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Comparing Crypto Taxation Regulations Worldwide

Mainfinex
Mainfinex
Sep 18, 2019 · 8 min read

Because of the relative newness of cryptocurrency, there is still a great deal of confusion regarding its taxation. As with any other type of taxation, the regulations vary by country. Some countries have not explicitly laid out crypto taxation guidelines, but most already have some regulations in place.

Why It Matters

Despite these lofty goals, those who own cryptocurrency must follow the rules of their countries. Many governments want to regulate cryptocurrency. This includes charging taxes on crypto as a way to increase government profits. A government does not want people to avoid paying taxes via cryptocurrency. After all, this would reduce the government’s budget.

If you hold cryptocurrency, you should be aware of the crypto tax regulations in your home country. You can also use knowledge about countries with no crypto taxes to your advantage. Interestingly, there are sometimes significant variations in taxation policies across European Union member countries.

Australia

Based on information from an ATO spokesperson, financial gains from selling cryptocurrencies must be reported. Residents must pay capital gains taxes on those gains. The ATO also sees transactions based on Bitcoin as “barter arrangements” without any goods and services tax. Even so, the capital gains tax applies.

Belarus

Canada

It is important to keep in mind that the Canadian Revenue Agency may consider day traders with high transaction volumes to be business entities. In this case, those day traders would need to use different forms to file their taxes.

Canadian tax law also requires you to maintain accurate records of crypto-trading activities. These records are for the capital gains tax. If a Canadian does not keep these records, they may face penalties and other financial impositions by the Canadian Revenue Agency.

Germany

There is an important caveat, however. For the lack of capital gains taxes to apply, the owner must hold the crypto for a minimum of one year. Additionally, crypto business owners must pay taxes on gains from personal crypto-related possessions, including corporate income taxes.

There is also rule 23 EStG, which indicates that cryptocurrency holders in Germany can trade tokens without paying taxes. This tax-free status of trades applies when the capital gains for trading are not over 600 Euros annually.

Because Germany is part of the EU, there are some additional complications. Specifically, those within the European Union can move throughout the member countries as they wish. To be a tax resident of Germany, several factors play a role. These include whether the person has a private residence within Germany and whether they were physically in Germany for more than six months at a time. For dual citizens, individual German tax status depends on the state where the person has economic and personal interests.

Japan

The country is working to streamline the process of filing taxes for cryptocurrencies, but it is still cumbersome, leaving much to be desired. The issue is that taxes are on asset and conversion gains.

Late last year, Japan also announced the development of a tracking system that will give the National Tax Agency information from transaction intermediaries, including altcoin trading portals and digital currency exchanges. This means that those who make profits from cryptocurrencies will not be able to hide their crypto-related income. As such, crypto holders in Japan will have to pay some niche taxes.

Malaysia

Malta

Those who are citizens of Switzerland, the European Economic Area, or the EU can move and run businesses in Malta. However, this does not automatically give them the benefit of the Malta crypto regulations for taxes. To qualify for those taxes, crypto owners must either buy a property that is valued at a minimum of 275,000 euros (around $300,000) or pay the local government rent of up to 9,600 euros (around $10,600) annually.

Portugal

Singapore

Singapore’s corporate tax residency only applies if you physically run the business within the country. To be a tax resident of the country, you must have spent at least 183 days in the country.

Slovenia

South Korea

Switzerland

If you earn income by mining cryptocurrency in Switzerland, this qualifies as self-employment income. If you earn crypto via the professional trading of cryptocurrency, this counts as business tax. If you earn your main wage in the form of cryptocurrency, then you must declare your assets on your income taxes.

Investors in cryptocurrency are those who only trade from their personal accounts. In this case, crypto gains are tax-exempt capital gains. This means you should report them to the Swiss government but will not need to pay taxes on them.

Switzerland also follows the canton tax structure. This means that there is regional variation, as each region can have its own taxes on crypto holdings.

The United States

Despite viewing cryptocurrencies as liable for taxation, the U.S. government does not classify them as legitimate money. As such, there are tax incentives based on currency conversions, of which some exist for fiat-to-fiat conversions.

The United States has one of the strongest taxation policies on cryptocurrency. Those within the United States who hold cryptocurrency must pay taxes on digital assets that experienced an appreciation in value over the financial year. They must also pay taxes on crypto they received via trade activities or mining, provided the activities in question are taxable.

To pay their taxes, crypto holders in the United States must determine their coins’ fair market worth at the time of purchase, based on the published exchange rates. Crypto holders are responsible for completing the relevant calculations for the value of their crypto, including the value of appreciation and depreciation.

The taxation of cryptocurrency in the United States is incredibly cumbersome, one of the most complicated and time-consuming digital currency taxation schemes. Because of this, crypto accounting programs offering tax-friendly reports are now available. These will automatically create the records that include conversions and are auditable, making it easier to complete taxes.

A Worldwide View

Crypto as Taxable Income

One of the common stances is to view cryptocurrency as personal income (or corporate income) and taxing it just like other personal (or corporate) income. Most countries in this category will only qualify cryptocurrencies as profits if the person receives it as payment to make a profit. Trading crypto or mining it would be an “other activity.”

Crypto on Capital Gains Taxes

Another common approach is to treat the profits from cryptocurrencies as the country would treat capital gains. Those countries make these regulations based on the fact that many people with crypto do so to hold or trade it. This is the same type of activity as with real estate, bonds, stocks, and other personal property types. Those types of personal property and crypto can depreciate or appreciate over time. The capital gains are defined as when the cryptos sell at a higher price than they were purchased.

Capital gains taxes and property taxes tend to receive better tax treatment than income. In some cases, countries will even give these types of gains tax exemption.

A Combination

Other countries take a more complicated approach. They either have unique definitions of cryptocurrencies or deal with them in varying ways, depending on the situation. One example is Singapore, where trading digital currencies results in taxes on the profits, but there are no taxes on long-term investments in crypto.

Conclusion

The common theme is that you should always pay attention to the taxation regulations in your country of residence. You do not want to get into legal trouble or have to pay back-taxes with fines for a lack of payment.

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