Crypto Taxation: Which Countries Tax Cryptocurrencies The Most (And Least)?

Which countries tax cryptocurrencies the most (and least)? Taxation, a competitiveness issue? A report by Coincub on the taxation of crypto-assets provides a detailed comparison between countries, showing Germany as the country with the most favorable taxation. True to its tradition of financial savings, our neighbor does not tax your BTCs if you have held them for more than a year.

The report also dwells on the countries with the softest (and heaviest) taxation on cryptos.

Belgium: the country with the heaviest taxation on crypto-assets

The 5 Least Crypto Friendly Countries - Coincub

Belgium tops the list of countries where the tax administration has the heaviest hand on capital gains linked to crypto-assets. The Kingdom has implemented a policy of taxation of 33% on capital gains generated by individuals.

For those who fall into the category of professional investors, the tax burden even rises to 50%.

Behind Belgium, we find unexpected countries:

‒ Iceland : when winnings exceed $7,000, they are subject to 40% tax. The scale is progressive, and reaches 46% on the highest income level.

‒ Israel : also progressive scale, up to 33%.

‒ The Philippines : when winnings exceed $4,500, they are subject to 35% tax.

‒ Japan : progressive scale, with a tax rate ranging from 5 to 45%, depending on income levels.

The Bahamas: tax haven for crypto-investors

The 5 most crypto-friendly countries - Coincub

We find at the top of the ranking two states known for their accommodative taxation: the Bahamas and Bermuda.

In the Bahamas, tax obligations are minimal, at best simply declarative. There is 0 tax to be paid on the capital gains of individuals, and for professionals a minimum fixed and insignificant collection.

Behind the archipelago we find well-known jurisdictions and others more surprising:

‒ Bermuda : a country known to host the international subsidiary of FTX, the country applies the same conditions as the Bahamas, but has a very advanced regulatory framework in terms of crypto-assets.

‒ Belarus : the country took the opposite view of its neighbors in 2018 by legalizing cryptocurrencies and stablecoins, and by exempting individuals and professionals from capital gains tax until 2023.

‒ The United Arab Emirates : having created a Crypto Valley with 0% tax, the Emirates hope to become a hub for the digital economy. They even entered into a partnership with Switzerland to develop their attractiveness for cryptocurrency giants.

‒ The Central African Republic : a country in the CFA zone which, despite recent announcements including the legalization of Bitcoin, seems mainly influenced by Russian foreign policy.

France is also one of the states with a high tax burden on crypto-assets

Unsurprisingly, the French tax administration is also one of the scarecrows on a European scale.

It will be recalled that in France, capital gains tax is applied when you exceed 305 euros in earnings for the year . 30% tax is then deducted from your tax base if you fall into the category of “occasional traders”. This rate increases to 45% if you fall into the category of “professional traders”.

In the fiscal barometer, France inherits an unflattering purple.

Individuals or professionals? The “cluster of clues” technique used by the French tax authorities.

In France or elsewhere, the individual-professional distinction is therefore central to deciding on the tax rate to be applied.

To qualify the taxpayer, the French tax authorities use a particular method, which consists of gathering objective indices on the positions taken:

Several remarks:

‒ Salary and professional trading : being a full-time employee alongside your activity as a crypto trader will not prevent you from being requalified as a “professional”…

‒ Earnings level : this is the most qualifying element. An investor making 30,000 euros in earnings a year, out of a total income of 150,000, will probably be maintained as occasional.

‒ Deferment of taxation : occasional or professional, capital gains are only taxable from the moment of conversion into fiat currency (euro, dollar). Gains cashed but in stablecoins are therefore subject to tax “suspension” - not exemption, nuance.

The habitual traders category

However , things will change from 2023 , with the appearance of an intermediate category : the “ usual trader ”.

Concretely, as long as an active trader will not be registered with the Trade and Companies Register, he cannot be considered as professional – only “usual”. In fact, it will be admitted that he trades actively, with conditions and frequencies similar to those of a professional.

And their taxation?

Gains received by habitual traders will be taxed as non-trading profits (BNC). The rate is slightly lower than that applied to the industrial and commercial profits (BIC) of professional investors.

Clearly: a tax on the progressive scale + social security contributions , after either a 34% reduction (micro-BNC scheme) or a deduction of expenses related to the activity (controlled declaration scheme).

There are certainly reasons to breathe for many French crypto investors , especially those who are actively positioning themselves on penny cryptos (cryptos for less than 1 dollar) and ICOs. On the forums, there are countless traders who complained that the tax authorities requalified them as professionals a little “at the head of the client”…

At the other end of the spectrum, many investors operating as a good father will also be requalified . They will therefore lose the benefit of the application of the 30% tax rate .

Every year, many French crypto investors pay dearly for the poor appreciation of their trading status. Indeed, there are countless retail investors requalified as professional investors, and undergoing a recovery (80% fine). To avoid seeing their earnings excessively trimmed, many professional investors decide to shrewdly expatriate their activities to Portugal (which recently rejected the taxation of Bitcoin and altcoins ) and Dubai.