Crypto tax regulation plays a significant role in the wider adoption of cryptocurrencies. Therefore, as a crypto enthusiast, you need to understand the countries that tax the highest and lowest.
In addition, you can also consider low-taxed countries for your future crypto investments or businesses. First, let’s get some clarity on crypto taxes. Follow along!
How Is Crypto Taxed?
You’re not liable to pay taxes when you hold a particular cryptocurrency. However, according to the Internal Revenue Service (IRS), you must pay crypto sales or transaction taxes.
Moreover, this taxation is also applicable to crypto-based businesses. For example, platforms that accept crypto payments are taxed under the business income category.
But what about cryptocurrency miners? Miners need to pay taxes under the ordinary income category.
Next, let’s check the workings of crypto taxation right away!
Also read: Best Crypto Tax Software to Ease Your Calculation and Be Compliant
How Does Crypto Taxation Work?
The IRS has set several tax events for every crypto-based payment and transaction. Therefore, you need to pay taxes for all such listed events.
You need to pay crypto taxes when you:
- Use digital assets in exchange for any form of goods or services.
- Receive digital assets as a reward for staking or mining activities
- Sell a digital asset for any fiat currencies.
- Receive a digital asset as an airdrop.
- Exchange between two digital assets.
- Trade one digital asset with another digital asset.
- Receive digital assets as a payment mode for goods or services.
At the same time, you don’t need to pay crypto taxes for:
- Buying any digital assets with fiat currency.
- Gifting a digital asset that falls under gifting exclusions.
- Sending digital assets from one crypto wallet to another crypto wallet.
- Transferring cryptos to tax-exempt organizations.
Let’s break the suspense and explore the countries with the highest crypto taxes.
Ranks of countries with the highest and lowest crypto taxes
Table 1: Countries with the Highest Crypto Tax Rates
| Rank | Country | Tax Rate |
|---|---|---|
| 1 | Japan | Up to 55% |
| 2 | Belgium | Up to 50% |
| 3 | Canada | Up to 33% |
| 4 | United States | 0% to 37% |
| 5 | United Kingdom | Up to 45% |
| 6 | Spain | Up to 47% |
| 7 | Denmark | Up to 52.1% |
| 8 | Netherlands | Up to 49.50% |
| 9 | South Africa | Up to 45% |
| 10 | Ireland | Up to 40% |
| 11 | Israel | Up to 53% |
| 12 | Austria | Up to 55% |
| 13 | Italy | Up to 43% |
| 14 | Norway | 22% |
| 15 | India | 30% flat tax on crypto assets + 4% cess + surcharges + 1% TDS |
| 16 | France | Up to 45% |
Table 2: Countries with the Lowest Crypto Tax Rates
| Rank | Country | Tax Rate |
|---|---|---|
| 1 | Malta | 0% |
| 2 | United Arab Emirates | 0% |
| 3 | Bahamas | 0% |
| 4 | Bermuda | 0% |
| 5 | Puerto Rico | 4% tax for crypto corporations |
| 6 | Cayman Islands | 0% |
| 7 | Seychelles | 0% |
| 8 | Monaco | 0% |
| 9 | Panama | 0% |
| 10 | El Salvador | 0% |
| 11 | Indonesia | 0.1% each (VAT and income tax) |
| 12 | Gibraltar | 0% |
| 13 | Liechtenstein | 12.5% on utility tokens |
| 14 | Germany | 0% |
| 15 | Singapore | 0% |
| 16 | Switzerland | 0% |
Now, I will discuss the above countries and their taxation rules in detail.
Countries with the Highest Crypto Taxes
#1. Japan
Japan’s National Tax Agency (NTA) charges a normal crypto tax between 5% to 45%. In addition, you need to pay a municipal tax of 10%.
Therefore, if you have crypto capital gains in Japan, you may have to pay a maximum of up to 55% in crypto taxes. However, you don’t need to pay taxes if your crypto profit is less than 200K JPY (Japanese Yen).
This high cryptocurrency tax policy slows down crypto adoption in Japan. Moreover, these tax rates restrict the entry of a large number of crypto investors and traders to this Asian country.
#2. Belgium
Belgium’s Special Tax Inspectorate (STI) taxes 33% for crypto capital gains from speculations. In addition to this tax, the residents must pay a communal tax between 0% to 9%.
Meanwhile, profit from crypto asset transactions falls under professional income. As a result, a tax rate of up to 50% is applicable.
