Unless you live in Malta or Puerto Rico or another similar country where cryptocurrency gains aren’t taxed at the moment, you’ll soon be trying to figure out how to properly account for your bitcoin or other cryptocurrency holdings ahead of the upcoming tax season and beyond.
Generally, ambiguity reigns presently, as cryptocurrency taxation is very much a work-in-progress for legislative bodies across the entire world. Nevertheless, as current cryptocurrency users, we must contend with the laws of our respective lands as they stand now, lest we commit tax offenses and cause major headaches for ourselves down the road.
Today, then, we’ll be breaking down the taxation models applied to cryptocurrencies in some of the world’s most influential nations to help give you a better sense of the current international regulatory spectrum.
Please Note: This article is intended as a general guide to cryptocurrency taxation models around the world, it is not a substitute for professional advice. We recommend you take speak to an accountant who is versed in crypto taxation in your jurisdiction.
The Three Main Taxation Models
Most nations make their crypto users submit to one of three fundamental taxation categories:
- Income tax
- Company tax
- Capital gains tax
Income tax applies to all non-incorporated entities that receive Bitcoin or other cryptocurrencies as income.
Company tax applies to enterprise-grade operations that are large and deal, accordingly, with huge amounts of crypto. Think of a cloud-mining company like Genesis Mining, for example.
Capital gains tax applies to traders who have invested in crypto speculatively with the express purpose of making gains. Most nations split capital gains taxes into short-term gains and long-term gains categories depending on various criteria.
Tell Me More About Capital Gains
The vast majority of crypto owners and traders will have to pay capital gains taxes on any gains from their crypto holdings. While crypto tax laws are still in their early stages, most countries have mature capital gains taxation schemes.
Calculating the cost basis of a stock trade is somewhat simpler than dealing with ‘cost basis’ for cryptos. While cryptos are regarded as something like a commodity for tax purposes, they are very similar to a currency. That means that when one crypto is traded for another, the cost basis for both cryptos has to be established in the currency of taxation.
For example, if you trade BTC for ETH, the value of both currencies at the time of the trade against the US dollar (for US taxpayers) would act as the cost basis for the trade.
If BTC=$4,000 and ETH=$140 than buying one ETH would establish a cost basis of $140. That figure would be important to record, as the BTC you traded would be taxed if you bought it for less than you sold it for. If and when you decide to trade the ETH that cost $140, that dollar figure acts as the basis for capital gains tax which would be levied.
When you trade your cryptos for fiat (or vice versa) the situation is a easier. Because you are trading crypto against fiat, the cost basis will be calculated in the same currency you pay taxes with.
The takeaway from all this is that keeping exact transactional records is extremely important.
In some ways it may be easier to move in and out of fiat, or a fiat equivalent for tax purposes. Establishing a cost basis between two cryptos isn’t simple, and the transaction dates are extremely important for taxation.
Stablecoins could be a good fiat stand-in for tax purposes (at least for US taxpayers), as most of them are stable against the US dollar.
What is a Taxable Event?
In general, the most common taxable event will the be the sale of cryptos at a profit. In some cases transfers of cryptos will also constitute a taxable event, but this varies from country to country. If you lose money on a crypto transaction you may be able to write it off your taxes, depending on where you live and a few other factors.
If you want to know more about how taxes could apply to your crypto trading or investments, it is a good idea to talk to a tax professional that has some knowledge about cryptos. Most nations impose strict penalties for non-payment of taxes, so if you owe the government money, get some advice before you owe them even more!
Now, let’s shift to specific national taxation approaches.
The IRS first issued guidance on cryptos back in 2014, but enforcement until the great crypto rally of 2017 was lax. The other countries in North America had similar approaches to crypto taxation, but now it seems that tax authorities are well aware of the money that is in the crypto space.
In the United States, the Internal Revenue Service (IRS) considers cryptocurrencies to be “property.”
In a legal sense, then, this means that your crypto investments will be subject to a capital gains tax—either a short-term capital gain rate or a long-term capital gain rate depending on how long you held your crypto before taking a profit.
If you cash your crypto out within one year of buying it, then you’ll be hit with the steeper short-term capital gains tax. These short-term rates are typically whatever your regular tax rate is, so if you’re taxed at 25%, then so, too, will your short-term gains be taxed at the same rate.
For U.S. users who cash their crypto out after one year of holding it, they’ll contend with the long-term capital gains tax rates of 0%, 15%, and 20% depending on their tax bracket.
