Cryptocurrency Tax – Where Is Crypto Subject of Taxation?

Cryptocurrencies are quite popular all over the world. People hear about Bitcoin and other popular cryptocurrencies on a regular basis. However, the information about the cryptocurrency tax is more limited due to various reasons. 

As of 2023, there are 195 countries in the world. Unsurprisingly, governments have different opinions about the cryptocurrency tax and cryptocurrencies in general. So, it is all but impossible to discuss how each government treats cryptocurrencies. We can focus on several countries.

Canada and the U.K. 

What about Canada and the U.K.? 

Did you know that cryptocurrency is viewed as a commodity in Canada? 

Yes, cryptocurrency in Canada is viewed as a commodity, which is a capital asset. 

It would be best if you remembered that the Canada Revenue Agency (CRA) has the right to track your crypto investments. 

Now, we can switch to the United Kingdom. 

It is worth noting that the country doesn’t have a specific cryptocurrency tax. The U.K. is using capital gains tax or income tax. The cryptocurrency tax a person will pay depends on the specific transactions you make with your cryptocurrency. 

As opposed to other countries, the U.K. doesn’t have a short-term as well as long-term Capital Gains Tax rate. 

The amount of capital gains tax a person will pay depends on how much you earn.

If you ask authorities in Australia, cryptocurrency is an asset. The Australian Taxation Office applies capital gains tax and income tax to cryptocurrency. 

The Netherlands has its own approach to the tax system. It is important to note that the Netherlands levies a wealth tax and not a capital gains tax. 

What do Germany and Portugal have in common? 

Do you know what Germany, Switzerland, and Portugal have in common? Let’s find out! 

As stated above, there is no unique approach to cryptocurrency tax. All of them aren’t so strict with cryptocurrencies.

It is a well-known fact that Germany has the largest economy in Europe. Its position regarding the cryptocurrency tax is quite interesting. Interestingly, cryptocurrency is viewed as a private asset. As a result, Germany levies an individual income tax and not a capital gains tax. 

It is desirable to keep in mind that Europe’s largest economy only taxes cryptocurrency if the cryptocurrency is sold within the same year the above-mentioned cryptocurrency was bought. 

As a reminder, the country taxes certain crypto events, like mining and skating. However, Germany’s rules on taxing cryptocurrency are far laxer compared to many countries. 

The government of Portugal has an interesting position regarding the cryptocurrency tax. The country’s government isn’t very strict when it comes to cryptocurrencies and taxes. 

People who profit from the purchase and sale of cryptocurrency don’t have to worry about capital gains tax. Moreover, you don’t have to worry about taxes if you simply exchange cryptocurrency for another cryptocurrency. 

To cut a long story short, cryptocurrencies in the above-mentioned are only taxable if you do it as a professional trading activity. 

What about Switzerland?

The Swiss Federal Tax Administration classifies cryptocurrency as an asset – specifically, a crypto-based or private wealth asset.

Capital gains tax doesn’t apply to private wealth assets. Interestingly, it only applies if you are a self-employed trader or a business. 

Crypto isn’t tax-free in Switzerland. It is still subject to income tax in certain cases and wealth tax. 

Switzerland consists of 26 cantons. For example, one canton may tax cryptocurrency while another may not. So, it is important to take into account the country’s administrative division. 

We can focus on Singapore. The country’s central bank is closely monitoring the situation regarding cryptocurrencies. On the one hand, Singapore is trying to control the situation. On the other hand, the Monetary Authority of Singapore, which is the country’s central bank, isn’t against cryptocurrencies. 

Have you heard about the Payment Services Act of 2019? It regulates the country’s legal environment for crypto. The purpose of the above-mentioned law is to find a perfect balance. The government wants to tackle illegal activities. However, the government of Singapore also understands the importance of cryptocurrencies. 

Don’t forget that cryptocurrencies don’t fall under capital gains taxes in Singapore.

Companies that buy and sell cryptocurrencies in the ordinary course of their business are taxed on the profit derived from trading in the cryptocurrency. Importantly, profits derived by companies that mine and trade cryptocurrencies in exchange for money are also subject to tax.

Malta and its approach to cryptocurrency tax 

Malta is no stranger to cryptocurrencies. For example, many crypto exchanges operate from Malta. What makes Malta so interesting to crypto-focused companies?

There are several reasons Malta makes strategic sense for crypto-related companies. As we all know, the island nation is a member of the EU. As a result, crypto-focused companies can operate in the EU. 

Moreover, it is tax-free for crypto investors. Moreover, they don’t have to worry about capital gains tax as well as VAT. Without exaggeration, Malta is a crypto-friendly country. Crypto-related companies appreciate the country’s position. 

India and cryptocurrencies 

India has huge potential when it comes to cryptocurrencies. However, it won’t be easy to solve various issues in a short period of time.

Let’s focus on cryptocurrencies and taxes. It is noteworthy that the current fiscal year, which ends in March, is the first year in which taxpayers will be taxed for their crypto traders. To cut a long story, any Indian resident who transacts crypto is required to declare their asset and pay taxes on the gains. The new Finance Bill of 2022 applies to crypto traders, etc.

A whole new section was introduced in the 2022 budget in order to tax crypto. The above-mentioned section imposes a 30% tax (plus applicable surcharge and 4% cess) on profits made from crypto trading (starting from April 1, 2022). 

This rate is the same as the country’s highest income tax bracket (excluding surcharge and cess). Commercial traders, retail investors, and anyone else who transfers Crypto assets in a given fiscal year are subject to this tax (subject to conditions). 

Furthermore, the 30% tax rate will apply in spite of the nature of the income. So it makes no difference whether it is investment income or business income. Moreover, there is no difference between short-term and long-term gains. 

Belgium and crypto traders 

Did you know that Belgium is known for its massive tax on crypto transactions?

It levies a 33% tax on capital gains on crypto transactions. Moreover, Belgium also withholds up to 50% in taxes from professional income on crypto trades. As a reminder, the country adopted strict crypto taxation rules several years ago.

As you can see, Belgium isn’t a very crypto-friendly country. What about Iceland?

This Nordic country isn’t particularly crypto-friendly as, well. For example, any crypto gains up to $7,000 are subject to under 40% tax. However, in the case of more than $7,000, you will have to pay 46%.

The government of the Philippines also has an interesting approach to cryptocurrencies. Interestingly, there is no tax on any crypto income under $4,500; however, after that, any income is taxed up to 35%. Importantly, the country’s government may impose new taxes on crypto by next year.  

Japan has one of the most developed economies in the world. Let’s get back to cryptocurrencies. It is worth noting that Japan has a progressive tax rate system for income considered miscellaneous income. What’s interesting is that the tax rate varies from 5% to 45%, depending on the amount of total profits.

The People’s Republic of China classifies cryptocurrencies as property for the purposes of determining inheritances.

The country’s central bank banned crypto exchanges from operating in the country. 

As a reminder, China was the major hub for bitcoin mining. In May 2021, The country placed a ban on bitcoin mining. Several months later, cryptocurrencies were banned outright. 

Lastly, it is vital to gather more information about taxes in your country before making a decision regarding cryptocurrencies.