Virtual profits, real tax
The European Union formalized a framework for regulating cryptocurrencies this year. Markets in Crypto Assets (MiCA) will come into force in 2024, establishing a single licensing regime for cryptocurrency service providers for all Member States. This is not surprising, given how popular cryptocurrencies are and how fast their adoption is progressing. Even more so, it is not surprising that investors who have opened up to cryptocurrencies are looking for a safe haven for their assets. And this is not a difficult task, despite the regulations, many countries support technological innovations and offer preferential tax conditions. So where is the best place to store your cryptocurrencies? We present a short summary.
In the first place, you can confidently point to El Salvador. But why? Because the country has recently adopted Bitcoin as an official means of payment. The government deliberately pursues a pro-cryptocurrency policy to attract as many investors as possible. And it must be admitted that the offer is extremely attractive. Investors choosing Ecuador as a tax residence can count on exemption from all taxes resulting from profits in Bitcoin trading.
The second place in this ranking goes to Switzerland. Investor income from cryptocurrency trading is exempt from tax here and is treated the same as transactions in fiat currencies. However, this rule does not apply to profits from cryptocurrencies generated by professional institutions and companies. Switzerland is also the country of tax residence for cryptocurrency foundations such as Ethereum, Tezos and Diem Associations.
Germany is in third place. Despite the fact that the European Union is in favor of imposing taxes on investors in European countries, Germany has a very positive attitude towards investors. Cryptocurrency investors have a number of facilities here. If the investor holds cryptocurrencies in the account for more than a year, he will be exempt from capital gains tax. These assets are classified as private assets and are subject to progressive tax and if less than a year has passed since the purchase, the taxpayer must pay -0%, -14%, -42% and -45%, respectively, depending on the tax threshold. If the profit from trading in cryptocurrencies exceeds EUR 600, investors are required to report such income to tax. However, this provision does not apply to companies which, however, are obliged to pay the full tax.
Another country that has a very friendly approach to cryptocurrencies is Singapore. First of all, it is a country of innovation and the best environment for business. As for cryptocurrencies, adoption is at a very high level in Singapore. The government supports cryptocurrency initiatives by setting very favorable regulations, which attracts investors. There is no capital gains tax here and the profits of individuals are not taxed. Cryptocurrencies are classified as intangible goods in Singapore, so they are not legal tender.
In addition to the above-mentioned countries, investors in cryptocurrencies are favorably treated by countries such as the United Kingdom, Portugal and the United Arab Emirates. Australia, on the other hand, requires tax residents to report to the tax office any movements (gains, losses) of assets and the tax depends on the resident income threshold.
Given the pace of change in the world of cryptocurrencies, it can be expected that the legislative process in many countries has not yet been completed and tax systems have to adapt to the new realities. But whether it is worth moving your business or even changing the country for a favorable tax settlement, everyone must consider for themselves. And before making hasty decisions, we always recommend carefully weighing the pros and cons.
