:

• Airdrop → taxable capital gain in the general base at market value at the time of receipt.
• If there is no market price → value 0 at the time of receipt, and full taxable gain at the time of first sale.

Practical declaration of Algorand rewards

1. Platform: If you use Algorand Wallet (Pera Wallet) directly, rewards are on the blockchain. You can use explorers like AlgoExplorer or tax tools like Koinly or CoinTracker to export your history.
2. Exchanges: If you use Binance or another exchange for ALGO staking, export the "earnings" history from the exchange.
3. Valuation: ALGO price in EUR by date. Sources: historical CoinGecko, CryptoCompare.
4. Declaration: In the IRPF, section for investment income → "other investment income."

Tax summary for Algorand

The tax rate for rewards in the savings base (19%-28%) is significantly more favorable than if classified in the general base (up to 47%). Maintain good documentation to defend this position before the AEAT.

Updated: April 2026 | Fiscal year: 2025