This article examines some of the top countries with loyal taxation for cryptocurrency investors.
An increasing number of investors and companies are ready to move to tax havens where cryptocurrencies are tax-exempt or have crypto-friendly tax policies.
In this article, we’ll look at 15 of the most popular destinations.
Cryptocurrencies have proven to be a profitable asset class for many investors and traders over the past decade. In the last year alone, assets such as Bitcoin, Ethereum and other large altcoins have grown in value many times over.
Given that cryptocurrency prices have returned to an all-time high, some traders may take advantage of market volatility and make a profit to reinvest; other investors will stick with the buy and hold method.
Besides the risk profile, location also plays a role in the choice between the two strategies.
When an investor trades cryptocurrency for profit, he may have to pay quite high taxes on the capital gains received.
However, in some countries, crypto profits are not subject to capital gains tax or special taxes (such as VAT and corporate taxes). These places are also attractive for starting businesses for cryptocurrency companies.
Hence the growing interest in tax havens.
Barbados is an attractive destination for crypto investors and entrepreneurs due to its proximity to the United States.
The island nation has created a fintech sandbox to attract companies using tax breaks.
In general, Barbados is not considered an absolute tax haven, but it does set minimum corporate taxes for offshore companies and their owners, in the range of 0-5.5%.
A foreigner residing in Barbados is taxed only on income earned in Barbados, and therefore, profits from cryptocurrency earned on foreign exchanges are outside the scope of taxation.
The Barbados Stock Exchange has implemented this technology and has even placed cryptoassets and security tokens to boost trading activity.
In 2017, President of Belarus Alexander Lukashenko signed a decree on the transformation of the country into a digital economy based on cryptocurrency.
The decree removed digital tokens from the same rules that apply to traditional markets in the country. The law exempts persons interacting with cryptocurrencies from taxes until January 1, 2023.
In 2018, Bermuda passed a comprehensive digital asset regulation known as the Digital Asset Business Act. There are no income or capital gains taxes in Bermuda and therefore cryptocurrency transactions are tax-free. Moreover, any taxes paid can be paid through USDC Circle.
Over the years, the country has attracted many cryptocurrency companies, including Gemini, Bittrex, and Circle, which have opened offices in this tax haven.
British Virgin Islands
Over the past decade, the British Virgin Islands (BVI) has become a leading offshore tax haven for international business, especially in the financial and technology sector.
The British Virgin Islands does not levy any capital gains taxes, income tax or corporate taxes on companies and individuals residing there.
During the ICO boom, the country managed to lure many crypto projects. Bitfinex, one of the largest cryptocurrency exchanges, and its subsidiary Tether are located in the British Virgin Islands.
The Cayman Islands are another popular tax haven for individuals and companies. There are no taxes on all types of crypto activity in the Cayman Islands.
Due to the lax tax laws, the Cayman Islands are a favorite destination for many crypto companies.
For example, BlockOne, which develops the EOS blockchain, headquartered in the Cayman Islands, raised over $ 4 billion in its initial coin offering (ICO) from here.
One of the amazing tax havens is Germany. In Germany, you do not need to pay any taxes on profits generated from investments in bitcoin and other cryptocurrencies if they are held for more than a year.
Moreover, if you sell your bitcoin for fiat money or exchange it for other cryptocurrencies within one year, there still remains a tax exemption of up to € 600 (or $ 727).
But if you sell your cryptocurrency for a year and make more than € 600, this should be stated in the income section for tax reporting.
Hong Kong has been a popular choice for many tech companies and investors due to its simple regulatory and tax system.
In addition, Hong Kong’s foreign income is not taxed, as is the Malta tax system. This has helped transform the city into a global financial center, attracting many prominent investors to the crypto space.
According to the Hong Kong tax authority, the Internal Revenue Department (IRD), if cryptocurrencies are bought and held for long-term investment purposes, any profits will be considered capital and will not be subject to income tax.
