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Crypto Taxes Around the World: A Global Overview of Tax Regulationsby@ulriklykke
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Crypto Taxes Around the World: A Global Overview of Tax Regulations

by Ulrik LykkeOctober 16th, 2023
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Cryptocurrency tax regulations vary widely across the globe. Different countries classify cryptocurrency gains under income tax or capital gains tax. In the United States, the IRS treats digital assets as property, resulting in capital gains tax on most transactions. Germany imposes income tax on crypto, with exemptions for long-term holdings and small profits. The United Kingdom categorizes digital assets into exchange, security, and utility tokens, applying capital gains tax to profits over £6,000. Singapore is known for its crypto-friendly approach, not taxing capital gains but imposing income tax for professional traders. In Japan, crypto gains are subject to a miscellaneous tax of up to 45%, plus a mandatory inhabitant tax rate of 10%. Australia's tax agency, ATO, treats crypto as property and applies income or capital gains tax based on trading frequency. Taxpayers can claim a 50% discount on capital gains tax for assets held over 12 months. Additionally, some crypto tax havens include The Bahamas, Bermuda, the United Arab Emirates, Malta, and Taiwan. These countries offer favorable tax conditions for cryptocurrency investors.
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Crypto taxes around the world differ from one jurisdiction to another. While some countries have adopted a stringent digital asset tax regime, others are taking a more relaxed approach.


But before diving into the specifics, it's worth distinguishing between the two main types of crypto taxes: income and capital gains tax.


Income tax, as the name suggests, typically applies to income earned in the form of digital assets, which could be from salaries, wages, or commissions. Capital gains tax (CGT), on the other hand, is incurred when one sells a digital asset or engages in a transaction leading to the liquidation of one's crypto holdings.


Of course, this does not necessarily imply that every country classifies income and capital gains tax in the same manner. Rather, the specific crypto tax regulations often vary based on how individuals earn, invest, or utilize their digital assets.


The United States

In the United States, the Internal Revenue Service (IRS) classifies digital assets as property, as outlined in a 2014 IRS notice. Consequently, the majority of digital asset transactions fall under capital gains tax, mirroring the treatment of traditional financial instruments like stocks and bonds. However, there are some instances where crypto gains are classified as income tax, such as salaries, crypto mining, and staking rewards.


Taxable Capital Gains

Selling crypto for fiat: If one liquidates their digital assets for cash in the U.S., they are liable for capital gains tax on the profit earned depending on their tax bracket. For digital assets held less than a year, the capital gains tax could range from 10%-37%. However, for assets held for a longer period, the tax is lower, ranging between 0%-20%. Losses can also be written off up to $3,000, provided the digital asset was sold for a price lower than its purchase price.


Converting from one digital asset to another: The process of selling one digital asset and buying another also incurs capital gains tax. If an investor in the U.S. were to sell their BTC and buy ETH, they would be liable for capital gains tax on the profit earned from the BTC sale.


Crypto payments for goods or services: Similarly, selling crypto to purchase tangible goods or services is a taxable event. The IRS classifies this type of transaction as a capital gain, given that it involves liquidating one's crypto holdings.


Income Tax

Salaries or Wages: Any income derived from salaries and wages in the U.S. is subject to an income tax, which varies depending on one’s income tax bracket.


Receiving crypto payments for goods or services: U.S. domiciled merchants who accept crypto as a form of payment are required by the IRS to report it as income.


Crypto mining and staking rewards: For BTC miners and those who stake on DeFi platforms, an income tax is applicable and normally calculated as per the prevailing prices of a given crypto asset when the miner or staker received it.


Notably, certain transactions involving digital assets in the U.S. are exempt from taxation. For instance, donations of digital assets to qualified charities or non-profit organizations are typically non-taxable events.


Similarly, gifting cryptocurrencies valued at less than $15,000 falls within this tax-exempt category. It's worth noting, however, that the recipient will be subject to capital gains tax upon selling the gifted asset in secondary cryptocurrency markets.


Germany

In Germany, cryptocurrencies are classified as private property and are thus subject to income tax. That said, the German tax system offers certain nuances and exemptions that can result in reduced tax obligations for both individuals and businesses.


Digital assets held for over a year are not subject to tax: Individual long-term crypto holdings are exempt from tax in Germany. In contrast, if one sells one's digital assets within a year, one is liable for an income tax of up to 45%, depending on the tax bracket.


Profits below €600 are also tax exempted: Gains realized from digital asset sales and are below €600 are not taxable in Germany.


Crypto mining rewards are subject to tax, less expenses: Germany treats crypto mining as a commercial activity, and thus income generated is taxed minus the expense incurred by the miners.


Crypto payments are taxed based on the difference between the purchase price and sale price: If one was to buy ETH today for $1650 and later sell it for $2000 to purchase an electronic, the taxable income would be ($2000-$1650), $350.


Staking rewards held for over a year are tax exempt: DeFi or NFT staking rewards are also subject to an income tax. However, if held for over a year, they become tax-exempt.


The United Kingdom

The UK's tax authority, His Majesty's Revenue and Customs (HMRC), classifies digital assets into three distinct categories: exchange tokens (like BTC and ETH), security tokens (representing business ownership), and utility tokens (issued by businesses for specific purposes or functions).