The higher the cryptocurrency taxes, the lower the investments. Therefore, investors don’t consider Belgium to be an ideal country for crypto investing.
#3. Canada
In Canada, you need to pay crypto taxes of 50% on your capital gains and 100% on your income. The tax rate in both cases varies between 15% and 33%.
In a nutshell, individual investors only need to pay tax on 50% of their crypto capital gains. On the other hand, professional traders need to pay taxes for 100% of their trading income or profit.
#4. United States
Internal Revenue Service (IRS) taxes crypto based on your tax bracket. Moreover, short-term and long-term capital gains have two different taxation.
Long-term crypto capital gains can attract a tax rate between 0% to 20%. On the other hand, short-term crypto capital gainers need to pay taxes ranging from 10% to 37%.
#5. United Kingdom
The United Kingdom offers a tax-free allowance for crypto capital gains up to £12,300. If you exceed this limit, you need to pay a 10% or 20% tax based on the tax slab.
Things get worse when it comes to the crypto income tax policy. After a personal allowance of up to £12,570, your income tax rate ranges from 20% to 45%.
#6. Spain
The State Agency for Tax Administration of Spain (AEAT) charges high capital gain taxes for crypto sales, trades, and deposits. These taxes range between 19% and 28%.
On top of that, a general income tax is charged for crypto payments for goods and services, mining, and other professional activities like staking. These taxes vary from 19% to 47%.
#7. Denmark
Denmark considers each crypto transaction as a financial contract and charges capital gain tax on every such transaction. Therefore, you need to pay a 42% tax on your crypto capital gains.
In addition, your income from crypto assets is also taxed heavily. This tax rate is 37.1% or 52.1%, according to your income bracket.
#8. Netherlands
Belastingdienst, the tax authority of the Netherlands, charges high-income taxes for crypto assets. As a result, you need to pay a tax of 49.50% for income over €73,030.
On top of that, crypto lending and airdrops attract a 31% tax charge. Moreover, mining and staking activities also attract taxes of over 30%.
#9. South Africa
The South African Revenue Service (SARS) is strict with crypto taxation. Therefore, you need to pay up to 18% taxes for your capital gains on your cryptocurrencies.
Additionally, income from crypto assets is also heavily taxed between 18% and 45%. The income tax is charged for referral rewards, crypto trading, mining, and staking.
#10. Ireland
Ireland’s Revenue Commissioners implement high taxation on crypto-related assets. Therefore, you need to pay both capital gain and income tax for your cryptos.
The crypto capital gain tax has a fixed rate of 33%. Meanwhile, crypto income tax varies between 20% and 40% based on your income slab.
#11. Israel
The Israel Tax Authority (ITA) considers crypto to be a tradable asset. For this reason, they charge capital taxes for crypto assets.
In Israel, individual investors need to pay a crypto capital gain tax of 25%. Besides, taxes for crypto businesses go as high as 53%.
#12. Austria
The Austrian Ministry of Finance considers cryptocurrency as an intangible asset. As a result, crypto assets are taxed as per the Austrian Income Tax Act.
This Central European country charges a flat 27.5% tax for crypto staking, lending, yield farming, and mining. Moreover, the crypto income tax rises to a maximum of 55%.
#13. Italy
The Italian Budget Law of 2023 introduced updated taxation on cryptocurrencies. According to this latest law, you need to pay 26% crypto capital gain tax when your capital gains exceed €2,000.
On top of that, an income tax is applicable for any income generated from crypto assets. This income tax rate ranges between 23% and 43%.
#14. Norway
Norway doesn’t charge any capital gain taxes; however, you need to pay income tax for crypto capital gains. This income tax is fixed at 22%.
Moreover, the income tax is applicable for all crypto-related activities. You need to pay this tax for crypto mining, trading, and staking.
#15. India
India introduced its latest crypto taxation in the 2022 budget. According to this Indian budget, investors are required to pay a flat 30% tax on crypto assets along with a 4% cess and applicable surcharges.
Additionally, you also need to pay a 1% Tax Deducted at Source (TDS). This TDS applies to crypto trading activities above ₹ 50,000 in a single financial year.
#16. France
France charges a 30% flat tax rate for capital gains from any form of crypto assets. Moreover, this tax is applicable for capital gains above € 305 per year.
