There is no unified crypto taxation system. Some countries are more liberal than others.
Here's our list of eight of the most crypto-friendly tax authorizations.
Germany offers a unique approach to taxing digital currencies like Bitcoin. Unlike most other nations, Europe's largest economy views bitcoin as private money, not currency, commodity, or stocks. For residents of Germany, any cryptocurrency held for more than a year is tax-free, regardless of the amount. If assets are held for less than a year, no capital gains tax is charged on sale unless the amount exceeds € 600 ($ 692). For business, however, this is a different matter; a startup registered in Germany still has to pay corporate income tax on crypto gains like any other asset.
It is not a country, but a special administrative region of China with theoretical autonomy in its affairs. And Hong Kong's cryptocurrency tax law is a wide-ranging issue, even after new guidance was released earlier this year.
According to Henri Arslanian, the global leader in cryptocurrencies at PwC, in essence, whether cryptocurrencies are taxed or not depends on their use.
“If digital assets are bought for long-term investment purposes, any profits from them will not be subject to income tax,” he wrote in March when the directive was introduced. But he added that this does not apply to corporations - their Hong Kong profits from activities in the cryptocurrency field are taxed.
In Malaysia, cryptocurrency transactions are currently tax-free because digital currencies are not considered assets or legal tender by the authorities. But the law is currently mobile. It only applies to individual taxpayers and cryptocurrency businesses are subject to Malaysian income tax. And soon everything may change. Mohamad Fawzi Saat, Director of Malaysia's Tax Department, said in 2018 that Malaysia is committed to releasing comprehensive guidelines on cryptocurrency tax treatment by the end of 2020.
Malta is famous all over the world for its friendly attitude towards cryptocurrencies. The government of the so-called "blockchain island" recognizes bitcoin as "a unit of account, medium of exchange or store of value." For example, profits earned from the sale of cryptocurrency are not taxed here. However, corporations using cryptocurrency trading as their main business are subject to a 35% tax. Companies that trade in stocks or foreign exchange pay the same amount. Besides, in the country, cryptocurrency is already used as a payment instrument, as well as an investment instrument.
Malta's financial guidelines, published in 2018, also distinguish between bitcoins and so-called “financial tokens”, which are equivalent to dividends, interest, or premiums. The latter are treated as income and are taxed at the applicable rate.
There is no capital earnings tax in Singapore, so neither individuals nor corporations that own the cryptocurrency are held liable. But companies based in Singapore are required to pay income tax if their main business is cryptocurrency trading or if they accept cryptocurrency as payment.
Authorities consider payment tokens such as Bitcoin to be “intangible property” rather than legal tender, and payment in cryptocurrency is a “barter transaction” in which goods and services are taxed, but not the payment token itself.
Unsurprisingly, Switzerland, home to an innovation hub known as Crypto Valley, also has one of the most forward-looking tax policies. Profit from cryptocurrency earned by a qualified individual through investing and trading is considered tax-free capital gains. However, income from professional trading and mining is subject to income tax. Notably, tax laws vary by region, and an annual "wealth tax" is levied on the total amount of cryptocurrency owned, as well as on the rest of a person's net worth.
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Belarus passed a law that legalized crypto. At the same time, individuals and legal entities are exempt from any form of taxation of transactions with digital financial assets until 2023. In the future, the government may reconsider its decision.