The world is finally starting to catch up with cryptocurrencies. This article presents an overview of tax legislation and several countries for 2021.
- Regulating Cryptocurrency Taxes
- EU Cryptocurrency Regulation
- Cryptocurrency Regulation Outside the EU
- Cryptocurrency Tax Laws – Americas
- Cryptocurrency Tax Laws in Asia in the Asia Pacific region
- Cryptocurrency tax laws in other regions
- No Crypto Taxes Countries
Regulation is always necessary when something comes along to shift a paradigm, which is why financial authorities in countries around the world are currently moving to put in place legislation that covers Blockchain technologies. Cryptocurrency tax laws are a growing necessity, but it isn’t clear at the moment whether there will be legislation that covers the whole world, or whether each territory will have its own rules.
Right now, every country has its own take on crypto taxes and surrounding legislation. Many jurisdictions take the view that digital currency is a means of payment or a medium of exchange. This means that the general legal status of cryptocurrency can vary, and this uncertainty invites a broad debate on various issues around how to license exchanges, how to tax cryptocurrencies, etc. It’s a fluid situation, so we intend to look at the way that the political class of certain countries sees cryptocurrencies.
Regulating Cryptocurrency Taxes
Typical users are often worried that if their dealings with crypto exchanges or ICOs run into difficulties, then the law won’t be there to step in and protect them. Traders and miners are also still at risk, with many worrying about the lack of certainty around crypto-generated incomes. At this stage, we should keep in mind that the activity of mining needs pre-launch investments and there’s a lack of protection around the supply of new components.
From the point of view of a sizeable business involved with cryptocurrencies, they are not so much concerned about legal certainty. They are more interested in a legal framework that offers them favorable trading conditions.
Many are in favor of measures which cement the legal status of cryptocurrencies through:
- active market participation in regulation
- international financial institutions
- banking institutions that participate in market events indirectly.
In general, we can put cryptocurrency taxes around the world under two headings: legal entities and natural persons.
A “natural person” is someone who trades or holds cryptocurrencies, and a “legal entity” means exchanges and crypto companies.
The law treats income that’s paid to you in the form of cryptocurrency, (which you could have gained from employment, business income, or the transfer of property) just like it treats any other income.
Ways that this income is usually created:
- profits from price fluctuations when buying and selling
- crypto mining
- renting out storage space
- salary payments in cryptocurrency.
If you traded in crypto-assets then this would be treated in a similar way to if you traded in securities, shares, and other financial instruments. So, the way to work out if a trade is being conducted would be very similar. This means that existing case law on trading shares and securities can often be used as a guide.
But the difference is that investors don’t need to include buying and keeping cryptocurrency on their tax return. It’s only if they sell or engage in trading that cryptocurrency becomes liable to taxation.
Capital gains tax also works the same for cryptos, which means that trading losses can be claimed against capital gains tax.
Capital gains taxes come in two flavors: short-term and long-term. The dividing line is the one-year mark. Anything that you keep for less than that is short-term, and anything that you keep for longer is classed as long-term. There’s a good deal of variation in these rates around the world, of course, and they can also vary according to your tax bracket, but long-term capital gains tax is usually lower.
Natural persons are advised to maintain records of every crypto-asset transaction. These need to include:
- what type it is
- transaction date
- whether it was buying or selling
- the number of units bought or sold
- how much it was worth in fiat currency
- bank statements and wallet addresses
Mining is considered to be self-employment, so miners must pay self-employment income taxes, and they are naturally allowed to deduct expenses, like electricity and storage costs.
Rewards or fees paid to the miner (for validating transactions) should be reported as trading or miscellaneous income according to the:
- level of activity
Unlike private investors, commercial enterprises and entities aren’t permitted to execute cryptocurrency transactions for private purposes. Bitcoin transactions undertaken by an enterprise are often characterized as income from commercial activities. In such cases, the minimum ownership term does not apply, so there is no tax exemption. It varies according to the legal and organizational structure of the company, but individual entrepreneurs and partnerships will pay income tax, and entities such as limited liability companies and joint-stock companies will pay corporate taxes.