And the Cryptocurrency Fairness in Taxation Act (CFTA) is also currently being debated in the U.S. Congress; this will would exempt all crypto transactions beneath $600 from taxation.
There was some debate about whether Crypto to Crypto trades would be treated as “like-kind”, meaning no tax would be due on these. This has now been clarified and tax is due, so you will need to keep records of any trades you make and pay tax accordingly.
A Company called CryptoTaxPrep offer a complete Cryptocurrency tax service which costs $750 for a state and federal tax return.
Per a 2013 interpretation letter, the Canadian Revenue Agency (CRA) declared cryptocurrencies are “commodities” under Canadian law—just like silver or natural gas. This means here your crypto will either be taxed as business income or as a capital gain (or business loss and capital loss, respectively).
Canada levies a 50% capital gains tax that would apply to any crypto transactions. This tax would only apply to buy-and-hold investors. High-volume traders could be considered a business by the tax authorities in Canada, and would have to file their taxes accordingly.
Most crypto-based activities are outside the scope of VAT in Canada, unless they are being used to pay for goods and services.
The Mexican government has an open-minded, liberalized legal attitude toward Bitcoin. Domestic regulatory framework is not yet finalized, but the nation’s legislature is actively designing new measures.
Despite the fact that the EU has a high level of financial integration, every member nation has a different tax code. The vast majority of the EU has sided with the US, and consider cryptos as far more like a commodity or stock than a currency.
The British government repealed their VAT tax against Bitcoin in 2014. Now, most cryptocurrency transactions are exempt from VAT fees in the nation.
Moreover, the HM Treasury considers BTC and other cryptocurrencies to be “assets,” not legal currencies. This mandates such crypto be taxed either by an income tax or a capital gains depending on the circumstances (if you’re a trader, for example, you’ll pay income tax vs capital gains for normal investors).
Mining as part of a business will have to pay corporation tax at the standard rate of 20%.
If you are an individual, you will pay capital gains tax on any profits you make from your cryptocurrency investments. It should be noted that each person has an allowance of £11,300 per year which is tax-free.
You are also able to “gift” some of your crypto investment to your spouse who will also have the £11,300 allowance. If you plan your withdrawal properly and do it in April ( start / end of new tax year ) you could withdraw £11,330 on the 5th of april and £11,300 on the 6th of april which means they fall in separate tax years. You can double that amount if you are married, meaning it’s possible to withdraw £45,200 without having to pay tax.
Like The USA, any crypto to crypto trades you make will be taxed :
The definition of a disposal is written above and many of you will have noticed the problem it causes. As BTC is the entry point into most Altcoins, you must first purchase BTC, then transfer that to an exchange, then to trade that for an Altcoin.
With the transaction times and volatility of BTC that value could have risen or fallen quickly, when you trade your BTC for an Altcoin you are ‘disposing’ of your BTC and creating a Capital Gain or Capital Loss.
Where you purchase and sell a large amount of Altcoins this can be a problem, you will need to create a spreadsheet recording the dates and FIAT values of the Altcoin purchases and disposals. Each separate disposal of a Cryptocurrency will be required to be converted to FIAT at the time of disposal.
See this excellent guide for more info.
Belgium taxes investments made by individuals that are seen as ‘speculative in nature’ at 33%, plus local surcharges.
If an investment isn’t speculative, and is outside of any professional activity, the gains may be tax-exempt and the losses won’t be tax deductible. This classification may or may not apply to Belgian crypto holders, depending on their activities.
Professional individual investors in Belgium will be taxed on a progressive scale from 25% to 50%, in addition to local taxes and social security contributions. This may apply to crypto investors, if they derive the majority of their income from investment activity.
Belgium’s Ministry of Finance has said that cryptos are currently exempt from VAT. Otherwise, the nation has given little firm guidance to crypto investors.
The Swiss have officially categorized Bitcoin as a “foreign currency.” Switzerland applies the Swiss Wealth Tax to any crypto assets, and is currently working on a more comprehensive tax code for the emerging asset class. Crypto ownership must also be declared on annual tax forms. Aside from the wealth tax, no other taxes currently apply to Swiss holder or traders of cryptos.
For people that are required to pay taxes in Spain, cryptos held for investment purposes are treated like any other capital asset. Once they are sold at a profit, the gains are taxed. Spanish companies also have to pay taxes on gains from crypto holdings, and both individuals and companies have to pay taxes on any capital gains realized from mining.
