Top 10 global havens to avoid paying tax on cryptocurrency

As India starts levying tax on digital currencies, here are some cess-free options

In her Union Budget 2022 speech, Finance Minister Nirmala Sitharaman announced that 'any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent' | Image: Manikandan R

Starting April 1, 2022, India will levy tax on cryptocurrency and other digital assets.

In her Union Budget 2022 speech, Finance Minister Nirmala Sitharaman announced that “any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent”. 

As investors and crypto exchange founders wait to see how the proposal plays out, The Federal presents the Top 10 crypto tax-free countries in the world (yes, there are still some havens where investors pay no tax or less tax on digital assets).

Germany

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Crypto isn’t totally tax free in Germany, but they do have some quirky rules that allow investors to avoid taxes.

Germany views cryptocurrencies as private money, not a capital asset. If you hold your crypto for more than a year, when you later sell, swap or spend it, you’ll pay no tax.

Holding the crypto is key, because crypto held for less than a year is taxed unless the profit is less than 600 euros.

Another quirk is the staking rule. If you’ve staked your crypto to earn further income, this crypto would be subject to taxes regardless of how long you’ve held it. It’s only after 10 years of holding your crypto that staked crypto would be tax free at the point of sale.

Germany does subject some crypto to income tax, including: Getting paid in crypto and mining crypto.

As well as this, a new law that came into force in 2021 across the EU, including Germany, effectively stops all crypto derivatives trading. So if you’re mostly trading prediction contracts, the EU isn’t the best place to be.

Belarus

In 2018, the Eastern European state legalised crypto activities and exempted all individuals and businesses from crypto tax for five years.

As such, all crypto activities, including mining and day trading, are viewed as personal investments, which makes them exempt from both income tax and capital gains tax.

This law was created to bolster Belarus’ digital economy, and it’s up for review next year.

El Salvador

El Salvador was the first country in the world to make Bitcoin a legal tender. In doing so, the country hoped to attract more investments. The country also now exempts foreign investors from paying any tax on Bitcoin gains or income.

Portugal

Portugal is one of the best places in the world to live if you want to avoid paying crypto taxes. Since 2018, all proceeds from selling crypto are tax free. Crypto trading isn’t considered investment income either.

Provided you’re not a business, your crypto is also exempt from VAT and income tax in Portugal. So for the vast majority of investors, Portugal is crypto tax free.

Singapore

There’s a reason many crypto exchanges, like KuCoin and Phemex, are based in Singapore – the city-state is a crypto tax haven for both individuals and businesses.

Singapore doesn’t have a capital gains tax. So when you sell or trade crypto, you pay pay any.

Cryptos are also viewed as intangible property from a tax perspective. When you spend them on goods and services, this is viewed as a barter trade, not a payment.

Of course, you can’t avoid all taxes. If you’re acting as a business and you accept crypto as payment, you will pay income tax on it. Similarly, if a company’s core service is related to crypto trading, it would be liable for tax.

Malaysia

Singapore’s neighbour is also a crypto tax free country. Because cryptocurrencies are not viewed as capital assets nor a legal tender, crypto transactions are tax free for individual investors.

This comes with a caveat though. The Malaysian Inland Revenue Board says that crypto transactions are only exempt from tax when they are not regular or repetitive. So in other words, if you’re trading like a day trader, you’ll pay tax.

Similarly for businesses involved in crypto, profits are subject to tax, regardless of whether those profits are in crypto or fiat currency.

Malta

Known as blockchain island, Malta is a crypto tax haven. The country recognises Bitcoin and other cryptocurrencies as a “unit of account, medium of exchange or a store of value”.

What this means is you’ll pay no capital gains tax on long-term gains from selling crypto provided it is considered “a store of value”.

That said, crypto trades are viewed as similar to day trading stocks or shares. As such, they attract tax rate of 35 per cent. There are, however, structuring options that allow you to reduce this tax rate to between 0 per cent to 5 per cent.

Cayman Islands

The Cayman Islands, a British Overseas Territory, has long been a tax haven for both businesses and investors, and crypto is no exception.

For both businesses and individual investors, the Cayman Islands is a crypto tax haven. The authorities there impose no corporate tax on businesses and no income tax nor capital gains tax on residents.

Puerto Rico

While Puerto Rico is an unincorporated territory of the US, it’s considered a foreign country as far as federal income taxes go. So the country sets its own tax laws.

Puerto Rican residents pay a much lower territorial income tax compared to the US federal income tax rate. Digital assets acquired while you are a resident of Puerto Rico are completely exempt from capital gains tax.

If you’re a US resident who acquired crypto prior to moving to Puerto Rico, you’d still need to follow the IRS crypto tax laws. However, if you acquire crypto after establishing residency in Puerto Rico, you are essentially in the clear.

Switzerland

Switzerland has long been considered one of the best places to live in the world when it comes to taxation, with policies that have earned the country the nickname ‘Crypto Valley’.

This doesn’t mean you won’t pay any tax on your crypto, it just means the crypto tax laws in Switzerland are very different from other countries.

You’ll pay income tax on crypto mining, as well as if you’re a qualified day trader. You’ll also be subject to wealth tax, levied on your total net worth each year. The wealth tax rate depends upon the Canton in which you live.

For individual investors, crypto profits are exempt from capital gains tax. So selling and trading crypto is tax free for many investors.

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