Cryptocurrency and Taxes

How cryptocurrency is taxed around the world

Cryptocurrencies are sweeping the world as one of the newest and most polarizing investments today. The world of digital currency is ever-growing, and, as this happens, the rules and regulations surrounding the currency are also forming. Like other currencies, cryptocurrencies are subject to taxation.

Each country has different taxation rules concerning digital currencies. Many countries are very strict about the taxation of digital currency. To be taxed, the coins need to be classified as a currency, an asset, or a commodity. The strict countries are well aware of how they classify the tokens. Others who aren’t sure of how to classify them, as well as those who are not strict on taxes to begin with, are considered low-cost jurisdictions for cryptocurrency.

Investors who are interested in bitcoin should be aware of how different countries tax their coins because they want to make sure they are tax-compliant. With this changing investment type, it’s easy to get behind. It’s also a handy tool to know which countries are less strict, because you may be able to save on taxes. For this reason, we have gathered some crypto tax laws from around the world.

United States

Since cryptocurrency is treated as property by the IRS in the United States, there are some guidelines when it comes to taxes.

Gross income– Individuals can compute the figure by utilizing the fair market price of the coin measured in USD. Because this can change, one would use the value of the currency of the date it was received. If this value is more than the taxpayer’s adjusted basis of the currency, it is considered a taxable gain. A loss occurs if the market value is lower than the adjusted basis.

Exchange– If an individual is looking at the digital currency from a sale or exchange basis, there are two ways of looking at it. If the currency is capital in nature, which are those that come with a capital gain or loss, it is included when calculating gross income. Those that are not capital are subject to taxation of ordinary gains and losses.

Mining– Cryptocurrencies can be acquired through mining activities. When an individual is calculating their gross income, they need to include the fair market value of the cryptocurrency as of the date they acquired the currency.

UK

The HMRC recognizes cryptocurrency as private money.

VAT: When the token is mined, the currency lies outside of the scope of VAT because mining is not considered an economic activity for VAT purposes. If the cryptocurrency is exchanged for foreign currencies, there is no VAT due on the value of the cryptocurrency.

VAT will be due in the cases where cryptocurrencies are exchanged for goods and services.

Corporation tax: When it comes to the relationship between digital currencies and profits or losses on exchange movements, the rules of foreign exchange and loan relationships are used for tax purposes. Exchange movements are decided by a company’s functional currency and the other currency. If there is an exchange of digital currency and the functional currency, there are no special tax rules.

Income tax: Whatever is gained or earned by a non-incorporated business on cryptocurrencies are to be found in accounts and are going to be taxed as normal income.

Low-cost jurisdiction for crypto

There are many countries around the world that proudly have no taxes on cryptocurrencies. This is more than likely due to confusion on how to classify digital money. Bitcoin and other cryptocurrencies can be classified as a commodity, currency, or asset, so while the crypto low-cost jurisdiction countries decide, many countries don’t tax digital currency.

Switzerland

This longtime global financial center, known for wealth management and a strong currency, is also considered a cryptocurrency low-cost jurisdiction. Cryptocurrencies aren’t viewed as foreign currency or a financial supply for GST.

Germany

In Germany, digital currencies aren’t classified as commodities, currency, or asset but instead are listed as private money. In this country, coins can be traded, and it will be considered a private sale and possess the same tax benefits.

Trading bitcoin and other cryptos can be traded tax-exempt if the capital gains aren’t higher than 600 euros.

Denmark

Trading crypto is completely tax-exempt in Denmark, making it one of the most friendly nations for crypto activity. Capital gains on cryptocurrencies are also tax-exempt.

The country of Denmark is closer to reaching its goal of being the world’s first cashless economy.

Slovenia

For investors looking for a low-cost crypto jurisdiction may seek out Slovenia. Here, capital gains aren’t taxed as part of an individual’s income. Businesses are taxed, however, as well as those who receive cryptocurrency as income.

Singapore

This country is well known for being lenient on capital regulations. With crypto, the country doesn’t consider the currency a currency or commodity.

Individuals who use digital currency for profit don’t have to adhere to any specific taxation laws. Businesses, however, are taxed on the profits derived from their crypto trading.

For more information about cryptocurrency, read our introduction to cryptocurrency page. We also have a cryptocurrency vocabulary list where you can learn all of the words associated with cryptocurrency.

Alpen Partners International

Alpen Partners International, the sister company of Alpen Partners, is now a registered investment advisor at the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.

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Alpen Partners International is not a tax specialist or advisor. The information provided by Alpen Partners International is for general informational purposes only and should not be considered as tax advice. The financial strategies and services we offer may have tax implications, and it is important to understand that tax laws and regulations are complex and subject to change.

We strongly recommend consulting with a qualified tax professional or advisor who can provide personalized advice tailored to your specific financial situation and needs. Your tax advisor will be able to assess your individual circumstances, guide you on any tax-related matters, and help you make informed decisions.

Alpen Partners International does not assume any responsibility or liability for any tax consequences that may arise from actions taken based on the information provided by our firm.

All investments involve certain risks. All investments carry the potential for financial loss, including the loss of the principal amount invested. Past performance should not be viewed as an indicator of future results.

Market conditions and broader economic factors can significantly impact the value of investments. Investments in international markets are subject to additional risks, such as currency exchange fluctuations, political or economic instability, and variations in accounting practices. Alternative investments, including but not limited to hedge funds, private equity, and real estate, may be illiquid, speculative, and are not suitable for all investors. The above information should be considered before making any investment decisions. All posts and publications are for your information only and are not intended as an offer, promotion, or solicitation to buy or sell any financial instrument or perform any other financial transactions. All information and opinions expressed in posts and publications reflect our current views as of the date of the publication and may be liable to change without notice.