What differentiates crypto from traditional finance is the decentralized nature of the industry. Crypto ignites the hope of financial freedom among investors. It is one of the major reasons behind the skyrocketing rise in the number of crypto investors globally. However, the recent announcements regarding taxes on crypto by several countries have acted as a demotivation for investors globally. India, the country with the highest number of crypto investors globally, recently announced a flat 30% tax on gains from digital assets. As a result, crypto volume on major exchanges dropped more than 40% in just 4 days after the new tax law came into force. Countries like the US and the UK have also announced taxes on crypto gains. This has forced investors and businesses to migrate to countries with relaxed tax rules regarding crypto trading.
Are you also ready to pack your bags and fly to a crypto tax-free country in 2022? If yes, it is extremely important to understand the rules regarding crypto investment in different countries. Thankfully, there is a long list of countries that encourage investment in digital assets. Whether you are an investor or an entrepreneur with a solid startup idea, you might select one of these crypto-friendly countries to save taxes or register your crypto business.
What are the top crypto tax-free countries?
- Germany: Unlike most developed countries, Germany recognizes Bitcoin, the largest cryptocurrency by market capitalization, as private money. In fact, German residents are exempted from tax for any cryptocurrency held for over a year. Also, capital gains on crypto assets are tax-free for less than a year, as long as total gains are less than 600 euros. However, the new law in the country discourages or effectively kills derivatives trading in the country. Also, crypto-powered startups still need to pay taxes in Germany.
- Belarus: Belarus is truly a top crypto tax-free country, At least until 2023. According to a law passed in March 2018, Belarus exempts individual investments as well as crypto businesses from taxes. However, it is an experimental law that the Belarusian government will review in 2023. Belarus aims to promote technological innovation and the development of a digital economy in the country through liberal tax laws. The law in the country sees crypto investments as well as mining as personal investments. Hence, crypto gains are exempt from any kind of taxes.
- El Salvador: If you are in the crypto market, you must be aware of the extremely liberal tax laws in El Salvador, one of the top crypto tax-free countries in the world. The country identifies Bitcoin as a currency and exempts foreign investors from paying taxes on Bitcoin gains. Moreover, several businesses have already started accepting Bitcoin in El Salvador and the government continues to promote the use of digital currencies in the country. Entrepreneurs and businessmen from across the world are investing in the crypto economy in El Salvador.
- Malaysia: Since Malaysia is yet to recognize cryptocurrencies as assets or legal tender, crypto transactions are tax-free in the country. The country is emerging as a powerhouse of the digital economy with increasing investments in the crypto sector from entrepreneurs and businessmen. However, profits from crypto are considered revenue and hence are taxable.
- Malta: Malta is also known as “Blockchain Island” due to its innovation-friendly policies. Malta recognizes Bitcoin as “a unit of account, medium of exchange, or store of value”. While Malta exempts investors from tax on long-held digital currencies like Bitcoin, crypto trades attract 35% tax in line with the business income tax. However, the Maltese system has “structuring options” that can be used to bring down the tax on crypto trades to 5% or less. The country came second in PwC’s 2020 Crypto Tax Index.
- Portugal: Portugal is hands down one of the most crypto-friendly countries globally. Gains from crypto trading or the proceeds from the sale of cryptocurrencies are tax-free in the country. Portugal exempts crypto gains from taxes since 2018. However, businesses accepting crypto as payment have to pay taxes. The country has taken several positive steps to promote crypto startups and benefit from the booming digital economy.
- Singapore: Just like its neighbour Malaysia, Singapore too has extremely liberal laws when it comes to crypto investments. A lot of major crypto exchanges including Kucoin have headquarters in Singapore. The absence of a capital gains tax helps Singapore qualify as one of the top crypto tax-free countries globally. While businesses accepting crypto as payment are taxed, individual investors remain exempted from any tax.
- Switzerland: Switzerland arguably has the most forward-thinking tax policies regarding crypto. That’s why the country is also known as “Crypto Valley”. Capital gains from crypto investment or trading are exempt from taxes in Switzerland. However, those taking up trading professionally have to pay tax. The country also taxes crypto mining. The laws in Switzerland differ from region to region.