Crypto Taxes Around the World
This blog post will cover:
- Crypto taxes in the U.S.A.
- Crypto taxes in Europe
- Crypto taxes in Canada
- Crypto taxes in Asia
- Places free from crypto taxes
Since cryptocurrencies are gaining popularity and the number of ways they can be spent is increasing, investors show an extremely high interest in this type of asset, and cryptocurrencies started to attract the attention of governments. It is a well-known fact that one of the most valuable advantages of crypto is the absence of regulation. At the same time, it is obvious that an unregulated economy cannot exist side by side with the traditional type. Thus we are witnessing a process of creating crypto legislation all around the world. Each country has its own peculiarities. Let’s take a look at some crypto tax laws that are already applicable around the world.
Crypto taxes in the U.S.A.
To talk about the taxes we should understand what cryptocurrencies are in a general economic picture. In 2014 The U.S. Internal Revenue Service decided that Bitcoin and cryptocurrencies like Bitcoin should be considered a kind of property. This means that capital gains are treated the same way as for traditional assets.
Right now there are two types of crypto taxes in the U.S.A.
Capital gain taxes in case:
- Cryptocurrencies are sold for fiat
- Crypto is used as a payment method
- Cryptocurrencies are swapped one for another
- Crypto trading
Income taxes in the following situations:
- If cryptocurrency was received in an airdrop
- If there are interest earnings from DeFi
- If a user receives income from mining, liquidity pools, and staking
- If crypto is received as payment
Crypto taxes in Europe
European countries have a lot in common in crypto regulation, usually taxes are different for trading and holding cryptocurrencies.
In Estonia cryptocurrencies that are similar to Bitcoin are treated as property, thus 20% tax should be paid if an owner sells it making profit.
In Bulgaria the law is pretty much the same, the only thing different is that tax is 10%.
In Norway cryptocurrencies are classified as assets and taxes are the same as from other financial product progits, which is 25%.
Switzerland is a different case, there are no taxes in case of selling or purchasing crypto, however, the crypto portfolio is evaluated and is a subject of wealth tax, which is calculated individually depending on the canton and income.
In the UK cryptocurrencies are categorized as property. Long-term investors pay the 10% capital gain tax.Traders have two options depending on the amount of income. If they get less than 12,500 GBP, they are exempt from paying the tax, otherwise they have to pay between 20% and 45%.
In France taxes are paid only by active traders, however, the tax is pretty high (66% of income is taxable).
Spanish rules also take into consideration the period of holding crypto. If it is bought and sold within 12 months, a tax rate will be between 24.75% and 52%. Long-term investors, those who keep cryptocurrencies longer than a year, have to pay between 19% and 23%.
Crypto taxes in Canada
In Canada crypto is classified as a commodity, and taxes are divided into capital gain and income taxes. Moreover, it is different for business and non-business actions, 100% of business income is a subject of taxation, whereas only 50% of capital gain is taxed. The Canada Revenue Agency describes several cases in which crypto holders and traders should pay taxes:
- Crypto is sold for fiat
- Crypto is traded for crypto
- Crypto is used to purchase goods and services
- Crypto is sold or gifted
Crypto taxes in Asia
Asian countries have their own way of dealing with cryptocurrencies, and there are various approaches. For example, in South Korea crypto legislation is currently under the discussion. So far it is planned to start taking taxes starting from 2022. The Ministry of Economy and Finance promises that crypto investors will pay a 20% capital gain tax.
A different picture may be witnessed in Japan. There all types of income connected to cryptocurrencies are considered to be miscellaneous income, and the tax rate may be as high as 55%. However, it very much depends on the total yearly income.
Places free from crypto taxes
Germany provides some interesting opportunities for those who plan to keep their crypto savings for a while. Here are cases when there are no taxes:
- Selling after a year of holding
- Selling within the year, but the profit is less than 600 EUR. In other situations taxes may reach 45%.
In Slovenia crypto becomes a subject of taxation only if it is used to pay for services or received by companies.
In Portugal there are no crypto taxes for individuals who trade or hold it.
If it seems difficult to deal with taxes, there are specialized companies like CoinLedger that can help. CoinLedger (formerly CryptoTrader.Tax) is an all-in-one portfolio tracking and crypto tax software solution that integrates with leading platforms such as TurboTax, H&R Block, and more. In just a few minutes, CoinLedger can calculate taxes owed on capital gains, income, and DeFi transactions, and allows customers to generate tax reports such as the IRS Form 8949 or income report, and export them into a tax filing software of users’ choice. Rated 4.8 out of 5 stars on consumer-review website TrustPilot, CoinLedger also offers dynamic portfolio tracking, as well as an-ever expanding list of supported crypto exchanges and blockchains, including over 10,000 cryptocurrencies.
Right now crypto regulation is just at the beginning of formation. Each country is trying to adapt a new financial phenomenon to the existing economic system. Undoubtedly, the existing legislation will change with time depending on the role of crypto in the minds of society and investors in particular. We have already seen at least one major change in governmental attitude towards the crypto problem. When the government of China changed its vision of the crypto industry and decided to force it out of the country after developing its own controlled digital currency. This resulted in the necessary adaptation of companies and miners to the new situation.
There are reasons to suggest that this will be repeated one way or another. So far we have a unique chance to use the benefits of different systems.