There is no specific guidance on crypto and VAT from Spanish tax authorities, but most crypto transactions are outside of the scope of VAT laws, and aren’t subject to VAT.
Holland’s Finance Minister initially announced that the Dutch government would be considering Bitcoin and the like as “barter items” henceforth. This classification was a liberal one, giving crypto users in the nation no need to license their activities or meet any sort of compliance regulations.
Accordingly, Dutch crypto users’ holdings had been taxed according to these users’ respective basic income tax rates.
Today the Dutch government sees any gains or losses that emerge from trading cryptos as a ‘business activity’ as a taxable event, and should be taxed as business income. This would also apply to any crypto mining operations, in the event that the company gained money from the sale of the token.
The tax laws for individuals in Holland are more nuanced. If a Dutch citizen or resident holds cryptos as an asset, the tax owed will be based on whether or not the assets form a ‘source of income’ to the individual.
When cryptos aren’t taxed based on the ‘source of income’ code, they will likely be taxed as savings or investments, at a flat rate. Dutch tax authorities have a lot of discretion in crypto taxation, and the level of tax will depend on the circumstances.
The Netherlands doesn’t apply VAT to cryptos.
At the time of writing, Germany doesn’t have a comprehensive set of laws that govern crypto taxation. Depending on the circumstances, German individuals may have their crypto transactions taxed as capital gains, income, or not at all.
One of the most important things to consider is how the cryptos are held. If they are held as a private asset, they won’t be in the same tax category as a business asset.
If you’re a trader, you have free capital gains up to €800 Euros. Once you breach this amount, you’ll need to pay a 25% flat-rate on your speculative gains. If you’ve made gains from simply holding your crypto and never moving it, you won’t owe any taxes in Germany.
When cryptos are held by individuals, it is likely that they will be treated as an asset, and any gains will be taxable under current capital gains taxes, if the purchase and sale take place in one year. Any gains from lending will probably be treated as income, but it is a good idea to consult a tax professional for more information.
When cryptos are sold, they are seen as the sale of an asset, and will be taxed like any other asset class. Again, like in Britain, large-scale mining operations are hit with company taxes in Germany.
Germany doesn’t apply a VAT tax to cryptocurrencies.
French citizens and residents are subject to heavy taxation on their crypto trades. Single trades are taxed at flat rate of 19%, as well as a social contribution of 17.2%, which works out to an all-in rate of 36.2%. That is a hefty rate to pay, but speculators and miners may have to pay even more.
If the French tax authorities think that crypto speculation or mining is a commercial enterprise, the taxes levied could be as high as 45%, plus any social contributions that are due.
For companies, the profits from cryptocurrency speculation and mining are considered to fall under the general corporation tax regime for profits and losses. The present tax rate under this regime is 33%, but it is slated to fall to 25% over the next few years.
The VAT tax law for cryptos in France is more nuanced than in other European nations. In France VAT tax would apply to crypto miners as a ‘supply of services’, and acquisition of goods or services with cryptos would also be subject to VAT.
The purchase or sale of cryptos is free from VAT in France, unless it occurs on an ongoing basis, and is a source of commercial income.
For a long time, there were no specific guidelines for taxing cryptos in Italy. Today, there still isn’t any sort of comprehensive tax code for cryptocurrencies in the nation, but the Italian Tax Authority has supplied general guidance for taxing cryptos.
Italy will tax what it defines as ‘speculative’ crypto activities at a rate of 26%. The catch is that in order to be considered ‘speculative’ a person must hold in excess of 51,000 euros for seven consecutive days. Otherwise, Italy is still tax-free for crypto traders and owners.
Companies and crypto traders are subject to commercial taxes in Italy, and transfers of cryptos are also subject to taxes. These laws probably don’t apply to the vast majority of crypto owners. If you have additional questions, talk to a tax professional.
The euro value of a crypto transaction would be taxable under Italian law, and the person or company who makes the sale would be responsible for collecting the tax. If you or your company is selling a lot of goods or services in exchange for cryptos in Italy, it is probably time to start collecting VAT, in euros.
Sweden’s crypto tax laws are more or less in line with the US and UK. If cryptos are sold at a profit, it is considered a taxable event. If cryptos are held as a business asset, and gains from their sale, or income derived from their leasing would also qualify as business income.
