The cryptocurrency space has come a long way since its inception a little over a year ago. Albeit the concepts of crypto go back way further, the industry as we know it today has been around for only a decade or so. Nonetheless, within a short period of time, the asset class has earned itself quite a name in the world of finance.
Now taxing crypto investments is a priority for many governments today. However, some countries are more liberal with crypto and digital assets than others.
Best countries for crypto taxation
Germany: Although Germany isn’t completely tax-free, there are some loopholes via which investors can skip paying the tax.
In Germany, if an investor holds on to their crypto for longer than a year, they won’t have to pay taxes on it when they sell, swap, or use it. Holding onto the cryptocurrency is important because, unless the profit is less than €600, cryptocurrency held for less than a year is taxed.
The staking rule is another peculiarity. Regardless of how long you’ve owned the cryptocurrency, taxes would apply if you staked it to generate further money. Staked crypto would only be tax-free at the point of sale after 10 years of holding.
El Salvador: El Salvador is one of the most popular countries in the crypto community. The country was the first to accept Bitcoin (BTC) as a legal tender. As such, businesses in El Salvador are obliged to accept BTC as a form of payment.
The country also exempted foreign investors from paying any taxes on Bitcoin profits.
Singapore: Singapore is the home base for many crypto exchanges and businesses. Well, the reason for that is straightforward. The island nation is a tax haven for individuals and businesses. Singapore does not have any Capital Gains Tax. Investors do not pay any taxes on the profits made from their crypto investments.
However, if a business accepts crypto as payment, there would be income tax levied on it.
UAE: The United Arab Emirates, in particular Dubai, is slowly becoming the crypto hub of the world. Currently, there is no personal income tax in Dubai. This indicates that there is no income tax, regardless of the size of your gains, if you are a tax resident of Dubai. Taxes on capital gains, company income, and salaries are all zero percent regardless of whether you actively trade or hold.
Worst countries for taxation
Belgium: Belgium is often considered the worst country for crypto taxes. The nation taxes capital gains from cryptocurrency transactions at a rate of 33% and withholds up to 50% of professional income from cryptocurrency trades for tax purposes.
Belgium’s strict laws were put in place way back in 2017.
Iceland: Iceland taxes cryptocurrency gains up to $7,000 at a rate of 40%, while larger gains are subject to a rate of 46%. However, mining companies are very attracted to the country due to its high availability of geothermal energy.
Phillippines: Any cryptocurrency revenue in the Philippines up to $4,500 is tax-free, but beyond that, all income is subject to a 35% tax rate. By 2024, the government of the nation would also be contemplating new cryptocurrency taxes. This has increased fears that Manila will imitate India and levy a 30% flat tax on all cryptocurrency income.
Japan: For income regarded as miscellaneous income, Japan uses a progressive tax rate system. Depending on the overall amount of profits, the tax rate ranges from 5% to 45%. However many individuals and groups are trying to persuade the government into reducing taxes on crypto investments.