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 that aren’t sure of how to classify them, as well as those that 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 more than likely due to confusion on how to classify the 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 on 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 commodity, 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 euro.

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

Alpen Partners Wealth Management International AG, the sister company of Alpen Partners AG, 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.

Building on many years of experience in private banking in Switzerland, Alpen Partners Wealth Management International AG provides investment advisory services to U.S. clients. Swiss banking is highly regarded around the world, well known for being sophisticated and discreet. In 2017, it was reported that $7.5 trillion in assets are held in Swiss banks and almost 51% of that is generated from clients outside of the country. Choosing Switzerland as a banking destination is choosing years and years of financial stability and growth.

The advantages of having an account in Switzerland include currency and investment diversification, asset protection, and the possibility to deposit assets in some of the oldest and best-capitalized banks in the world.