Taxation is a highly unpopular subject among cryptocurrency investors and traders alike. This is because quite often their governments fail to understand what cryptocurrencies really are and end up taxing it like a seemingly similar asset such as stocks.
Why do cryptocurrency investors hate being taxed in the first place?
Well, no investor loves being taxed but the crypto investors especially keep taxation in mind. There are two answers to the question; one is short and the other one is long. Let’s start with the short one. Cryptocurrency investors hate being taxed because the whole philosophy of crypto revolves around taking away the government’s power through borderless transactions and free trade access all across the world.
The longer answer is that Bitcoin and other cryptocurrencies are just too volatile to be made for fiat taxation. Investors do not want their books messed up too much because of volatile tax returns. It is not easy to report cryptocurrencies for taxation. It is not easy for governments to track cryptocurrencies without significant privacy loss for investors as it is the same as giving them the key to their trading strategies. Cryptocurrencies are also too volatile to be easily fileable in tax returns. Since governments could see Bitcoin as just another tax cow, they often forget to understand it completely and thus pass taxation laws with shortcomings that affect small and big investors alike.
So, Bitcoin tax-free initiatives and understandings are essential for attracting crypto-related businesses in any country. Some progressive governments understand this and have lowered taxes or in some cases removed them entirely to attract investments from around the world. Here is a list of these countries who are the most tax-friendly in the world in no particular order.
Disclaimer: Some countries do not have any taxation legislation for cryptocurrencies and their taxation system is impulsive and unreliable. So they are naturally not included in this list.
5. Malaysia
Cryptocurrency accumulations are completely tax-free in the South East Asian country due to zero capital gains tax over there. It also has a relatively easier process to allow entrepreneurs and investors to move into the country and establish their business.
While there have been some rumors regarding a capital gains tax in the country, so far there has been none proposed for the next financial year so keep this in mind before booking a ticket to Kuala Lumpur!
4. Switzerland
Often known as a tax haven for people from all backgrounds, legal or illegal, Switzerland is now home to some of the biggest crypto projects in the world including Ethereum and Facebook’s Libra project itself.
However, not all crypto income here is tax-free. If one trades for a company professionally, he/she is liable to business tax while there is also some taxation on crypto mining. But, if one is only trading on his personal account with his own money, then capital gains is 0%. So, HODLing there is tax-free. But, there is a complication of the wealth tax but that can be minimized by moving to a strategically tax-free district in the country.
How many hours to Zurich, then?
3. Malta
The small Mediterranean nation has long been on the news regarding a cryptocurrency haven but it does come with a catch. Yes, HODLing is tax-free here as it comes under the long-held income but trading is taxed as it is considered business income.
However, there is a catch as only European residents are allowed to move to the country freely. The rest of the world may have to take advantage of a Global Residence Program and buy property worth at least EUR 27,500 to become tax residents. However, this program comes with a hefty minimum tax on non-Europeans.
2. Portugal and Germany
These two countries have very similar rules for crypto investors and HODLers. The football-loving countries also follow the de-facto “European model” for taxation. There are no capital gains taxes but there are taxes on collective Bitcoin trading as it is classified business income. So, HODLing and trading are free but not on a commercial level.
EU residents can freely move to the countries but will eventually need a registration certificate. All other nationality holders have to apply for permanent residency which cannot be easy to get sometimes.
1. Singapore
Singapore is also one of the destinations for investors and businesses from around the world. It follows more or less the same pattern of other progressive countries; there is no tax on personal and business Bitcoin HODLing and none on personal trading as well but there is tax on business-level trading in the country.
Singapore is known for its easier immigration laws and investors can freely move into the country provided they are willing to invest their money or even just transfer it to the local banks.
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