A growing number of people are investing in cryptocurrency – such as Bitcoin, Solana and Litecoin – defined by Investopaedia.com as “a digital or virtual currency that is secured by cryptography” with “decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation”.
For investors in cryptocurrency looking to take out a second nationality or move their assets overseas, countries that do not tax cryptocurrency will be attractive options. Most countries do tax cryptocurrency but there are a few who do not or who tax at low levels, making them popular destinations for cryptocurrency investors.
When looking into the best countries it is important to understand each country’s Capital Gains Tax laws and their position on taxing cryptocurrency. Meanwhile, here is our useful guide to the best countries who do not tax cryptocurrency.
Germany
Although cryptocurrency is not completely tax-free in Germany, a good knowledge of the rules and regulations can ensure that no tax is paid under certain circumstances. Astons’ team of experts can provide specific advice to help you negotiate the best arrangements.
As long as the investor holds their cryptocurrency for more than a year in Germany, they will not have to pay tax when they sell it, spend it or swap it, because it is regarded as private money and not a capital asset. However, if it is sold within a year and the profits are more than 600 Euros, there will be tax to pay.
Staked crypto is subject to taxes if it has been staked in order to generate further income. The investor would have to have held staked crypto for more than ten years in order to sell it tax-free.
On the negative side, Germany does still impose income tax on some types of cryptocurrency. This would apply when:
- Being paid in cryptocurrency
- Mining crypto
- Staking crypto
- Selling, swapping or spending crypto within one year if the gain is more than 600 Euros.
- Selling staked crypto within 10 years.
In addition a new EU-wide law has come into force, which prevents crypto derivatives trading, making Germany and indeed the EU slightly less attractive to cryptocurrency investors.
Belarus
Belarus has passed a law legalising cryptocurrency and will keep it tax-free until 2023. All crypto investing and trading is regarded as personal investments, exempting them from Income Tax, Capital Gains Tax and Corporate Tax in the case of cryptocurrency owned by businesses.
El Salvador
Staking its claim as the first country to allow Bitcoin as legal tender, El Salvador has embraced cryptocurrency as a means to attract investment in the country. Unusually, businesses accept payment in Bitcoin making it easy to pay for a wide range of goods and services this way. There is no Income Tax or Capital Gains Tax for foreign investors in cryptocurrency.
Portugal
In 2018 Portugal made all income from selling cryptocurrency tax-free, making it an attractive choice for investors for the past few years. Crypto trading has not been considered to be investment income, leading it to be exempt from taxes. For personal investors (rather than businesses) cryptocurrency has not been subject to VAT or Income Tax. However, it has recently been announced that this tax-free status will shortly end, with the Portuguese Minister For Finance stating that cryptocurrencies will be subject to tax in the near future. Our expert team of advisers will be able to keep you updated on any changes as they happen. Contact us here (link).
Singapore
Individual and business investors are not subject to Capital Gains Tax in Singapore, so no tax will be liable when trading or selling cryptocurrency. The country regards crypto as “intangible property” for tax purposes, so for personal investors using crypto to spend on goods or services, it is viewed as a barter trade rather than a payment, exempting it from taxes. However, businesses taking payments in cryptocurrency are liable for paying Income Tax on the payments, and if a company’s core service is in crypto trading, it is also liable for Income Tax.
Malaysia
Cryptocurrency is not seen as capital assets or legal tender in Malaysia, making it tax-free for individual investors. However, this only applies when transactions are not done a regular basis as that would be viewed as regular or day trading, which is liable for taxes. Businesses carrying out crypto trading are subject to Income Tax.
Malta
Malta is known as a blockchain island which means it is a centre for the digital recording of cryptocurrency transactions, which are then duplicated across a computer system, making the transactions much more difficult to hack or cheat, therefore making them more secure. Malta regards cryptocurrencies as “a unit of account, medium of exchange or a store of value”. This exempts the investor from Capital Gains Tax when crypto is sold, providing it is viewed as a “store of value”.
However, cryptocurrency trades are liable for a rather high Business Income Rate of 35% as they are considered similar to day trading stocks and shares. In mitigation, a knowledge of certain structuring options within the country’s tax system can enable the investor to reduce the tax to under 5% or eliminate it completely, dependent on residency status and the amount of income earned. Our team at Astons can give expert advice to negotiate these tax arrangements. Contact us here (link).
Cayman Islands
Well known as a tax haven for both individuals and businesses, the Cayman Islands have favourable arrangements for taxing cryptocurrency. As with general taxes in the country, there is no Corporate Tax on businesses, nor Income Tax or Capital Gains Tax on residents for cryptocurrency transactions.
Puerto Rico
Whether a person pays tax on cryptocurrency transactions in Puerto Rico is very much linked to residency. Investors who acquire cryptocurrency after acquiring residency are not liable to pay Capital Gains Tax. However if they acquired crypto prior to becoming residents, they will have to pay tax on that cryptocurrency. Residents do pay Territorial Income Tax on crypto but it is set at a low rate.
Switzerland
Crypto tax laws in Switzerland are different from most countries. Although Income Tax and Wealth Tax are payable on crypto mining and for those qualified as day traders, people trading crypto as individuals rather than professional traders, will not have to pay Capital Gains Tax on their profits from selling or trading in cryptocurrencies.
Our team at Astons are experienced and knowledgeable in advising investors on international tax laws and will be happy to help you negotatiate the various tax arrangements involving cryptocurrency and any other investments abroad. Please contact us here for expert, friendly advice.