As well as taxing cryptocurrency sales on the stock market, there’s also the question of taxing income derived from an ICO. In particular, the Ethereum blockchain has given companies the chance to use smart contracts and withdraw digital tokens. Cryptocurrencies have grown at such a rate that there is a lot more interest in ICOs, but this leads to many tax questions both for buyers of tokens and the companies that issue them.
As well as taxing entrepreneurs for their BTC transaction profits, there’s also the issue of paying VAT. VAT is charged on certain goods and services only, so with any transaction, it’s always best to check the nature of a company’s activities so that you can be sure of which services it offers and understand whether they are taxable not.
|Type of tax
|Progressive income taxGST
|Capital gains tax
|Progressive income tax
|Progressive income tax (for international trading)
|Capital gains tax
|Progressive income tax
|Progressive income taxGST
|Progressive income taxVAT
|Progressive income taxConsumption tax
|Progressive income tax
|Income tax VAT
|Progressive income tax
|Progressive wealth taxProgressive income tax
|Progressive income tax
|Private money or Asset
|Corporation taxProgressive income tax
|Capital gainsProgressive income tax
EU Cryptocurrency Regulation
The EU doesn’t have an overall tax regulator. It’s crucial to the sovereignty of member states that each of them retains the ability to levy their own taxes, including cryptocurrency taxes. Since it doesn’t have overall control, the EU Antitrust Commission approaches aggressive tax planning with the assistance of cryptologists. The commission also coordinates the state police effort that manages competition in the EU.
In 2015, the Court of Justice of the European Union (CJEU), the chief judicial authority of the European Union, determined that BTC-related activities are exempt from consumption tax. Selling BTC may not attract consumption tax, but it may attract taxation in other categories like income tax or capital gains. The way it’s treated for tax purposes varies between EU countries.
Valdis Dombrovskis, the Vice President of the European Commission, has stated that cryptos amount to an alternative form of financing and that they are here to stay whether we like it or not. This acceptance points to a broader acknowledgment of the role that cryptos will be playing in the financial system going forward, and Brussels is working on measures to regulate subsequent innovations.
Cryptocurrency and Taxes in Germany
BTC is not recognized as a payment method or type of electronic cash in Germany; instead, the Federal Ministry of Finance (BMF)has designated bitcoin as private money and so considers it to be a foreign currency. So, cryptocurrency trades don’t attract VAT. Bitcoin does not count as an investment either, so you won’t pay the 25% withholding tax if you sell it at a profit, as you would with stocks.
Bitcoin trading is classed as a private sale activity, so any profits will be taxed according to §23 EStG. That said, if retain bitcoin is for more than the year before selling them, you generally won’t pay any tax on the profits.
Investing in Bitcoin – when profits are taxed
Do you have to pay tax on bitcoin in Germany, and if so, when? If investors buy and sell bitcoin within a few months and make a profit, then they have to pay tax on that profit.
Example 1: someone buys crypto in July for €400. They sell it in April the following year for €1,000. The €600 they make needs to be declared as Other Investment Income on their income tax return and will be taxed at their particular rate.
Example 2: someone sells bitcoin inside of six months and makes €500. Since the exemption limit is €600, they won’t have to pay any tax on that profit.
Useful to know: The €600 exemption limit applies to all private sale transactions, not just cryptocurrencies.
Cryptocurrency trading – the LIFO or FIFO method?
In practical terms, you buy into bitcoin and hope that the price rises later, but if this does happen it can be a bit tricky to work out your profit. The FIFO approach (first-in-first-out) is the preferred one for tax purposes in Germany. It means that bitcoins that were purchased first are sold first. The LIFO approach (last-in-first-out) is also theoretically possible, but if you do go for this way of doing it, you can’t change it later.