However, the tax rates for professional crypto traders and miners are on the higher side. As a trader or miner, you need to pay a tax rate that can go up to 45%.
Now, let’s dive into the list of countries that charge the lowest crypto taxes.
Countries with the Lowest Crypto Taxes
#1. Malta
Malta is titled the “Blockchain Island,” following its favorable government policies on crypto and blockchain technology. For example, you don’t need to pay capital gain taxes on crypto assets.
Moreover, part-time mining activities are charged only 10% tax and are exempted from other types of taxes. However, crypto day trading profits are considered business income and taxed highly.
#2. United Arab Emirates (UAE)
The United Arab Emirates is considered one of the most crypto-friendly countries in the world. Therefore, this West Asian country doesn’t charge any crypto capital gain or income taxes from investors.
In addition, you also don’t need to pay taxes to stake or transfer your crypto assets. However, you need to pay a 5% VAT whenever a purchase is made using cryptocurrencies.
#3. Bahamas
The Bahamas is an island country that offers investors a tax-neutral environment. Therefore, you don’t need to pay capital gain, income, or inheritance taxes on crypto assets.
However, you need to pay low taxes when it comes to cryptocurrency trading. As a result, a trader’s profits are charged under value-added tax (VAT).
#4. Bermuda
Bermuda is considered a prominent tax-free destination for crypto investors. You don’t need to pay capital gain, income, or withholding taxes for your crypto assets.
In addition, digital asset companies are encouraged to operate with Bermuda as their base. For this reason, the Ministry of Finance has implemented tax benefits for crypto-based companies and their operations.
#5. Puerto Rico
Puerto Rican residents need not pay any taxes associated with cryptocurrencies. This tax benefit applies to trading, staking, and mining income.
Furthermore, Puerto Rico charges very low taxes for crypto corporations. For example, a corporation that generates profit using staking and mining is charged just 4% in taxes.
#6. Cayman Islands
The Cayman Islands gained popularity among U.S. investors for its tax benefits. These islands don’t charge business or corporate taxes.
In addition, residents also don’t need to pay capital gains or income taxes. Most importantly, the islands’ zero property tax policy reduces all the total taxes to zero.
#7. Seychelles
Seychelles is one of the prominent tax-free crypto countries on this list. This smallest African country incorporates 20% of the total crypto exchanges in the world.
This tax-free destination doesn’t charge any tax for income and capital gains. As a result, Seychelles is favorable for crypto investors and traders alike.
#8. Monaco
Henley & Partners ranked Monaco among the best crypto-friendly countries after Singapore and UAE. This Western European country is a tax haven for high-profile investors.
Monaco doesn’t charge any personal income or crypto capital gain taxes from its residents. In addition, the overall tax laws and policies favor crypto investors and traders.
#9. Panama
Panama allows its residents to use major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) along with the U.S. dollar. Moreover, you don’t need to pay taxes for crypto capital gains.
This liberal crypto taxation policy allows more foreign companies to invest in Panama. Moreover, such policies make it the best country for crypto tax.
#10. El Salvador
El Salvador was the first country to accept Bitcoin(BTC) as legal tender. Therefore, this Central American country is regarded as one of the most crypto-friendly countries in the world.
Furthermore, El Salvador has removed capital gain tax, income tax, and property tax associated with any form of technological innovation. For this reason, you don’t need to pay taxes for the capital gains generated from your crypto assets.
El Salvador is a prominent example of the adoption of efficient crypto policies. These policies help to attract more crypto projects and investors to this country.
#11. Indonesia
The Indonesian trade ministry considers crypto assets as commodities. Therefore, their government charges VAT and income tax on crypto capital gains.
You also need to pay these two taxes on each crypto transaction. At the time of writing, Indonesia charges 0.1% each for VAT and income tax on crypto assets.
#12. Gibraltar
Gibraltar doesn’t charge taxes on any crypto investments. As a result, individual investors need not pay capital gains or withholding taxes.
In addition, Gibraltar also exempted VAT for crypto-based activities. However, companies shall pay a 12.5% corporation tax for the crypto profits.
#13. Liechtenstein
Liechtenstein has no taxation policies on capital gain taxes for profits made on security tokens. Therefore, you don’t need to pay to trade, invest, or transfer such crypto tokens.
However, this small Central European country considers utility tokens as commodities. As a result, profits on utility tokens can attract a 12.5% tax.
