Top Countries With Zero or Low Taxes for Crypto-traders

This study explores the top countries that have zero or low taxes on cryptocurrencies held by crypto traders.

Cryptocurrency is a virtual currency with no physical state but a digital representation of value. You can’t see, touch, or put it in your wallet but can use it anywhere & anytime. Its online processing reduces the dependency on intermediaries. Cryptocurrencies depend on blockchain ledgers for decentralization, immutability, and transparency. Blockchain technology uses hashing functions with thousands of nodes working together which are practically impossible to hack. Transactions are made between parties using special IDs. Governments or banks don’t have the authority to control cryptocurrencies the way they control fiat currency. Its growth and adoption have increased rapidly over the past few years.

Tax on cryptocurrencies

Many countries around the world have tried to apply tax regulations to cryptocurrencies. They demanded that cryptocurrencies should be treated as assets which make the tax implementation obvious. Still, there are countries that warmly welcome virtual currencies acknowledging their importance and exempting them from tax. Their governments are working to provide a friendly environment for cryptocurrency adoption by favoring individuals, crypto startups, and businesses by charging low taxes. There are few countries as well, which don’t charge even a penny for buying, selling, or storing digital currencies. Following is the list of countries with zero or low taxes for crypto traders, which you may consider cryptocurrency tax haven.

Subscribe now

1. Malta:

Malta is a Southern European island country consisting of the island chain in the Mediterranean Sea. It is the fourth most densely populated sovereign country. According to a long-running international survey, Malta is one of the richest, healthiest, and most prosperous nations in the world. The government of Malta has a close watch on blockchain and cryptocurrency and promotes the industry by providing a favorable environment to crypto startups. 

Malta, as an EU’s crypto leader, doesn’t have any specific legislation for cryptocurrencies. NoMoreTax.eu of Malta means there is no income tax on the income generated outside the country by foreign residents unless brought to the country’s bank. EU citizens are free to move to Malta, but non-EU citizens have to follow the Global Residence Program to pay rent up to 9600 Euros. 

In 2018, Malta Commissioner for Revenue issued three sets of guidelines on stamp duty, income tax, and the VAT treatment of transactions involving DLT assets. According to these guidelines, tax determination for any DLT asset depends on the purpose of its use. Crypto trading within the day is considered similar to foreign exchange or stocks and is taxed like a business income at the rate of 35%. But there is no tax on long-held cryptocurrencies either for capital gains or VAT. 

2. Bermuda:

Bermuda is a British Overseas Territory with nearly 181 islands. It is a self-governing country with its own constitutions and cabinet. It had one of the world’s highest GDP per capita for most of the 20th century.  The international business of insurance and financial services is the backbone of Bermuda’s economy. The current government of Bermuda has enthusiastically embraced cryptocurrencies and blockchain considering its diversification. 

Bermuda became the first country to accept tax payments in USDC stablecoin. Cryptocurrency is tax-free in the country. There is no income, withholding or capital gains, or any other tax imposed on digital assets. The transactions involving cryptocurrency are also not taxable. Moreover, digital assets based companies including ICO are likely to receive an undertaking from the Ministry of Finance to the effect that, any legislation imposing a tax on profits or income, or computed on any capital assets; then the imposition of any tax shall not apply to such companies or any of their operations.

3. Switzerland:

Switzerland officially the Swiss Confederation is a country situated in the confluence of Western, Central, and Southern Europe. It has a strong economy due to its international outreach. It was ranked as the second-best country in the world for conducting business and the most trustworthy country. Switzerland is a crypto-friendly jurisdiction considered as one of Europe’s crypto havens. The Swiss Canton of Zug is working on converting into a hub for cryptocurrencies and Fintech startups. 