Cryptocurrency and Taxes
The Council of State has removed previous tax instruction on cryptocurrencies and changed the rules on how to declare them. Some crypto-asset definitions may not be covered by the general tax code, particularly the anonymous ones. Despite this, you shouldn’t think of this as a deliberate omission. It’s more likely just been overlooked. Capital gains that were realized after 1 January 2019 are all taxed at 30%, and this includes contributions to social Security.
The simplicity of a flat tax regime
The 2019 Finance Act offers a definition of surplus value, which more or less looks like this: transfer price – purchase price – possible depreciation. As an example, a sale price of €9,000, a purchase price of €3,000 and no capital loss gives a capital gain of €6,000, which means you will pay €1,800 tax.
There are a couple of exceptions to this rate. If capital gains are under €305 then you won’t have to pay any tax on, but you will still have to declare any such gains. The rate goes up to 33% or 34% when you have the good fortune to receive an exceptional high-income contribution (CEHR). A higher rate applies when individual taxable income exceeds €250,000.
Specific regime claimed for mining
Earnings from what’s classed as ‘usual activity’ used to be taxed as industrial and commercial profits (BIC), while anything classed as ‘occasional activity’ would be considered non-commercial profits (NBC). Mining is taxable as a non-commercial profit (NBC) at present.
The crypto community has asked for particular tax measures for mining, as well as classifying Blockchain projects as “young innovative enterprise” (JEI) and giving them CIR (credit of research tax). These have been put into the upcoming draft budget law.
Cryptocurrency Taxes in the Netherlands
If you yet paid in BTC, it counts as salary or income, which you declare in box one. For crypto reporting, enter all of your crypto income from trading or mining as euros. This is taxable at 30%.
Dutch Cryptocurrency Regulation
The tax authorities consider any cryptos that you own to be assets, which means that you need to pay tax on their total value. Cryptocurrency capital comes under “other equity” in box three, which is covers saving and investing. The tax you need to pay is worked out for each bracket, based on an estimated return on which you also pay 30% tax. With this in mind, you’ll need to keep accurate records of what you own and all of your incomings and outgoings. It’s well worth spending the extra time and effort doing this evidence could be your best defense against being taxed at up to 51%.
|Effective tax rate
|0 to 70,800 euros (the first 30,000 exempt)
|70,801 – 978,000 euros
|> 978,000 euros
Cryptocurrency Tax in Sweden
In Sweden, when you buy and sell bitcoin, your expense is how much you paid for the bitcoin, expressed in Swedish kronor. Your profit is taxed at 30%, while losses are deductible at 70%. A one-time bitcoin payment needs to be reported as turnover, inclusive of any VAT.
If your employer has paid you in bitcoin, you report this as income. Income tax has four tiers.
|0 kronor to 18,800 kronor
|Circa 32% (ca. 11% county and 20% municipality tax)
|18,800 kronor to 468,700 kronor
|32% + 20%
|468,700 kronor to 675,700 kronor
|32% + 25%
Any amounts that you report need to be proved using things like receipts or original account statements. If you have wallet addresses, the blockchain transactions need to be consistent with the accounting for the mining, sale, or purchase of the bitcoin.
Cryptocurrency Regulation Outside the EU
Crypto taxation in the United Kingdom
The UK taxes business income and generally doesn’t tax activities that aren’t generating business income. However, there may be situations where factors like the degree of skill and organization involved in a particular venture will make an activity more likely to be taxable.
