The use of cryptocurrency in investment, trading, and as a means of payment has been rising steadily over the past years. Even today, there are countless digital nomads and remote workers who are accepting Bitcoin and other cryptocurrencies as forms of payment in their business, and even in their day to day life!
However, an important issue that arises from cryptocurrency is how it is taxed. Different countries take different approaches to the taxation of crypto, where countries such as Israel and Bulgaria consider it a foreign currency for tax purposes, while other countries apply a VAT tax on all cryptocurrency trades. Since there is no uniform policy in taxing cryptocurrency, this can create confusion among entrepreneurs. Should they buy cryptocurrency? Which exchange in which country should they buy on? What happens in terms of capital gains taxes when they sell their crypto? Many location independent business owners are hesitant to accept cryptocurrency as payment because they don’t know how it will affect their taxes.
However, a lot of progressive steps have been taken by many countries in dealing with this new world of digital finance. Some countries have implemented welcoming regulations on cryptocurrency, such as promoting crypto technology by allowing trade and investment in crypto currencies at zero or low tax rates.
So, let’s take a look at some of the famous crypto-friendly tax countries.
Germany considers cryptocurrency neither as a digital currency nor a commodity. According to German law, Bitcoin and other cryptocurrencies are ‘Private Money’. They are not subject to VAT on sale and purchase. They are exempt from long-term capital gains tax, meaning if you hold them for more than 1 year before selling, the earnings from the investment will not be taxed in any way, regardless of the amount. Even for the sale of Bitcoin within one year, capital gains tax will only be applied if the amount is more than 600 euros. But keep in mind, the above rules are for resident individual investors only. Businesses involved in trading of crypto are subject to corporate income tax from the purchase and sales of cryptocurrency, just like any other commodity.
Thus, for working nomads and remote workers who have a home base in Germany, investing into cryptocurrency can have a favourable tax treatment compared to other countries around the world. But keep in mind that if your German business accepts Bitcoin as payment it will be subject to corporate income tax.
Portugal has widely embraced cryptocurrency and is considered one of the most crypto friendly nations. The Portuguese Tax Authority has declared trading and transacting in cryptocurrency to be tax free for individuals. No individual will be taxed for exchanging crypto to regular currency, and there is no income tax or capital gains tax on the profits arising out of the trading in cryptocurrency. VAT is also not applicable in the purchase and sale and cryptocurrency, making crypto virtually tax-free for individuals!
Portugal is also now an important nomadic hub and all nomads should have it on their radar, as it has an easy tax residency process and it is the friendliest in terms of digital currency taxation.
However, this relief is for individuals only, and companies that accept payments in digital currencies are liable to VAT and income tax arising from these sales.
Singapore is an ‘Investment Haven’ in the sense that there are no capital gains taxes in Singapore. So, just like any other intangible property, anyone (whether an individual or an entity) that holds cryptocurrency for investment purposes does not have to pay any tax on the capital gains.
But for businesses that are involved in the trading of cryptocurrency as their main activity, the profits will be taxed as normal income tax considering the crypto as any normal product. Not only this, but for businesses that accept cryptocurrency as a form of payment for goods and services sold, the profits will be taxed as normal income tax.
Tax residency in Singapore is determined from the place of operation of business, already making it a favourable country for location independent businesses. And with the favourable tax laws regarding crypto, it makes it even more attractive to register your company in Singapore.
Malta is the first country to launch a holistic regulatory framework for ‘Distributed Ledger Technology’, earning itself the title of ‘Blockchain Island.’ According to these regulations, cryptocurrencies are considered as ‘a unit of account, medium of exchange, or store of value’ making it the country with the highest acceptance of cryptocurrencies as a means of transactions.
Long-term capital gains taxes are not applied on investments in cryptocurrencies in Malta, and VAT is also not applied on the sale and purchase of crypto. So, investment in cryptocurrency will be tax-free, similar to Germany. However, if you are involved in the day to day trading of crypto, taxes will be applied, similar to the case of day trading in the stock market. In this case, business income tax at the rate of 35% will be applied.