#14. Germany
Germany is one of the best countries for crypto tax savings for long-term investors. Therefore, you don’t need to pay any taxes once your investments are above one year’s time.
Moreover, you won’t be taxed for short-term capital gains below €600. These tax benefits are applicable for crypto trading, staking, and mining.
#15. Singapore
According to a report by Henley & Partners, Singapore is the best country for crypto investments. For instance, you don’t need to pay income or capital gain taxes for your crypto assets.
Moreover, this developed Southeast Asian country exempted GST on crypto-based payments. Therefore, you can avoid the 8% GST if you buy goods or services with eligible cryptocurrencies.
#16. Switzerland
Switzerland always finds a place on the list of the best crypto-friendly countries to invest in. Besides, the Swiss Federal Tax Administration (FTA) considers crypto assets as private wealth assets similar to bonds and stocks.
In short, private wealth assets are exempted from capital gain taxes. However, you need to pay taxes for short-term trading, mining, and staking of cryptocurrencies.
What is Crypto Capital Gain Tax?
Crypto capital gain tax is similar to the capital gain tax on stocks and other financial instruments. As a result, you need to pay taxes when your crypto investment generates profit.
For example, let’s say you bought a cryptocurrency and sold it for a higher price. In that case, you are liable to pay tax for the profit amount.
You need to pay capital gain tax when you:
- Sell your cryptocurrencies.
- Exchange your cryptocurrency with another.
- Spend your cryptocurrency in exchange for goods or services.
Moreover, there are two types of capital gains based on your investment period. These gains include:
- Short-term Gains: Suppose you sell your cryptocurrencies within one year of their purchase. In that case, your profits are considered as short-term gains.
- Long-term Gains: Selling your cryptocurrencies after one year falls under long-term gains.
Next, let’s understand the calculation of capital gains. Stay along!
How are Crypto Capital Gains Calculated?
Crypto capital gains are calculated after deducting the losses made in that year. Here, it’s important to separate short-term and long-term gains and losses.
First, you need to calculate the difference between short-term capital gains and losses. Similarly, calculate the value for long-term capital gains and losses.
For example, let’s say that you bought Bitcoin(BTC) worth $20,000 and sold it for $30,000. In that case, you need to pay capital gains tax for the profit, which is $10,000.
In addition, the tax rates for short-term gains are higher than those for long-term gains.
Now, here are some amazing tips for your crypto journey!
Tips to Minimize Crypto Taxes
You can follow these methods to reduce or avoid crypto taxes:
#1. Sell Crypto Assets on Low-income Periods
You can plan to sell your cryptos whenever your income for a particular financial year is low. By doing so, you’ll be able to save a lot on taxes.
For example, you’ll fall into a lower crypto tax bracket during the low-income period. As a result, the taxation will also be low.
#2. Take Crypto Loans
Crypto loans are considered non-taxable events. Therefore, you can take crypto loans instead of selling your cryptocurrencies.
Moreover, taking a loan also provides you access to fiat currency without taxation.
#3. Invest for a Longer Term
A high amount of crypto taxes are charged for investments below one year. Therefore, wait at least a year before selling your asset to reduce crypto taxes.
I highly recommend this long-term investment method as it provides enough time for a better return on your crypto asset.
#4. Send Gifts as Cryptos
Sending cryptocurrencies as gifts is a simple method to avoid crypto taxes. You can send your stored cryptos to friends or family members to avail of this tax benefit.
However, according to U.S. regulations, you can only consider gifting cryptocurrencies worth up to $17,000 in a financial year.
#5. Relocate to a Crypto-Friendly Country
Suppose you plan to invest or trade in a substantial value in cryptocurrencies. In that case, you can consider relocating to any of the lowest crypto-taxed countries listed in this article.
For example, you can move to the Cayman Islands, where property taxes and crypto taxes are zero.
FAQs
El Salvador has the lowest crypto taxes with no property, capital gain, or income taxes for investors.
Panama has the best crypto regulation favorable for foreign investments.
The best method to avoid high taxes is to invest your crypto assets for at least one year.
To legally avoid crypto tax, you can send crypto gifts or relocate to a tax-free state or country.
Final Thoughts
Countries with low or zero tax rates are always favorites for crypto investors. However, always remember that tax rates are not permanent and change based on government policies.
If you plan to relocate for foreign crypto investing, I highly recommend countries like UAE, El Salvador, and Panama. These countries are currently the tax havens for investors across the world.