Why using crypto may not be profitable for a company
If a UK company uses a cryptocurrency, either as an investment (SOV) or method of payment (Payment Rail), the crypto is treated as a currency. In this case, the year-end balances must be converted into sterling and will be taxable. An instrument like bitcoin can be very volatile, and if a company has a positive cryptocurrency balance at year-end it will have to pay a tax in pounds sterling on the gain. Unfortunately, by the time accounts are drawn up several months later, the cryptocurrency could have lost most of its value, leaving the company to pay a tax bill that may now be greater than the value of the asset they own.
|Buying 10 BTC
|Purchase of BTC
|Value at Year-End
|Tax rate 19%
|Value when tax is due
|Actual tax rate
That’s why it’s very risky to hold onto these virtual currencies. Using them for payments is fine, but hanging onto them the long periods can be fraught with danger. In any case, it’s best to convert transactions into local currency straight away to avoid the risk of punitive currency fluctuations.
Different taxation for natural persons
HM Revenue & Customs assumes citizens will treat virtual currencies as financial assets rather than as currency, so if you don’t sell the asset then you don’t have to pay tax on it, and because it’s financial, you don’t have to pay VAT on it either. However, it becomes problematic if you want to use the crypto to make payments. Every transaction produces either a capital gain or loss.
Miners and active traders aretreated differently for tax purposes. The gains they make aren’t subject to capital gains tax, but they are subject to income tax. It’s similar to how real estate developers and stock market traders are treated: not as passive investors but as active traders.
|Up to £12,500
|£12,501 to £50,000
|£50,001 to £150,000
Cryptocurrency Taxes – Switzerland
In the past few years, the Federal Tax Administration has been working out a reference rate for BTC. Regulation of Bitcoin and other cryptocurrencies comes under current criminal, financial, and contract laws, without the need for their own dedicated set of regulations. A three-tier system exists to categorize cryptocurrencies, based on what they are used for: utility, payment, and asset tokens.
Cryptocurrencies can easily be identified, so they are considered to be just as assessable as movable property, like cash. If you own cryptocurrency then it will be subject to wealth tax, and you have to report it in the statement of securities. There isn’t a clearly defined tax rate, though. Cantonal tax administrations work out the average prices of several trading centers at year-end.
Cryptocurrencies which aren’t yet recognized on the Swiss Federal Tax Administration rate list and can’t easily be priced have to be declared at the purchase price. This may be needed when there aren’t yet any transactions in a particular currency.
Embracing cryptocurrency through income tax policy
Profits or losses arising from cryptocurrency transactions are last as non-taxable capital gains or non-deductible losses. On the other hand, if someone makes use of a cryptocurrency in a professional setting, such as trading, the profits are taxed as independent income, and losses are tax-deductible.
If a natural person is paid for performing a service with a cryptocurrency, this is seen as income, so it attracts income tax. For reporting, you calculate its value on the date of settlement and convert it into Swiss francs. The same applies to the self-employed.
Cryptocurrency Tax Laws – Americas
Crypto Taxes in the United States
Cryptocurrency is considered to be property in the eyes of the tax code. Profits come from capital gains rather than exchange differences, so owners must report their transactions to the IRS and pay taxes on them as if they were property. US Miners must also pay taxes on their annual gross income. If a taxpayer receives a cryptocurrency to pay for goods and services then its value should be calculated in dollars on the day of receipt.
How gross income affects your tax bracket
Federal income tax ranges from 15 to 35%, depending on the size of net profit; and the state tax is 0 to 10%, depending on which state you are registered in. How much federal tax depends on the amount of net profit (PE), which can be worked out using the formula: PE = Revenues – Costs.
Tax rises in line with the size of the net profit. From 0 to $50,000, it’s 15%. Above $50,000, it’s $7,500 with another 25% on the next $50,000 (and up to $75,000), and so on. The highest rate of 35% is applied after net profit exceeds $18,333,333.
|$0 – $9,525
|$9,526 – $38,700
|$38,701 – $82,500
|$82,501 – $157,500
|$157,501 – $200,000
|$200,001 – $500,000
Short-term capital gains are taxed as ordinary income under the law, and long-term capital gains are taxed at 0%, 15%, and 20%.