Although HMRC's detailed crypto taxation guide from 2018 recognizes the need for varied tax approaches for these asset types, definitive guidelines are yet to be issued. Here's an overview of the current crypto tax policies in the UK:


Crypto gains above £6,000 are subject to a capital gains tax: As of April 2023, crypto gains in the U.K. resulting from the sale of digital assets, exchanging one crypto for another and payments incur a capital gains tax of up to 20%, provided the profits are above £6,000.


Mining rewards and airdrops attract an income tax: Any proceeds from crypto mining, airdrops, and crypto payments received for goods or services could be taxed up to 45% depending on the income bracket.


DeFi staking rewards are taxed on a case-by-case basis: According to a 2022 tax U.K. tax guidance, proceeds realized from DeFi staking should be assessed individually based on a couple of factors.


Negligible value claims for worthless digital asset holdings or lost private keys: U.K. crypto holders also have the option to file for negligible value claims in the event their holdings become worthless or lose access to their digital wallets.


Singapore

Singapore has emerged as one of the leading crypto hubs in Asia, thanks to its crypto tax-friendly regime. Most notably, the country does not tax capital gains on crypto holdings. However, if individuals are trading digital assets professionally, they are required to report their profits as income to the Inland Revenue Authority of Singapore (IRAS).


Other crypto tax structures in Singapore include:

Taxes on Bitcoin mining may vary depending on the nature: Individuals who mine Bitcoin as a hobby are not subject to taxation but those who do it as a business may be required to report their income and pay taxes according to their tax brackets.


Staking and lending rewards above SGD 300 are taxable: DeFi and NFT stakers who earn over SGD 300 annually incur an income tax on their gains.


Crypto payments are exempt from the 8% goods and services tax: The IRAS views goods and services paid for in crypto as ‘barter transactions’ hence exempting these transactions from the 8% tax charged on fiat purchases.


Crypto losses are tax deductible: Individuals or businesses operating in the digital asset industry in Singapore can deduct losses for tax purposes if it is part of the income.


Japan

Japan does not recognize cryptocurrencies such as BTC or ETH as legal tender. Residents are mandated to report any income derived from digital assets in their annual tax returns, as detailed in the National Tax Agency's (NTA) publication, Tax Answer No. 1524. Crypto gains are categorized under income tax, subjecting them to tax rates similar to those for employment incomes.


Taxes vary between 5%-45%: Crypto gains resulting from the sale of digital assets, exchanging one crypto for another, payments, salaries, mining rewards, and airdrops are subject to a miscellaneous tax (zatsu-shotoku) of up to 45% depending on one’s income bracket.

Mandatory inhabitant tax rate of 10%: In addition to the income tax, Japan requires crypto users to pay a 10% inhabitant tax rate which comprises 4% and 6% prefectural and municipal tax rates, respectively.


Transferring crypto between one’s wallets is not taxable: The only time a taxable event occurs is when one liquidates their crypto holding for one reason or another.


Australia

The Australian Taxation Office (ATO) categorizes crypto as property and is among the most progressive tax agencies in the world. Since 2019, the ATO has been tracking crypto transactions in collaboration with digital service providers (DSPs) to ensure tax compliance within its jurisdiction.


Similar to the U.S., the ATO applies income or capital gains tax to digital asset gains. For traders, the former applies because they are considered to be running a business, while long-term investors are subject to capital gains tax (CGT).


Taxable Capital Gain Events: trading one crypto for another, converting crypto to fiat, making purchases via crypto, and gifting cryptocurrencies.



Income Tax Events: salaries, wages, and receiving crypto payments for goods or services.

50% discount on CGT for digital assets held over 12 months: Individual crypto investors in Australia who have held their assets for over a year may be eligible for a 50% discount.

Capital losses offset capital gains: Digital asset holders who realize a loss from their crypto sales can use it to offset capital gains with the approval of the ATO.


0% income tax for gains below $18,200: The income tax rate is favorable to low-income earners but could go as high as $51,667 + 45% of the excess over $180,000.


Crypto Tax Havens

According to rankings by Coincub based on several factors, including income tax, capital gains tax, taxation thresholds for income tax, tax exemptions for long-term investments, and other types of crypto tax reliefs, some of the leading crypto tax havens are:


  • The Bahamas - Renowned as a tax haven, The Bahamas offers favorable tax concessions for both overseas entities and individual investors in cryptocurrency. With its reliance on value-added tax and property duties, the nation shows little inclination toward imposing stringent taxes on crypto earnings.


  • Bermuda - This British overseas territory accepts USD Coin (USDC) for traditional tax payments and government services, and currently does not levy income, capital gains, or withholding tax on digital asset transactions or holdings.


  • United Arab Emirates - The UAE has no federal income tax structure, individual emirates setting their own tax decrees. For now, individual crypto gains remain largely tax-free, as the UAE pushes to be a leading crypto hub in the region.


  • Malta - Known as 'Blockchain Island,' offers varied tax structures that attract both amateur and professional crypto investors. While crypto trading is taxed at 35%, this can be significantly reduced with proper structuring.


  • Taiwan - This small island state features no capital gains tax on crypto and boasts a substantial NT$6.7 million tax-free allowance annually. Additionally, it applies a flat 20% tax rate on overseas income.



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