Tax regulation of Switzerland is different from one region to another; canton taxes. For tax assessment, cryptocurrencies must be converted into Swiss francs whose end-year conversation rate is provided by the Federal Tax Administration (FTA). Crypto holdings are subject to wealth taxes according to the Swiss Federal Tax Administration’s year-end average price or their purchase price. Qualified individuals that buy, sell or hold cryptocurrencies for personal benefits are not required to pay taxes on their gains but professional registered traders pay capital gain tax and offsets for a loss like a business pays corporate taxes. 

4. Germany

Germany, officially the Federal Republic of Germany, is a country in Central and Western Europe. Germany has the largest national economy in Europe with a low level of defense spending. The share of industry in gross value makes Germany the highest among G7 countries. It is a crypto-friendly country with its government working for its development in various industries. Bitcoin is seen as a legitimate currency with no tax on its transactions. 

According to NoMoreTax Eu, if you hold bitcoin or altcoins for one year or more, there will be no capital tax on its sale. Crypto selling after being held less than a year is subject to income tax. In 2018, the German Ministry of Finance issued guidance for value-added tax (VAT) treatment in cryptocurrencies dealings, as decided by the European Court of Justice (ECJ). According to this guidance, the use of cryptocurrency for payment is tax-free for VAT purposes. Tax is not imposed on mining for VAT purposes. Depending upon certain precise circumstances, a crypto exchange platform may be a taxable activity for VAT purposes. Under German tax law, offering digital wallet services in return for consideration is an activity subject to tax for VAT purposes. The exchange of cryptocurrency into fiat and vice versa is not subject to the VAT regime.

5. Singapore

Singapore officially the Republic of Singapore is a sovereign island city-state in Maritime Southeast Asia. Singapore is a regional hub for wealth management with its exports of electronics, chemicals, and services, providing the economy's primary revenue. It is a technology-ready nation with its government having an appetite for technology and innovation. The government of Singapore has warmly welcomed blockchain and cryptocurrency. 

In Singapore, bitcoin is treated as goods but not currency. According to the Inland Revenue Authority of Singapore (IRAS), there is no capital gains tax in long-term Bitcoin investments by individuals or corporate companies but any enterprise rendering Bitcoin trading has to pay 7% GST, which is expected to increase by 9% between 2021 and 2025. There is no capital gains tax in long-term bitcoin investments. The companies doing cryptocurrency mining also have to pay tax, depending upon various factors. 

Singapore offers visas and permits to foreign entrepreneurs, while individuals spending more than 183 days in the country are considered tax residents and have to pay corporate tax residency. According to the latest guidelines, transactions involving utility tokens are not likely to be subject to tax. For ICOs, the tax will be imposed on proceedings depending upon the rights and functions of the token. Security token issuers don’t pay capital gain tax. STO earnings are taxable only when classified as a revenue asset. It is an opportunity for startups to raise funds without harsh taxations. Buying things with bitcoin is like bartering according to the latest guidelines. IRAS will not charge tax on the initial issuance of airdrops of funds.

6. Portugal:

Portugal is a southern European country on the Iberian Peninsula bordering Spain. The economy is ranked 42nd in the World Economic Forum’s Global Competitiveness Report 2017-18. It has 38 nominal GDP per capita. It has a service-based mixed economy where the government has privatized many firms and liberalized areas of the economy. The government of Portugal has provided a friendly environment to the blockchain and cryptocurrency. In recent years Portugal has positioned itself as one of the most economically innovative countries regarding cryptocurrency, in Europe. There are no specific regulations that deal exclusively with the taxation of cryptocurrency. The Portuguese Tax & Customs Authority (PTA) announced that buying and selling cryptocurrency in Portugal is not taxable. Cryptocurrencies are not subject to capital gain tax or Value-added tax (VAT).

In contrast, the professionals involved in cryptocurrency business activity are subject to some taxes. The issuing and trading activity of virtual currency is not regulated and supervised by the Federal Reserve Bank of Portugal or any other financial system, either national or European, the European Central Bank particularly. The Federal Reserve Bank of Portugal noted that the absence of regulations doesn’t make cryptocurrency’s operations illegal or prohibited. Tax is paid on a sliding scale, in Portugal, although professionals considering moving tax residency to Portugal can also benefit from a non-habitual tax regime (NHR) that allows exemption and reductions in tax for 10years for individuals of high cultural or economic worth.