Non-uniformity of sales taxes
How is a one-time Bitcoin transaction taxed in the US? Spending BTC to purchase a product or service is treated as a sale and selling a property at a profit is taxable.
In the US, sales tax ranges from 0 to 8%, varying between states. This doesn’t include city and local taxes. Regional taxes vary according to the unique economic situation of each state, taking into account the status of different economic sectors, the abundance (or not) of the goods, and whether they were imported or made in the United States.
Also, other areas attract local taxation in some states. This is known as a local surtax. For instance, Delaware has no sales tax, and in Alaska, some cities and districts decide on their own sales tax rate of up to 7%, although there is no state tax.
Taxes on cryptocurrencies in Canada
Profit made from the sale or exchange of a virtual currency is considered income may be taxable, so you’ll need to record it on your tax return. This is true for any type of transaction. Tax rates:
- 15% on the first $45,000 of taxable income, plus
- 20.5% on the next $45,000 of taxable income, plus
- 26% on the next $50,000, plus
- 29% on the next $60,000 of taxable income, plus
- 33% of taxable income over $200,000
The Canada Revenue Agency (CRA) considers a bitcoin to be a commodity or good. The CRA doesn’t see bitcoin as a currency so using it to pay for things is considered to be barter trading. For example, whenever a taxpayer exchanges property for another property, it is a barter trade, so the tax rules around barter trading apply.
What happens if the price of Bitcoin shoots up?
Can a crypto be taxed in Canada at the same rate if the price sees dramatic changes? If the virtual currency is held continually then price changes don’t have tax consequences. You only need to pay tax when it’s sold or exchanged for something else.
That said, under certain circumstances, the speculative nature of cryptocurrency may mean that it attracts income tax.
Crypto taxes in Brazil
Digital currencies need to be reported as other assets in the Assets and Rights tab because they’re seen as a financial asset. Every digital asset you buy needs to be declared, meaning that you need to complete a new field for each one. If you bought five different assets, you need to declare them in five different fields. You’ll also need to describe the digital asset that you own, including how much of it is in your possession, what it cost you, and when you bought it.
There’s no central authority on conversion rates so converting cryptos to local currency is usually proved using negotiation statements with the exchanges or extracts from your wallet.
Capital gains policy
If you make gains while disposing of assets worth more than R$35000 and less the $R$5 million then they will attract tax as a capital gain at 15%. Income tax collection must be made before that month’s final business day following the transaction.
If you sold your crypto and didn’t know if you had made a capital gain, and therefore didn’t pay the monthly taxes, the Capital Gain Calculation Program can work it out. If you made a capital gain and didn’t report cryptocurrency taxes in Brazil, you will still need to pay tax retrospectively, which may include fines and interest.
Cryptocurrency Tax Laws in the Asia Pacific region
Cryptocurrency tax in Australia
The ATO sees cryptocurrencies as property, so they’re treated similarly to shares and real estate investment. Investment profit attracts tax and must be declared on an annual basis.
Any business that uses crypto should think about the implications of GST. They will need to keep detailed transaction records, which should be easy enough to do given the blockchain is a transparent ledger.
Advancing cryptocurrency regulations
The Tax Office runs a department that deals with cryptos and offers guidance on relevant laws for users. Australia monitors trading activities and can identify suspicious or unusual transactions above $10,000 AUD. It’s worth pointing out that for anyone with less than $10,000 AUD in cryptos there’s no need to declare them because the law says that anything under this threshold is for personal and recreational use.
Australia has been upgrading its data matching abilities so that it can ensure crypto traders are paying taxes that are consistent with their profits. Everyone who participates in bitcoin transactions is required to maintain records of their sales and purchases.
Crypto Taxes in Japan
The National Tax Agency says that virtual currency profits are taxable, but that they are exempt from consumption tax.
Revised Fund Settlement Act to include crypto
The Fund Settlement Act was originally intended to set out the rules for gift certificates and e-money, and the revised version included cryptocurrency. The law now defines cryptocurrency, the registration of crypto exchanges, and restrictions on business.