Another important point to look out for is that short-term gains from cryptocurrency activities in Hong Kong, such as trading, will be subject to income tax, according to a PwC report.
The tax regime for cryptocurrencies in Malaysia is very similar to Singapore. Malaysia has no capital taxes, making it another attractive tax haven for cryptocurrency investors.
The Inland Reserve Board, the tax regulator, explained that profits from cryptocurrencies are taxed only if they are derived from trading activities on cryptocurrency exchanges.
In addition, there is no provision for taxing cryptocurrency transactions under the 2014 GST Act, although there has been talk of amendments.
The absence of an indirect taxation system like the GST makes it easier for companies to deal with crypto service platforms and exchanges without affecting transaction taxes.
Malta is also known as the “island of blockchains” as a marketing ploy to attract cryptocurrency companies. Binance, the world’s largest cryptocurrency exchange, operates in Malta.
The island nation of Malta offers many benefits for non-state (foreign) companies operating there. For foreign companies and foreign residents, profits and capital gains are not taxed if they originate outside Malta and are not transferred to the banking system.
The effective corporate income tax rate for non-local companies is only 5%. However, for companies registered in Malta, it is much higher.
This remittance-based tax system is considered a loophole to the strict tax laws in EU countries. The country only offers tax incentives to foreign legal entities, including companies and resident foreigners.
Portugal is one of the most attractive tax havens for crypto investors in Europe.
In 2016, the Portuguese tax authority ruled that all cryptocurrency transactions will not be subject to capital gains and profits tax.
Puerto Rico is another attractive relocation option for crypto traders and investors, especially those looking to save on taxes on their assets.
Puerto Rico is located in the United States but is considered a foreign country for U.S. federal income tax. Puerto Rico is well known for Law 22, which maintains zero capital gains tax and only a 4% income tax rate.
The law was passed in 2012 to encourage wealthy people to relocate.
In Switzerland, cryptocurrency exchanges are viewed as traditional payment transactions.
According to the Swiss Federal Tax Administration, all profits and losses from cryptocurrency transactions made by individuals are not taxable.
While individuals are exempt from tax, profits generated by cryptocurrency businesses are taxed under Swiss law.
Thanks to favorable tax regulations, the European country is home to many cryptocurrency funds such as Ethereum, Tezos and Diem Association.
Cryptocurrencies are considered to be movable property in Slovenia. According to section 32 of the Personal Income Tax Act (also called ZDoh-2), personal income tax is not paid on income from the sale of movable property.
Income from commercial activities using cryptocurrencies such as mining is taxed at 25% of annual income.
Singapore taxes are advisable if you are a long-term investor in all assets, including cryptocurrency. Capital Gains Tax does not apply to all assets in Singapore.
Cryptocurrencies are also exempt from the standard 7% tax under the country’s goods and services tax (GST) system.
However, in April 2020, the Inland Revenue Authority of Singapore (IRAS) published an e-tax guide that clarifies short-term crypto profits from trading activities that are taxed as ordinary income.
The progressive tax rate for Singapore residents starts at 0% to $ 20,000 and ends at 22% for those earning over S $ 320,000.
Seychelles is another tax haven, a favorite destination for many cryptocurrency companies. The archipelago hosts the BitMEX crypto derivatives exchange.
Income from cryptocurrency generated from cryptocurrency trading or exchange transactions in the Seychelles is completely tax-free. Tax incentives apply only to offshore legal entities and foreign individuals residing there.
However, state or local companies and citizens must pay taxes on their income in Seychelles.
Most countries charge investors and traders a significant portion of crypto profits in the form of capital gains taxes on top of income taxes. For example, the USA, among other factors, charges 10-25% depending on the investor’s income level.
Companies and investors working with cryptocurrency and other digital assets have found it much easier to move their offices to a tax haven.
Many tax havens such as Malta, Singapore and the Cayman Islands have moved entirely to blockchain technology, making it easier to do cryptocurrency businesses.