Tax liability is a major concern for anyone investing in Bitcoin and other cryptocurrencies. Some even consider it an excruciating nightmare.
However, while some countries are putting pressure on investors and levying income and capital gains taxes on Bitcoin trading, many others are taking a more aggressive approach. , often with the aim of promoting better adoption and innovation in the cryptocurrency industry. They have friendly laws in place that allow investors to buy, sell, or hold digital assets without paying taxes.
Here are the jurisdictions with the most extensive cryptocurrency tax rules, updated in 2021.
Belarus is taking an experimental approach to cryptocurrencies. In March 2018, new legislation legalized cryptocurrency activities in the Eastern European country and exempted relevant individuals and companies from taxes until 2023. After this period, the regulation will be reviewed.
By law, mining and investing in cryptocurrencies are considered personal investments and are therefore exempt from income tax and capital gains tax.
Liberal laws are introduced to encourage the development of the digital economy and technological innovation. The country recently ranked third in Eastern Europe and 19th in the world in terms of P2P crypto trading.
In contrast to most other countries, Germany has a novel approach to taxing digital currencies such as Bitcoin. Europe’s largest economy sees Bitcoin as private money rather than currencies, commodities or stocks.
For people resident in Germany, any cryptocurrency that is held for more than a year is tax-free, regardless of the amount. If the property is held for less than a year, there is no capital gain tax as long as the amount does not exceed 600 euros ($ 692 USD).
For businesses, however, this is a different matter. Startups founded in Germany continue to have to pay corporation tax on crypto income like any other asset.
But in 2021 a controversial new tax law will come into force that will deal “a fatal blow” to crypto derivatives trading in Germany, as losses are no longer deductible. The law dealt with the regulation of derivatives across Europe.
Bitcoin advertising in Hong Kong’s financial district | The source: BAHK
It is not a country but a special administrative region of China that has its affairs autonomy. Hong Kong’s cryptocurrency tax law is currently very general, not specific, even after new instructions issued in 2020.
Whether or not cryptocurrencies are taxed largely depends on their use, according to Henri Arslanian, a global crypto leader at PwC.
“If the digital asset is purchased for long-term investment, all settlement gains will not be subject to corporate income tax,” he wrote in March when the policy was enacted. However, this does not apply to companies. Profits from the company’s crypto business in Hong Kong are taxable.
PwC has clearly affirm that Bitcoin is considered a virtual good for tax purposes, in a comprehensive guide to the tax treatment of cryptocurrencies in various legal systems by the end of 2020.
Nayib Bukele – President of El Salvador
After passing a law accepting Bitcoin as legal currency in El Salvador, the country aims to exempt foreign investors from taxes on Bitcoin profits. Javier Argueta, Legal Adviser to President Nayib Bukele, said:
“If a person has assets in Bitcoin and is getting high returns, they don’t have to pay taxes. This is done to encourage foreign investment. Additional capital or additional income is not taxed. “
While there is still no legal regulation for these tax exemptions, it is a clear sign of the country’s intention to attract foreign investors with crypto portfolios.
Malaysia does not tax capital gains from cryptocurrencies, but regular trading is considered a profession.
In Malaysia, crypto transactions are currently tax-free and cryptocurrencies are not eligible for capital gains tax as digital currencies are not considered legal property or currency by the authorities. .
However, profits from active trading can be viewed as sales and therefore taxable income.
Ranjeet Kaur, communications director at Malaysia Domestic Revenue Department (LHDN), said in an interview:
“If a business generates more ROI passively or occasionally, without a plan or without a system, then the profit from that business is tax-free income.”
However, in the case of active, systematic, and repeated transactions, the “party believed to have engaged in a transaction or a profession” whose profits from such transactions are subject to income tax.
Cryptocurrency related businesses are also subject to Malaysian income tax.
The government of “Blockchain Island” recognizes Bitcoin “as a unit of account, a medium of exchange or a store of value”.
Malta does not levy capital gains tax on perennial digital currencies like Bitcoin, but cryptocurrency transactions are treated similarly to day trading and are subject to trade income tax of 35% in Malta. However, this can be reduced to 5% to 0% using the “structural options” available in the Maltese system.
Malta’s Financial Code, published in 2018, also distinguishes between Bitcoin and a “financial token” that equates to dividends, interest or bonuses. Financial tokens are treated as income and taxed at the applicable tax rate.
Malta is second after Liechtenstein in Tax index Cryptocurrency 2020 by PwC that ranks jurisdictions based on the completeness of the rule they issue.
Portugal has passed a liberal cryptocurrency tax law aimed at encouraging innovation.
Portugal has one of the most crypto-friendly tax systems in the world.
Proceeds from the sale of coins by private individuals are tax-free as of 2018, and crypto trading is not considered investment income (usually a tax rate of 28%).
However, companies that accept digital currencies to pay for goods and services are subject to income tax.
There is no capital gains tax in Singapore, so neither individuals nor companies holding cryptocurrencies are subject to this tax.
However, Singapore based companies are subject to income tax if their primary business is trading cryptocurrencies or if they accept crypto payments.
Authorities view payment tokens like Bitcoin as “intangible assets” rather than legal currency, and cryptocurrency payments represent a “commodity exchange” where goods and services are traded rather than a payment token.
Slovenia is another country that has its own approach to crypto taxation.
Individuals are not taxed on capital gains when selling Bitcoin, and the gains are not considered income. However, companies that receive payments in crypto or through mining must pay taxes at the corporate income tax rate. Token distribution via ICO services is also subject to taxation of up to 50%.
In particular, the Mediterranean country does not allow pure crypto transactions (e.g. accepting payments only in Bitcoin).
In late 2020, local source Slovenia Times reported that crypto communities in the country are actively working with regulators and tax authorities to clarify the country’s tax laws.
sticker Games Bitcoin awareness in Basel, Switzerland | Source: Bitcoin Street Art
No wonder that Switzerland also has one of the most forward-looking tax policies with the “Crypto Valley” innovation center.
Crypto profits made by qualified individuals through investing and trading are considered tax-free capital gains.
The State Secretariat for International Finance (SIF) is pleased notification Beginning of August 2021:
“Mission accomplished. The new DLT law is now in force. Thank you to everyone who contributed to the drafting of this reform law. We are now looking forward to new ideas and business applications.”
However, commercial and commercial mining income is subject to income tax. Specifically, tax laws vary from region to region, and an annual “property tax” is levied on the total amount of cryptocurrency an individual holds, along with the remainder of an individual’s net worth.
Of course, there are many other countries that do not tax profits from cryptocurrencies. These places are considered tax havens where digital assets are neglected and low tax regimes apply in all areas.
The island state of Bermuda is one such territory. Bermuda does not levy income taxes, capital gains taxes, contractor taxes, or other taxes on digital assets or related transactions.
In particular, people can pay taxes with crypto. In October 2019, Bermuda became the first government to accept payment of taxes, fees, and other government services with the USDC stablecoin.
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