Investors and Industry Leaders Have Raised Concerns Over High Tax Rates On Crypto Gains
The clouds of uncertainty over the crypto industry are gradually disappearing. Thanks to institutional adoption and regulation of digital assets by several governments globally. From Nigeria in Africa to the Netherlands in Europe and India in Asia, crypto has witnessed widespread adoption globally. Crypto is democratizing global finance by eliminating intermediaries and putting people in control of their money. However, the announcement of high taxes rates on crypto gains has emerged as a major roadblock in the long-term success of the crypto industry.
Several countries across the world have announced fresh tax rates on crypto in an attempt to regulate digital assets. Regulation of crypto plays a major role in increasing trust among investors. One can see the positive impact of regulation in increasing investments in crypto. Millions of new crypto investors jumped on the crypto bandwagon in 2021. However, the announcement of fresh taxes has acted as a demotivation for investors and entrepreneurs. For example, the announcement of a flat 30% tax on crypto gain by the Indian government led to a massive decline in volume across exchanges.
With several leading countries announcing new taxes on crypto income and crypto trading, traders are looking for top crypto tax-free countries to shift their business and maximize their gains.
Countries With Highest Tax On Crypto
- United States: The world’s largest economy is one of the top countries to announce tax rates on crypto gains. The US treats crypto as capital gains and imposes tax accordingly. Users need to pay taxes in the range of 10% to 37% on short-term capital gains. However, long-term gains in the country are taxed in the range of 0% to 27%. USA’s Internal Revenue Service identifies buying and selling crypto property. Crypto is taxed in the US in the same way as other assets like gold and stocks.
- South Korea: South Korea is one of the top countries that has announced substantial tax rates on crypto assets. The ‘strange’ crypto laws in the country have irked many, especially the supporters of a decentralized global economy. The laws regarding crypto in South Korea require individuals to disclose their identity through an ID card for every crypto transaction above a certain price range. In general, South Korea taxes crypto gains at a rate of 24%.
- India: India, the country with the highest number of crypto investors, recently announced a flat 30% tax on crypto gains. Besides a 30% tax on crypto gains, the government also imposed a 1% TDS on payments made in relation to the transfer of virtual digital assets. Also, the loss from the transfer of crypto assets cannot be set off against any other income. However, the Reserve Bank of India continues to be skeptical about the crypto industry.
- The Netherlands: The Netherlands is one of the major European countries that have come up with clear and concise regulations regarding crypto. The tax rates in the country varies based on the income and profile of individuals. The highest tax rate for crypto gains in the country is 31%.
- Belgium: Belgium announced taxes on crypto in 2018. Belgium probably has the highest tax rate on crypto in entire Europe. The European nation imposes a 33% tax on crypto. The country announced such a high tax rate on crypto to crackdown on the increasing money laundering cases. However, Belgium has been facing several problems in enforcing these taxes due to investors using offshore platforms to hide identity and evade taxes.
- Japan: Japan tops the list of countries with the highest taxes on crypto. The regulatory bodies in Japan see the high tax rates in the country as an attempt to keep a check on the skyrocketing demand and adoption of crypto in the country. A lot of people use cryptocurrencies as an alternative payment method. Several organizations across Japan continue to urge the government to reduce taxes on crypto. Thankful, the country is considering reducing the tax rates to somewhere between 20% to 30%.
The imposition of such high tax rates on crypto could be lethal to the booming crypto economy that aims to democratize global finance. With several governments welcoming crypto businesses and investors from different parts of the world, countries with high tax rates could witness a migration of investors. Crypto is all about financial freedom and financial institutions need to pay heed to the concerns of investors. Since crypto is powered by blockchain technology, the migration of investors may also result in a brain drain. This could leave countries devoid of bright minds from Web3, DeFi, and NFT space. There is a need for standard laws regarding crypto that can be framed upon consultation between all the major economies.