Following France’s recent decision to re-classify cryptocurrencies as ‘movable property’, bringing down the capital gains taxation rate from as high as 41% to a flat 19%, we thought we would investigate some of the best and worst nations for cryptocurrency trading when it comes time to lodge those tax returns!
The Best Countries
Hands down the most progressive country when it comes to cryptocurrency taxation is Belarus.
The landlocked Eastern European nation has deemed Bitcoin and other cryptocurrencies completely tax-free for the next five years at least. And it’s not only for individuals, blockchain-related businesses can operate freely and pay no taxes until at least 2023. This is an integral part of their strategy to build a special economic zone, named High Technologies Park, to attract fledgling blockchain startups.
This even includes profits from cryptocurrency mining! Oh, and smart contracts are recognized as legal contracts, providing complete legitimacy for any business operated on blockchain platforms such as Ethereum.
Portugal won’t tax any of your profits from cryptocurrency trading or investment, but only for individuals. Businesses are still taxed on profits generated from their blockchain-related business operations.
Denmark has declared that they won’t tax any cryptocurrency traders and those who take yearly profits using Bitcoin won’t have to pay any capital gains tax at all. But, this is purely due to their indecision to classify any cryptocurrencies as actual money, which may change in the near future.
The Netherlands, as you could have guessed, are quite encouraging when it comes to cryptocurrency investment and use, primarily due to their very simple tax system. At the very start of each year, profits on cryptocurrencies are declared – but you’ll never pay more than around 5% on any profits due to their very low capital gains tax rates! Be wary though, the tax rate changes every fiscal year.
Slovenia is pretty good for the individual investor: capital gains from bitcoin and other cryptocurrency profits related to trading and speculation are not added on to respective yearly incomes. Being paid in cryptocurrencies such as a Bitcoin for work though will attract pretty standard taxation rates. Businesses receive no special treatment here either.
Germany recently announced that they will not be taxing cryptocurrency transactions at all, making it one of the most progressive countries in the world in relation to the treatment of Bitcoin and other digital assets as legitimate legal tender. In fact, your Bitcoin is treated exactly the same as fiat. Purchases using cryptocurrencies will never be taxed, great news for any businesses or merchants looking to adopt the new wave of global currency.
For investors in Germany, it is recommended to hold your cryptocurrencies for at least one year, after which the taxation of those sweet decentralized profits will be completely waived!
Special mentions (countries where there is no capital gains tax!)
Now, there are quite a few nations around the world that do not have any taxation system for capital gains, and as such would make great havens for cryptocurrency operations and investment. They include (but not limited to): United Arab Emirates, Qatar, Saudi Arabia, Bermuda, Cayman Islands, The Bahamas, Brunei, Kuwait Oman and Bahrain and even New Zealand, Hong Kong and Singapore.
Switzerland also gets a special mention, as they’re becoming one of the world’s leading havens for blockchain developers. This is due to the grey area that cryptocurrencies still inhabit there, where they are not a currency, not a property and not a service or classified as goods, which makes it hard to tax!
The Bad
The worst country for the taxation of cryptocurrency daytraders, apart from those that have outright banned the purchase and use of them altogether (most recently India), has to be the United States of America.
In America, cryptocurrencies are deemed to be property, not currency, as is with most of Europe and Asia. That means that any time you make a trade on (or off) an exchange, you are trading property – which makes it absolutely liable to be taxed. Every trade made is a taxable event, unlike (most of) the rest of the developed world, when taking profits (ie, converting cryptocurrencies into fiat), is the only taxable event.
A recent reddit post drew worldwide media attention when it detailed how one prospective cryptocurrency trader now owes the IRS up to US$50,000 in taxes. Just for making standard trades and not being forward-thinking enough to cover any possible taxes that would be generated by each positive and negative trade.
Most countries not discussed in this article feature some kind of variant of a tax system that currently exists for the trading of stocks and other traditional assets: if you take profits, it’s added onto your yearly income, on which you pay taxes for. If you hold it for longer than a year, it’s classed as a speculatory asset, and you get a tax break.
Disclaimer: the taxation details provided in this article are accurate to the knowledge of the author and CryptoCoinSpy.com at the time of publication. These rules are subject to change at the authority of the pertaining governments of each country. This is not advice on how to pay your taxes, for that, seek a professional.
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