As per the Presidential Decree on development of digital economy of 2018, mining, buying and selling of cryptocurrency is treated as a personal investment and will be exempt from tax until 2023, for both individuals and businesses. To boost the innovation in digital financial technologies, high technology parks are established as special economic zone where no taxes will be applicable in any activities related to cryptocurrency, apart from a 1% tax on the turnover. Getting a residential status in Belarus is comparatively easier, and cities like Minsk are becoming more attractive for digital nomads.
Malaysian law does not tax any long term capital gains from any investment which is applicable to crypto investments, VAT tax is also not applied in crypto trading. Even day trading in cryptocurrency was considered tax free until recently, making all transactions involving cryptocurrency tax free.
However, according to very recent debates, active traders of cryptocurrency are required to declare their gains from trading. If the profits from the purchase and sale of cryptocurrency are revenue in nature, they will be taxed as business income under income tax. New guidelines regarding the taxation of cryptocurrency are to be issued soon to ensure there is more clarity on this issue in Malaysia.
Switzerland is known for promoting the use and innovations in blockchain technology, earning the country the title of ‘Crypto Valley’. It is much more favourable for crypto mining and trading that headquarters of various cryptocurrencies, such as Ethereum and Libra, are located in Crypto Valley. Mining of cryptocurrency is considered as self-employment and is subject to business income tax.
Cryptocurrency that is traded or held as investment will not be subject to capital gains tax if you are trading in your individual account and qualified as an individual trader. However, buying and selling via qualified professional traders is considered a business income and is taxed as such. Nomads with remote jobs should remember that wages received in crypto should be declared as salary income.
Slovenia is another country that does not charge capital gains tax for individuals in the sale of cryptocurrency. However, accepting payments in crypto attracts income tax, or corporate tax for businesses. Companies involved in the mining of cryptocurrency are also required to pay corporate tax on the profits arising out of it. Further clarity is to brought by the tax authorities in the near future.
Hong Kong taxes cryptocurrency according to their use, as per the new guidance issued regarding the taxation of cryptocurrency. According to this, if the crypto is purchased with the purpose of long-term investment, they will not be subjected to income tax. However, for corporations, any profits earned by cryptocurrency trade as business activity will be taxed. For the purpose of corporate taxation, cryptocurrency will be treated as a virtual commodity.
Estonia treats cryptocurrency as an asset for the purpose of income tax. Normal income tax and capital gains taxes are applicable for the sale and purchase of cryptocurrency. However, the buying and selling of cryptocurrencies are not subject to VAT, and niether is the mining of cryptocurrency.
Estonia, with its unique digital nomad visa, is becoming the new hub of digital nomads, and its crypto-friendliness is another important aspect to its future as a digital nomad haven.
Bermuda, a country with no personal income tax, also does not impose tax on the buying, selling or holding of cryptocurrency. Use of cryptocurrency as a form of payment is also legal and not subject to any tax. In fact, Bermuda’s government is the first to accept taxes in any recognized cryptocurrency! Bermuda aims to make itself the international destination for cryptocurrency in the future.
Vanuatu is the only country in the world that accepts Bitcoin payment in exchange for citizenship. The government offers a Vanuatu passport for crypto investors with a five year validity. Additionally, Vanuatu has been a tax haven for quite some time, with no income or corporate tax, making it an important location for crypto trading nomads.
Gilraltar is famous for its low taxation, which is no different when talking about cryptocurrency. A fixed rate of 10% corporate tax has been imposed on crypto-trading and there are no capital gains tax on crypto investments. The Gibraltar government has embraced crypto startups,m and the payments and holding of cryptocurrency are highly encouraged!
As is made clear from this article, cryptocurrency is slowly becoming more accepted globally. However, there are still many countries that are skeptical about cryptocurrency, and still in the phase of understanding and forming regulations around it. A lot of development will be happening in the near future in the crypto-world, and tax laws will change to adjust to this new form of growing currency. As always, we will keep you updated with the latest developments in the crypto world, especially those that affect the nomadic lifestyle. Until then, happy buying!
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NOTICE: The content of this article is not to be considered as a legal opinion or tax advice. Wanderers Wealth does not hold itself out as a legal or tax advisor. If you want to receive a legal opinion or tax advice on the matter in this article please contact us directly and we will refer you to a legal practitioner.