Crypto transactions are taxable as income. The law has 10 categories of income tax, but individual earnings count as miscellaneous income. Actually, miscellaneous income doesn’t have a hard and fast tax rate. There are seven brackets from 5% to 45%, which are applied according to the amount of combined incomes.
|Gross income amount
|Over 200,000 yen 1.95 million yen or less
|Over 1,950,000 yen and less than 3,300,000 yen
|Over 3,300,000 yen 6.95,000 yen or power
|Over 6.95 million yen and below 9 million yen
|Over 9 million yen and below 18 million yen
|Over 18 million yen and below 40 million yen
|Over 40 million yen
(Inhabitant tax of 10% is also added.)
Cryptocurrency taxes in China
Cryptocurrency exchanges and ICOs are banned in China, and its central bank has warned citizens to avoid their potential risks, and also declared a position on taxation of foreign-derived crypto income. Natural persons using international platforms to buy a cryptocurrency and then sell it on to others at a profit are subject to income tax, and such transactions are classed as asset transfers. The initial price of the cryptocurrency that was traded should be equivalent to the price for buying that cryptocurrency online plus the applicable additional charges. If the taxpayer does not show evidence for the initial price, the authorized tax bodies will decide on it.
Crypto Taxes in Hong Kong
The Hong Kong Financial Services and Treasury Bureau (FSTB) produced a report in 2018, declaring that cryptocurrencies are no threat, despite the uncertainty about regulating them. Cryptocurrency investments are not subject to capital gains tax, but any profits derived from them will attract income tax, so you need to include them in your personal tax return in Hong Kong.
This is encouraging for investors and industry in Hong Kong. After China’s ICO ban, the Hong Kong Securities and Futures Commission (SFC) took the view that it would review each case on its own merits rather than issuing a blanket ban too.
Cryptocurrency Taxes in South Korea
South Korea’s National Tax Service is researching taxation methods for the crypto market. The NTS has been looking at how other countries do it, sending its representatives to the USA, Japan, Germany, and the UK to learn from their approaches. The current view from officials is that they will apply income tax to crypto trading.
To establish an appropriate rate, historical transaction data is needed. Crypto resembles a property like real estate or securities, so it should be taxed according to established income taxation principles. Taxing transactions, or using VAT, can only be applied once a clear definition of cryptocurrency is worked out, and there can be no room for ambiguity.
Crypto exchanges have already been clearly defined however and will be taxed according to existing policies, with rates of 22% for corporate tax and 2.2% for local income tax.
After the ICO ban in South Korea, the Deputy Prime Minister has said that the government would take a different stance on the digital industry after in-depth reviews to consider all relevant concerns.
Cryptocurrency Tax Laws in Other Territories
Crypto Taxes in India
The Reserve Bank of India (RBI) has issued several statements expressing its apparent discomfort on the subject of cryptocurrency regulation, but these have been unhelpfully contradictory. Despite this, be assured that if you hold virtual currency in India then it is inevitable that you will pay taxes.
India has imposed an 18% tax on goods and services related to cryptocurrency operations. The country’s authorities categorize cryptocurrencies as digital products, seeing them as similar to software. The new legislation will class crypto activities as akin to supplying goods and the storage, transfer, and accounting of crypto assets will be viewed as services. The value of transactions can be accounted for in rupees or any other currency. For sale or transfer purposes, the delivery location will be that of the registered person. International transactions will fall under an integrated tax on goods and services, and will also be treated as import-export activities with goods.
Taxes on Cryptocurrency in the UAE
The UAE doesn’t yet have a clear approach to taxing cryptocurrency transactions. Its central bank did publish a plan to boost user protection and financial stability, but its President has announced that these policies don’t apply to cryptocurrencies.