7. Belarus:

Belarus is an Eastern European nation and member of the Eurasian Economic Union (EAEU), with its manufacturing-based economy and Byelorussian rubles (BYR) as currency. Its population is nearly 10 million. The economy is the 72nd-largest economy in the world by GDP based on purchasing power parity (PPP). The government of Belarus has recently embraced blockchain and cryptocurrency to attract foreign investments. 

In 2018 a new law, for developing the digital economy, came into being in Belarus, which legalized cryptocurrencies. Under this Decree, Belarus is a jurisdiction with liberal regulations of cryptocurrencies. Until January 2023, Belarus, under the ordinance, has waived all taxes on cryptocurrency transactions and income for five years. Businesses involving cryptocurrency, trading, mining, bitcoin gifts, and inheritance are tax-free for five years; mining and all other crypto operations are not considered entrepreneurial activities. 

The prerequisite for taking advantage of these policies is to register as a resident of Belarusian High Technology Park. As long as you are registered with Park, it is possible to operate a business from abroad. Until 2049, businesses operating in the Park are not subject to taxes but only have to pay 1% of their turnover to the government. Individual activities of crypto are considered personal activities, therefore, exempted from tax. The Presidential Decree on the development of the digital economy has not yet established rules for the ICO operations and crypto exchange, so these areas will be self-regulatory and are not subject to taxes.  The investments attracted as the result of the creation and sale of tokens are not recognized as taxable income.

8. Malaysia:

Malaysia is a Southeast Asian country. Its economy is the 35th largest economy in the world. According to the World Bank, Malaysia is a developing economy with 33rd nominal GDP. Its economy depends upon the oil and gas sectors. It has a 31.53 million population. The government of Malaysia is a supporter of blockchain technology and cryptocurrencies. 

Malaysia has attracted fintech companies because of its interesting low-tax options for crypto startups. Bitcoin is not recognized as a legal tender in Malaysia; therefore, the Central Bank doesn’t operate bitcoin operations. There is no capital gain tax on the sale and investment of digital assets. 

In 2018, the Inland Revenue Board (IRB) of Malaysia froze the account of a cryptocurrency exchange business to ensure it complied with tax and record-keeping requirements as there is no tax exemption to the crypto exchanges. The IRB has not provided any specific guidance for the impact of the Prescription Order and regulating digital assets as securities on the application of the Income Tax Act. There are rumors that regulations may change in the future budget as there was no proposal for either in the 2019 budget. For tax treatment, the government will first have to define cryptocurrency for tax purposes in the country. But for now, cryptocurrencies and their transactions are not imposed on taxation in Malaysia.

9. Georgia:

Georgia is a country in the Caucasus region of Eurasia. It is a land of nearly 4 million people. Because of economic reforms and modernization, Georgia's economy is quickly growing among the countries in Eastern Europe. It is one of the top cryptocurrency jurisdictions in the world with no legislative restriction for crypto exchange. It is providing a beneficial tax system for businesses involving crypto assets. 

In 2019, the Georgian Ministry of Finance published a decision for taxation regulation on cryptocurrency in Georgia. According to this decision, individuals in Georgia are not subject to income tax on any profit received from selling cryptocurrency. According to GTC, natural Georgian persons are subject to tax only on their income received from a Georgian source. While those sources which don't meet the criteria listed in Article 104 are exempted from taxation. 

For both individuals and corporations, exchanging cryptocurrency into Georgian or other national currencies is not taxable by VAT. Georgia has become a regional mining hotspot for the past few years because of offering cheap electrical energy generated by many hydropower stations. Right on input VAT for selling computing power from Georgia to abroad is maintained but not subject to tax by VAT. Selling hash power by a Georgian resident to a Georgian resident is subject to tax by VAT at the rate of 18%. Purchasing computing power by a Georgian resident from another country is an operation imposed to reverse VAT in Georgia. Legal entities are subject to tax on their worldwide income in Georgia. The income received from selling cryptocurrency by companies has to pay 15% corporate income tax.