Crypto miners in Sweden are subject to the same laws that govern other businesses, which means that any cryptos that are sold would be considered business income. If an individual mines cryptos, they would be subject to similar laws, and would have to pay capital gains if and when their mined cryptos are sold.
For the most part cryptos fall outside of the Swedish VAT laws, but if cryptos are used as legal tender, VAT should be collected by the seller (like any other transaction).
Taxation laws which apply to individual crypto owners are unset for now. Russia has been working on a comprehensive set of crypto laws for more than a year, but there still aren’t any clear guidelines for taxation.
However, Russian president Vladimir Putin just instructed the Russian Duma to draft up a framework through which to regulate and tax large crypto mining operations in the nation. He wants the law to be completed this year.
Once the laws are in the public sphere, Russian tax payers will likely have a better idea of how much they would owe in taxes. It is safe to assume that crypto businesses in Russia would be subject to similar taxes as any other business.
Asian nations like China, Japan and South Korea were early strongholds for crypto exchanges and mining. That all changed when China banned the use and mining of cryptos in 2017, though Japan and South Korea remain open to the industry.
In Q3 2017, China banned crypto exchanges and Initial Coin Offerings (ICOs) indefinitely in domestic markets, leading many pundits to wonder if the Chinese Communist Party was on the verge of banning crypto ownership altogether.
The reasons for these bans? Chinese regulators are concerned about clamping down on the possibilities of money laundering through crypto before the crypto space gets too big and too unmanageable.
Per Sheng Songcheng, a top economic adviser to the People’s Bank of China:
“Because it is traded anonymously and peer to peer, Bitcoin makes it easy for money laundering and tax evasion.”
These Chinese bans will likely not be permanent, but they will remain as Chinese administrators further workout a new tax framework.
Japan’s top regulatory watchdog considers Bitcoin to be a “commodity.” The nation’s government also ended the 8% “Consumption tax” that hitherto applied to crypto on July 1st, 2017.
Beyond that, Japanese crypto users contend with all of the normal taxation models: income tax, capital gains tax, and company tax.
South Korean regulators are currently exploring a range of taxation options including 1) value-added taxation (VAT), 2) gift taxes, 3) income tax, and 4) capital gains tax.
Thailand: Bitcoin was illegalized in Thailand in 2013 and then re-allowed in 2014 with numerous restrictions.
Most nations have decided that cryptos are an asset that is most similar to a commodity, and are treating them as such. Some nations have taken a harsh view of cryptos, like Bolivia.
The idea that cryptos somehow make tax evasion simpler is perhaps partially true. Most transactions that can be handled via offshore structures, which are a far more efficient way to skirt taxes globally.
One county that has seen a surge in crypto use is Venezuela, where the local currency has lost most of its value. The Venezuelan government introduced its own national crypto, but it isn’t popular at home, or internationally.
Instead, the residents of Venezuela have turned to popular cryptos like Bitcoin and Dash to save and trade, as many see cryptos as being more stable than the fiat currency their government is issuing.
Israel’s top financial watchdog drafted up new rules at the beginning of 2017 that classified cryptocurrencies as “assets” that must fall under the purview of capital gains taxes in the nation.
The Australian government just ended the infamous “double tax” on crypto in Australia by exempting cryptocurrencies there from facing the goods-and-services tax (GST).
Bolivian officials have banned cryptocurrencies, arguing that they enable tax evasion.
Cryptocurrencies are taxed just as any other regular financial instruments are here.
Brazilian legislators have characterized crypto as an “asset,” not a currency. Accordingly, Brazilian crypto users face a 15% capital gains tax on their profits.
Earlier this year the Venezuelan government decreed that anyone who deals in cryptos must pay whatever taxes they owe in cryptocurrency, as the Venezuelan government needs help raising funds.
The decree didn’t give any guidelines on whether or not crypto holders or traders have to adhere to a different set of tax laws, so it is safe to assume that they will be taxed like any other asset or business.
Most Nations See Cryptocurrencies As Property
As you can see, then, the predominant international trend is to regulate cryptocurrencies like Bitcoin as if they were “property” and “assets.” Most nations have yet to come around to the idea of treat crypto like real currencies in a technical, legal sense.
Whether this dynamic will hold true over the next ten years, though, is anyone’s guess.
It’s clear for now that regulators have only just begun to seriously scrutinize regulating cryptocurrencies. Indeed, many more tax updates are in store for crypto users the world over in the years ahead.