As the adage goes, only two things are certain in life: taxes and death. As different jurisdictions around the world grapple with gaping budget deficits and try to look for areas to cast the tax net, crypto investors and players are increasingly targeted.
While it is impossible to evade death, it is relatively easy to circumvent taxes. Escaping the latter involves two options: using decentralized exchanges and protecting your privacy or relocating to a Bitcoin tax-free country.
The option of using decentralized exchanges is mired with a lot of inconveniences, which may be ultimately harmful to your goals. The best option is to look for a jurisdiction with a favorable crypto taxation regime. Preferably, investing in Bitcoin tax-free countries can greatly enhance your wealth.
Here are top 10 Bitcoin tax-free countries that you can consider, as they are BTC tax havens.
Germany does not consider Bitcoin (BTC) as a currency, commodity, or stock. Instead, Bitcoin is regarded as private money, similar to foreign currency. Also, trading in Bitcoins is considered under rule 23 EStG as a private sale, which provides tax-free benefits.
Specifically, this rule stipulates that trading in Bitcoins/cryptos is exempted from capital gains tax if their gains do not exceed 600 EUR per annum. However, for crypto businesses, the owners have to pay taxes on gains derived from Bitcoin through corporate income taxes.
Because of the rule, Germany is a BTC tax-free country for mid and long-term Bitcoin investors.
Malta, a small island on the Mediterranean, is no surprise to this list. The country has established itself as a crypto paradise due to its crypto-friendly legislation. As in the case of long-held bonds, Malta doesn’t tax long-held cryptocurrencies.
Precisely, any EU citizen crypto investor who holds to his digital asset for more than 183 days is exempt from all taxes. The provision makes Malta a preferred destination for EU investors and Bitcoin holders.
However, cryptocurrency trades done on a single day considered to be similar to trading in currencies and are, therefore, taxed as business income.
In Portugal, the gains on the value or sale of any currency are not subject to taxation. Since Portugal treats cryptocurrencies as a form of currency, it is automatically exempt from capital gains tax and VAT.
However, taxpayers who deal with cryptocurrencies as a business activity are still subject to taxes. Also, the exchange of crypto for fiat money is free of VAT, and crypto users don’t have to pay any income tax.
Located in Eastern Europe, Belarus is a landlocked country that has been quite liberal to digital currencies. In December 2017, the president of Belarus signed a decree that legalized “smart contracts,” mining, and trading in cryptocurrencies. Additionally, he declared that mining, trading, and capital gains on cryptocurrencies & ICOs would also be tax-free until January 1, 2023.
For individuals seeking a tax haven for their Bitcoin investments, Slovenia is a perfect location. The country considers cryptocurrencies as virtual currencies, implying that they are neither monetary assets nor financial instruments under Slovenian law on payment services and systems.
The Financial Administration of Slovenia (FURS), through guidelines issued in 2017, addressed the subject of taxation on capital gains related to cryptocurrencies. According to the instructions, the taxation of cryptocurrency transactions depends on diverse factors.
Notably, the type of transaction and the status of the trader, as well as other individual factors, determine the tax status. Thus, the treatment of tax income from trading in Bitcoin will depend on each particular case.
However, profits made by individuals from trading Bitcoin are not subject to tax since capital gains aren’t taxable in Slovenia. Moreover, from the time when cryptocurrencies are not categorized as financial instruments, any capital gains on them can’t be liable to taxes.
Historically, Singapore has been very friendly in its capital regulations. The country doesn’t have any capital gains tax in place. Concerning digital assets, Singapore neither considers Bitcoin as a commodity or currency.
For businesses engaged in trading of virtual currencies in the ordinary course of their business, the payment of taxes on their profits is mandatory. However, companies that hold on to cryptocurrencies for their long-term investment purposes are not liable for tax because the country doesn’t have a capital gains tax.
For individuals, there is no specific rule regarding Bitcoin taxation. So, by bypassing the various determinants of trading, as defined by the IRAS, anyone can circumvent paying taxes.
Similar to its neighbor Singapore, capital gains are not taxed in Malaysia. According to the latest 2019 budget, no provision was made for the taxation either. Currently, Bitcoin and other cryptocurrencies, as well as their transactions, are tax-free.
Bermuda, a small Caribbean island and a former British colony, is a celebrated tax haven. The country has no VAT, income, or capital gain taxes. It only has a minimal payroll tax and high consumption taxes on goods and services.
The light tax regime in Bermuda extends to the Bitcoin and other cryptocurrencies. Since Bitcoin is not recognized as a legal tender, it is not subject to tax.
Gibraltar, located south of Spain, is a tiny country and a colony of the United Kingdom. The country has a reputation for low taxes. It doesn’t impose capital gains or dividend tax on Bitcoins and other digital assets.
10. Hong Kong
Even if Hong Kong’s banking sector is not friendly to cryptocurrencies, Bitcoin is exempt from capital gains and VAT.
Many countries are still grappling with the decision of whether to tax or not tax virtual currencies. But before they take a position, they have to figure out if cryptocurrency is an asset or a currency, like the USD or EUR.
When deciding where to locate your Bitcoin business, it is crucial to find out the government and the central bank’s approach to Bitcoin. Also, if you are serious about relocating your BTC trade to Bitcoin tax-free countries, especially if your government is not receptive to cryptocurrencies or has a hostile tax regime, then it is time to make a move.
Featured image: forbes.com