In Which Countries are Staking Rewards Taxed? 💎

The answer to this question depends on the country you live in and your tax residency. In this article, i'll try to describe primary cases of crypto staking rewards taxation worldwide. In one article it is simply impossible to explain all the details. I set another goal - to show crypto investors a common perspective. Here we are looking specifically at staking rewards taxation for individuals.

The general trend is that developed countries have been tightening regulations on the taxation of cryptocurrencies. The basic approach is that you have to pay personal income tax or capital gain tax for your staking rewards.

This type of staking taxation is in place in the US. The IRS recently published a clarification about PoS staking taxation: "Rewards received are included in the taxpayer's gross income." This means that staking rewards must be declared for personal income tax, with a tax rate of 10%-37%. Last but not least, users need to pay tax only in the year that staked tokens are unlocked.

In Canada, according to local tax authority (CRA) guide, the basic tax paid to individual crypto investors is the capital gain tax calculated at the moment of at the time of accrual of profits. However, it's a bit complicated for staking rewards - probably, it's taxable twice. The first time as a personal income tax for getting crypto at the time of getting the income, and second time then, the taxpayer spends/sells its rewards, and it's taxable by CGT.

However, this second time, staking profits are taxable only if the holder has an additional profit. Furthermore, Canada has a relatively low CGT tax rate of 22,25-27.4%, and 50% of crypto profits are excluded from CGT - so only half of the gain is taxable.

Europe: Special Regulations for DeFi taxation

A similar approach to staking taxation is popular in the European Union. Depending on the country, staking rewards are subject to personal income tax/capital gain tax once or are taxable twice.

For example, in Denmark and the Netherlands, you must pay personal income tax on the profits when the coins are accrued. Income tax is calculated on the face value of the cash in the local currency.

And even Switzerland requires the payment of personal income tax on staking. Tax rate depends on the commercial activity of an individual. Unfortunately, crypto gains are not taxed if less than €51,000.

Sweden and some other EU countries has another approach to staking taxation. According to a Skatteverket guide Ethereum 2.0. staking is taxed twice - you pay Interest Income Tax (30%) to staking rewards and then later in the case price of rewards has increased - Capital Gain Tax in the moment you sell/spend them.

In the UK the status of staking and DeFi taxation is still unclear. However, basic approach of HMRC is that staking rewards are subject to personal income tax (as miscellaneous income)) or capital gain tax, depending on the types of transactions and commercial activity. At the same time, there is information that the approach to taxation of crypto-assets in the UK may be softened.

If you live in Europe, you should also know that Germany and Portugal offer tax breaks for long-term cryptocurrency holders with 0% capital tax (CGT). Also, in France, the tax must be paid only one time - when going fiat.

No special tax regime for staking rewards

In other jurisdictions, however, the tax status of staking has yet to be determined - and its taxation follows the general principle as other cryptocurrency income. For instance, In Serbia, Ukraine, Kyrgyzstan, and Kazakhstan, tax must be paid when withdrawing staked coins into fiat. Capital gain tax in these countries is low: Serbia (15%), Kazakhstan (10%), Ukraine (18%), and Kyrgyzstan (10%).

Zero Tax Countries

Finally, a third approach to the taxation of staking is represented by zero-tax countries or countries that do not tax income from cryptocurrency transactions or give tax exemptions for crypto income to foreign investors.

El Salvador, Georgia, Uzbekistan claim they have 0% tax on cryptocurrency income as a tax exemption. You also may be interested in jurisdictions with 0% tax rates for individuals like 🇧🇭 Bahrain, 🇧🇲 Bermuda🇻🇬 British Virgin Islands, 🇰🇾 Cayman Islands, 🇦🇪 UAE.

Conclusion

At the moment, there are three main approaches to staking taxation. Under the first approach, you pay income tax on the nominal profit and capital tax on the sale of tokens if the price has increased by the time of sale. This taxation scheme is more prevalent in developed countries.

In the second option, you pay tax only once when you exit to fiat - income or capital tax. Finally, the third option - jurisdictions with zero tax or tax exemptions for cryptocurrency income.

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