10. Slovenia:

Slovenia is a central European country with a strong economy. It has a developed economy, and the country enjoys a high level of stability and prosperity. Its population is 2.081 million.  It is the wealthiest Slavic nation regarding per capita GDP. The government of Slovenia is welcoming blockchain technology and cryptocurrency. 

Slovenia doesn’t impose a tax on Bitcoin. There are no specific regulations for cryptocurrency taxation in the country. In 2018, the Financial Administration of the Republic of Slovenia issued guidance for the tax treatment of cryptocurrencies. The individual obtains income from trading or mining cryptocurrencies as a result of permanent and independent business activity, their income is considered as personal income and taxable depending upon various factors up to a 20% tax rate. 

According to FURS, cryptocurrencies are movable property, and capital gain from trading cryptocurrency is exempted from taxation, provided outside the permanent business activity scope. Cryptocurrency-related activities creating revenue for the companies are subject to 19% corporate income tax in case of a surplus of revenue over expenses. Exchanging cryptocurrencies into fiat and vice versa are exempted from VAT. The mining of cryptocurrencies is not subject to VAT. Online platforms connecting peer-to-peer trading for combining buyers and sellers are imposed to 22% value-added tax (VAT). During an initial coin offering the gratuitous obtaining of the cryptographic token by an individual is subject to different tax regimes depending upon the nature of the transaction. These laws are quite favorable for individual trading, but there is a possibility of change in the regime.

11. Andorra

Andorra officially known as the Principality of Andorra is a sovereign landlocked microstate situated between France and Spain in the Pyrenees mountains. It has a population of around 77,000 and known for its ski resorts and a tax haven. Its economy is largely dependent on tourism and its GDP for 2019 was worth 3.15 billion US dollars.

There are no specific rules and regulations available for cryptocurrencies yet but Andorra Financial Authority Autoritat Financera Andorrana (AFA) is analyzing the pros and cons of the cryptocurrencies while working on different regulation options. Tax on personal income is charged at the rate of 10% so all the gains made on cryptocurrencies are subject to 10% taxation while crypto exchanges, crypto trading/investment companies, and mining companies are also charged 10% tax on their income.

There are also exemptions available such as on capital gains realized from publicly traded stocks under certain conditions. A tax deduction is available up to 5% for investment in fixed assets and you can enjoy a tax rebate on job creation. There is no wealth tax, inheritance tax, or gift tax which makes it one of the best places to stay and operate your business.

Bottom Line

These are countries that have considered cryptocurrencies’ potential and provided a favorable environment for trading. You can enjoy capital freedom and make your crypto trading activities tax-free. Some other countries, such as the South Korean government, are also looking to allow tax exemption on crypto trading profits.  A member of the South Korean ministry said that the government is preparing a taxation plan for virtual currencies considering the taxation plan of major countries and international discussion trends to prevent money laundering. The future of cryptocurrencies is bright, and governments of many countries are experimenting with this technology to apply in their industries.

Bibliography:

1. "Bitcoin-friendly countries", 99bitcoin.com. July 24, 2020.

2. "Blockchain laws and regulations", globallegalinsights.com. May 2020.

3. "Cryptocurrency world survey", loc.gov. August 2020.

4. "Seven Countries Where Cryptocurrency Investments Are Not Taxed", forbes.com. June 24, 2019.

5. "Eight Countries That Don't Tax Your Bitcoin Gains", news.bitcoin.com. May 25, 2020.

6. "INSIGHT: Taxation of Cryptocurrency in Georgia", news.bloombergtax.com. December 16, 2019.

7. "Tax Treatment of Cryptocurrencies in Slovenia", nomoretax.eu. May 06, 2020.