In the absence of clear guidance, it’s very important to know whether cryptos represent a currency or a commodity. Calling it a commodity would place it under the jurisdiction of the Emirates Securities and Commodities Authority and would mean it would be subject to VAT. Calling it a currency would place it under the regulatory authority of the Central Bank.
There is currently no clarity on this matter.
Crypto Taxes in Russia
The Russian government has said that cryptocurrency transactions with a fiat currency equivalency of more than 600,000 rubles or about $9,600USD will be taxed. This is already the limit used by the Russian authorities in the battle against terrorist financing and money laundering.
State versus Digital Assets
Also, the Financial Assets Act classifies cryptocurrencies as a digital financial asset that can be only be managed by authorized exchanges, and this also holds for ICOs. Cryptocurrency account holders must also seek authorization from the Russian government. This law has been the subject of a lot of criticism because many investors would prefer a more flexible regulatory framework.
The tax on cryptocurrency transactions will be 13%, but since virtual currencies are anonymous this makes taxation more complicated. The Russian state is also working on its own cryptocurrency.
Cryptocurrency Tax Laws in Israel
Profits from selling cryptocurrencies in the secondary market will be treated as capital income, so they should be declared and may be taxed at up to 50%. The Tax Authority has said that that crypto transactions will be treated as barter trading for tax purposes according to the value of the exchanged assets on the transaction date.
If a company sells products or offers services and is paid in crypto, the tax law determines that this constitutes income. The proceeds of ICOs should be reported as deferred revenue (a sort of advance payment from a customer) by the issuing company and would be taxed in Israel in accordance with the value received on the date of issue (cash and/or cash equivalent).
Cryptocurrency Taxes in Turkey
Turkey taxes bitcoin, but the government has yet to say which tax category it will come under. The central bank and the Capital Markets Board of Turkey have stated that cryptocurrencies are a commodity, but the situation is unclear.
Investor profits over 24,000 TL are taxable, so you won’t be taxed on anything less. Commission for each transaction on Turkish platforms will also be subject to tax.
Crypto taxes in South Africa
The country has been progressing its position on crypto regulation, but currently, such currencies don’t have any legal status. Despite this, citizens still have to pay taxes on them. Cryptocurrency isn’t recognized as a currency under South Africa’s Income Tax Act. Rather, it’s classed as an intangible asset. An official statement by the regulatory body of South Africa says that taxpayers have to declare their cryptocurrency income. Failure to comply will result in fines and penalties.
Tax is payable on mining profits, profits from exchanging cryptos for fiat funds, and using them to pay for goods and services. Income and losses should be reported under capital gains tax, while any other crypto earnings will be subject to income tax.
No Crypto Taxes Countries
Cryptocurrencies aren’t regulated under Maltese law, and crypto exchange is treated like commodity trading. The Investment Services Act does not see cryptocurrency as an investment so it doesn’t need to be licensed. Also, crypto companies don’t need to get a license from Malta’s FSA if it doesn’t constitute a collective investment scheme or doesn’t operate as a banking institution. Running a banking institution requires a proper license, or the individual will be taxed at 5%. Otherwise, it’s tax-free. Malta retains sovereignty from the EU of its tax arrangements.
SKAT is Denmark’s tax authority and it classes bitcoin as a decentralized payment system. On this basis, SKAT considers that Bitcoin is not an official currency, so it is not covered by the Tax Control Act. This means that Bitcoin’s price can’t be used to prepare tax-related annual accounts.
It’s only possible to use a value listed on the sales or purchase invoice for the particular trade in question, to calculate taxable income. The authority sees BTC transactions as a private matter, so crypto gains are tax-exempt and losses are not deductible.
For something like the sale of coins to a non-resident, the company doesn’t pay VAT. If the sale is to a Singaporean resident, tax exemption is only applicable if its annual turnover is under 1,000,000 SGD. If the IRAS classifies the company’s services as international services, then no tax is payable.
