Globally, cryptocurrency is expanding outside its niche market and gaining traction among the general public. Regulations and taxes are growing as a result of this rise in popularity and use.
Cryptocurrency regulations and tax laws will change as the technology does. To reinvest revenue into the economy, governments are attempting to tax cryptocurrency users on their profits.
Let's first explore why cryptocurrencies are taxed in some countries before looking into the various tax laws governing cryptocurrencies around the world.
Why Tax Crypto?
If there is one reason why governments and authorities have propagated so much fear, doubt, and confusion, it is because cryptocurrency has disrupted those countries' economies.
National fiat currencies are based on the state of the economy of the nation, but the price of a cryptocurrency is determined by the state of the project's economy, supply, and demand. More people are exchanging their fiat money for cryptocurrencies.
People are removing money from their home countries and investing it in alternative economic options by purchasing cryptocurrencies. Governments no longer have control over the value of the converted currency because this directly affects the funds they have available.
Success in cryptocurrency has a direct detrimental effect on the government, which is why they are attempting to regain control and tax you for it.
How is cryptocurrency taxed in countries across the world?
United States of America
How cryptocurrency is taxed in the USA.
The Internal Revenue Service (IRS) typically taxes cryptocurrency as investments and property rather than like money. Consequently, all transactions—from selling coins to making purchases with them—are taxed in the same way as other capital gains and losses.
This presents a good opportunity for long-term cryptocurrency investors: if they hang onto their coins for at least a year, they can take advantage of lower long-term capital gains taxes, which range from 0% to 20% depending on your income level. The same tax rates you pay on all other income—10% to 37% in 2022, depending on your federal income tax bracket—apply to short-term cryptocurrency profits on purchases held for less than a year.
Even if you use cryptocurrency to make purchases, you may still be subject to these taxes, which means you may also owe taxes on any gains your cryptocurrency has made since you initially acquired it.
If you get cryptocurrency in exchange for goods and services or earn it by mining it, you can also be required to pay taxes on crypto. In these situations, it is taxed depending on the value of the cryptocurrency on the day you receive it at your regular income tax rates.
(If you later sell the cryptocurrency you’ve mined or have received at a profit, you can incur taxes.)
Europe
Which tax regulations in Europe are on the side of the user and which are on the extreme end? Let's examine a few of Europe's tax havens... and hells.
Tax havens
Germany
Germany is not a crypto tax-free country, however, it is not taxable at all times.
If held for more than a year, cryptocurrency is not subject to taxes because it is seen as private money rather than a capital asset. If you choose to withdraw before a year has passed, you won't be taxed unless your earnings are greater than €600.
The asset must be held for longer than 10 years for staking profits to be tax-free. If you mine cryptocurrencies or get paid in them, you can be subject to cryptocurrency income tax.
Other than that, Germany has minimal tax rules that would deprive cryptocurrency profits.
France
While France does tax cryptocurrencies, it has recently worked to find ways to do so in a way that is advantageous to both the French government and cryptocurrency users.
The tax rate on profits from cryptocurrency sales was changed by the French State Council in April 2018, lowering it from 45% to 19%. Cryptocurrency sales were reclassified from capital gains to moveable property.
Portugal
As of 2018, Portugal is a tax-free haven for cryptocurrencies.
If you are a business that uses cryptocurrency or are a professional trader, you can be taxed. Cryptocurrency sales and purchases generate entirely tax-free profits. As of now, it is not taken into account for investment or income tax.
Portugal will not impose any income, capital gains, or VAT if you are not a business or professional trader. Cryptocurrency is not merely an asset in the eyes of Portuguese authorities; it is treated like any other currency.
Switzerland
The sale of cryptocurrency by private individuals is tax-exempt, according to a 2019 working paper published by the Swiss Federal Tax Administration.
This means that you can invest in cryptocurrencies without being concerned about paying capital gains tax on your realized profits. Only professional crypto investors have to pay taxes.
Slovenia
Slovenia might be the best option for you if you're looking for a tax break.
According to the Financial Administration of Slovenia, personal cryptocurrency profits are exempt from taxation. You may be required to pay tax on your professional or business activity.
Tax hells
Norway
Sales of cryptocurrencies in Norway will be considered capital gains and subject to a 22% tax.
Norway taxes cryptocurrency mining because it views it as an income. Businesses will be required to pay 25% VAT on cryptocurrency sales in addition to corporate income taxes on cryptocurrency income.
United Kingdom
Your sales of cryptocurrencies in the UK will be subject to a capital gains income tax.
As a taxpayer, you might have to pay 20% or more plus additional rates. A tax-free allowance exemption is available for capital gains taxes that are less than £12,300.
Netherlands
The Netherlands charges crypto users a relatively low tax of between 0.54% and 1.58% on fictitious gains. Therefore, simply holding results in taxes; otherwise, unrealized gains may also be subject to taxation.
Activities like staking, mining, and trading will all be subject to income tax.
Spain
Spain takes tax avoidance seriously and requires all citizens to declare their cryptocurrency trading profits.
A capital gains tax that ranges from 19% to 26% is applied to income made from the sale of cryptocurrencies.
Italy
Cryptocurrencies have been compared to foreign currency by the Italian tax authorities.
Income derived from cryptocurrency exchanges or from the conversion of cryptocurrencies into fiat currencies will be subject to substitutive tax. You'll be required to pay a fixed rate of 26% on sales.
Asia
Here are the different cryptocurrency tax regulations in some Asian countries.
Philippines
The Bureau of Internal Revenue (BIR) in the Philippines has not yet released specific instructions on how to classify cryptocurrencies and how to tax the income generated by them.
The Philippine Tax Code still specifies that gross income refers to all income, regardless of source, for the purposes of calculating tax.
As a result, revenue from cryptocurrency transactions should be included in the taxpayer's overall income for tax purposes.
Thailand
Thailand has implemented a 15% capital gains tax on income from cryptocurrency trading in order to raise money from the industry due to the country's significant increase in the use of digital assets. The tax will be applied beginning with the 2022 fiscal year and is governed by a Royal Decree and the Amendment of the Revenue Code.
In terms of corporate entities, there is currently no definite tax regulation.
Malaysia
Malaysia does not currently have a tax structure for cryptocurrency enterprises, and there is no requirement to pay capital gains tax when selling investments or capital assets.
Cryptocurrency exchanges are subject to corporate income tax, whereas businesses utilizing digital assets as their main business activity may be subject to income tax.
Singapore
Because there isn't a concept of capital gains tax in Singapore, neither firms nor individuals are subject to it when selling cryptocurrency. However, if your Singapore-based company's main activity or business is trading in cryptocurrencies, income tax may be due.
Similarly, if your Singapore-based business takes cryptocurrencies as payment, you must likewise pay income tax on the income generated. This is so because Bitcoin units aren't regarded as tangible property in Singapore.
As a result, it is not considered to be a source of legal tender in and of itself; as a result, trading it is not regarded as a financial transaction.
Instead of being treated as income, the exchange of Bitcoin tokens is considered to be a trade, in which case they are taxed as goods and services.
Conclusion
Most countries are still attempting to understand what blockchain is, and regulation and taxes of cryptocurrencies are still extremely new. Even some of the most popular tax havens in the world have some hiccups in its operations.
Try to take advantage of your winnings in any of the European or Asian countries that now have excellent cryptocurrency tax laws.
We really hope that this article has increased your knowledge of the cryptocurrency taxes in different countries. However, it is always best to continue doing your own research to stay ahead of the game.
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