For turnover above 1 million SGD (about 724,600 US dollars) companies need to register for tax. A company can apply to register as a GST payer voluntarily, even if its turnover is below the threshold. After voluntary registration, taxpayers have to maintain this status for no less than two years and maintain records for five years (even if the business has moved abroad, etc.)
Slovenia’s approach to crypto taxation makes it a haven for crypto assets. The legislation was introduced in 2013, and since then, there have been more changes in this area under Slovenian Company Tax Law.
Individual investors’ profits are treated as income and so are not subject to taxation. The financial administration of the Republic of Slovenia treats individual income from crypto trading as non-taxable. In Slovenia, capital gains don’t typically apply to income from movable property or derivative financial instruments. Still, companies that use cryptocurrencies are taxed, as are individuals who are paid in bitcoin.
Belarusians are allowed by law to mine cryptocurrencies and trade them on international exchanges. This qualifies as a business and individuals who engage in it won’t be taxed until January 2023. But they can only use their own capital to fund the activity and they can only do it for their own personal use. Any investments accepted from other parties, any partnerships, or renting equipment to others means they have to register as a private entrepreneur and standard income tax rates will then apply. The IRC considers cryptos to be assets like securities, albeit riskier ones, so miners and traders pay the same level of tax as people who are involved in securities investments. The level of tax is the same as for private entrepreneurs too.
Portugal’s tax authority does not consider crypto transaction gains to be taxable in the same way as capital gains, because the wording of the law is too restrictive. It only applies to gains derived from what the IRS code terms factual assets, which covers things like securities. The law as it stands doesn’t cover cryptocurrencies.
Even though Portuguese tax legislation does not at present regulate this kind of activity, the income produced by it amounts to a distribution of profits that’s proportionate to their participation (meaning it’s an investment). So, selling a cryptocurrency isn’t subject to taxation in Portugal unless the taxpayer does this as a business or professional activity. In such a case they should provide an invoice or invoice-receipt for each sale or provision of service, but investors don’t need to list this activity as a profession.
Panama uses the territorial principle of taxation, applying it to both its citizens and residents for income tax, capital gains, local taxes, and inheritance tax for individuals. Consequently, when a company receives income from outside of Panama’s territory it’s not liable to pay corporate tax.
This means that Panamanian residency is attractive for anyone who creates income beyond the country’s borders, such as cryptocurrency investors. This means that your digital business can generate profits overseas and pay no tax on them. The only downside to this arrangement is that the Panamanian government has not issued guidelines on what kind of crypto activity is legal and what isn’t.
If you make money from cryptocurrencies you shouldn’t ignore your potential tax obligations, so you should check on local compliance requirements. Cryptocurrencies are well regulated in only a few countries of the world at the moment, but the number is growing as countries get to grips with the implications of this new money. In time, it’s likely that the same kind of tax rules that govern fiat currencies will also be brought to bear on crypto investments too. But that’s no reason to feel disheartened. The high-profit prospects of cryptos mean that even in quite punitive tax regimes it’s still possible to generate excellent returns, even when taxes exceed 50%.
A lot of banks are still getting to grips with crypto, and many prohibit cryptocurrency trading in their terms and conditions. Companies will need to source business accounts that allow them to more easily convert crypto into fiat currencies.
More and more traders are relocating to territories where cryptocurrencies have favorable tax conditions or even exemptions. It would be best to select a country that offers crypto-friendly tax legislation without the burden of taxing foreign companies.
For those that hold large amounts of crypto assets, selective private banks located in places like Switzerland is probably the best choice. Switzerland is a good example as it’s adapted quite quickly to the needs of crypto millionaires.
For those with more modest amounts to bank, it’s best to look towards crypto-friendly financial service providers offering online business accounts for offshore territories. That could mean tax-free Belarus, territorial tax countries like Panama and Singapore, or somewhere with a special program like Malta. Naturally, your ultimate choice will be shaped by your individual needs.