How are cryptocurrencies taxed around the globe?

India’s Finance Minister Nirmala Sitharaman on Tuesday announced that any income from cryptocurrencies will be taxed at 30 per cent. The announcement was part of the government’s Budget 2022 presentation, during which the finance minister also unveiled the Reserve Bank of India’s plans to introduce a digital currency as early as 2022.

“There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent,” finance minister Nirmala Sitharaman said during her Budget 2022 speech.

This sparked a lot of reaction from real and armchair experts alike. There were also memes shared on the same that started trending. Hence, we at India Today decided to go through the taxation structure and the monitoring mechanisms on cryptocurrency and digital assets across the globe and give you a view as to where India stands in this table.

Taxation around the globe

USA

The IRS in the US views cryptocurrency as a capital asset, meaning there are taxes to be paid on any gains obtained from selling them. In other words, you’ll pay short-term capital gains tax if you held the security for one year or less, and you’ll owe long-term capital gains tax if you held your position for longer than one year.

If you simply buy cryptocurrency, there is no taxation involved. Theoretically, you can avoid taxation on your cryptocurrency forever if you simply hold it. You’ll only be taxed on your cryptocurrency if you sell or exchange it at a gain in the future.

The tax rate on Bitcoin capital gains varies between 0 per cent and 37 per cent if you sell them within a year. If the cryptocurrency was kept for more than a year, the appropriate tax rate is substantially lower, ranging from 0 per cent to 15 per cent, or even up to 20 per cent, depending on the individual or combined marital income.

Any losses from the sales can be used to offset income tax up to $3,000 in total.

Canada

Cryptocurrency isn’t seen like a fiat currency in Canada. Instead, it’s viewed as a commodity, which is a capital asset – like a stock or a rental property. If your crypto is taxed as income – you’ll pay Income Tax on the entire proceeds of a crypto transaction. If your crypto is taxed as a capital gain, you’ll only pay Capital Gains Tax on half of any profits of a crypto transaction.

In terms of Income tax, you will be paying 15% – 33% depending upon the below given ranges of taxable income.

Tax rate	Income
15%	On your first $49,020 of taxable income
20.5%	$49,0201 – $98,040
26%	$98,041 – $151,978
29%	$151,979 – $216,511
33%	$216,512+

The Canada Revenue Agency can track your crypto investments. The CRA announced they’re working with crypto exchanges to share customer information. They’re using this information to track Canadian crypto investors to ensure they’e reporting their crypto investments accurately and paying their fair share of crypto tax.

United Kingdom

There is no specific Bitcoin tax or cryptocurrency tax in the UK. Instead, your crypto will either be subject to Capital Gains Tax or Income Tax. The crypto tax you’ll pay depends on the specific transactions you’re making with your crypto. If you’re seen to be making an income, you’ll pay Income Tax. If you’re seen to be making a capital gain, you’ll pay Capital Gains Tax.

Unlike many other countries, the UK doesn’t have a short-term and long-term Capital Gains Tax rate. All capital gains are taxed under the same rates. The amount of Capital Gains Tax you’ll pay depends on how much you earn.

You’ll pay either 10% or 20% tax on any crypto gains, depending on what band you fall under. This of course will depend on the overall taxable income, size of profit, and deducted allowances.

Tax rate	Taxable income
10%	Basic Rate Income Band (up to £50,270)
20%	Higher Rate Income Band (up to £150,000)
20%	Additional Rate Income Band (more than £150,000)

Australia

In Australia, cryptocurrency is viewed as an asset and attracts Capital Gains Tax and Income Tax by the ATO(Australian Taxation Office). If you’ve bought, sold, or earnt interest from cryptocurrency in the past financial year, you’ll need to declare your crypto totals on your Income Tax Return.

• The ATO has a data sharing program with all Australian exchanges.
• The ATO knows has crypto transaction data from as far back as 2014.
• The ATO has the Know your customer (KYC) information you provided when signing up for any Australian exchange or wallet.

The Australian government does not see bitcoin and other cryptocurrencies as money nor foreign currency. Instead, the ATO classes crypto as property, and as an asset for Capital Gains Tax (CGT) purposes. Crypto can also be viewed and taxed as Income Tax. How you’re taxed depends on your intentions and setup.

A CGT event occurs when you dispose of your cryptocurrency. Dispose means to sell, gift, trade, exchange, convert or use crypto to buy things. Importantly, if you hold for 1 year before disposing, you’ll pay 50% less tax on crypto gains.

Income	Income
$0 – $18,200	0%
$18,201 – $45,000	Nil + 19% of excess over 18,200
$45,001 – $120,000	$5,092 + 32.5% of excess over 45,000
$120,001 – $180,000	$29,467 + 37% of excess over 120,000
$180,001+	$51,667 + 45% of excess over $180,000

Netherlands

The tax system of the Netherlands differs slightly from other countries. It levies a wealth tax rather than a capital gains tax. Rather, a presumed interest is levied in the Netherlands on the value of all assets minus all liabilities at the start of the tax year. If your total assets including crypto are worth 50,000 or more, then your crypto is subject to a 31% wealth tax.

Countries that offer relaxed taxation rules for cryptocurrency

Now we will see regulations in countries which have a more lenient approach towards taxing digital assets and cryptocurrencies. Owing to this, these places are often seen as cryptocurrency havens and attract a lot of blockchain and crypto related investments houses and start-ups.

Germany

Cryptocurrency is viewed as a private asset and not as property in Germany, which means it attracts an individual Income Tax rather than a Capital Gains Tax. The key thing to know is that Germany only taxes crypto if it’s sold within the same year it was bought.

So, while Germany taxes certain crypto events, like short term trades, mining and staking, its rules on taxing crypto are far laxer when compared to other countries. In Germany, cryptocurrency is classified as ‘other assets’ and selling it is a ‘private disposal’. This distinction is important since the private sale of assets holds tax benefits in Germany.

As a ‘private sale’ in Germany crypto gains are completely tax-exempt after a holding period of one year. In addition, profits on crypto sales up to 600 per calendar year remain tax-free.

Portugal

In Portugal, the government has chosen to adopt a soft stance on cryptocurrency taxation. Individuals in Portugal who profit from the purchase and sale of cryptocurrency are not taxed on the capital gains.

Further, the exchange of cryptocurrency for other currency is also free of taxation. This means, buying or selling cryptocurrencies would not be subject to capital gain taxes or value-added tax (VAT) and it’s a virtual tax haven for digital assets.

The situation differs for private companies in Portugal who receive payment in cryptocurrency for whom normal capital gains taxes apply. The key is that if you are an individual who is paid in cryptocurrency then you can avoid paying heavy capital gains taxes while private firms may have to pay taxes.

In summary, cryptocurrencies in Portugal are only taxable if you do it as a professional trading activity and therefore you need to open an activity as a trader and pay taxes according to your profit, otherwise they are considered non-taxable in Portugal due being unable to fit in any category.

Switzerland

The Swiss Federal Tax Administration (FTA) don’t classify cryptocurrency as legal tender – like the Swiss Franc. Instead, they class crypto as an asset – specifically a crypto based asset or a private wealth asset – like a stock or a bond.

For private investors in Switzerland, capital gains tax does not apply to private wealth assets. Capital Gains Tax only applies if you’re a self-employed trader or a business. This doesn’t mean you won’t pay any tax on your crypto. Crypto is still subject to Income Tax in some instances, as well as the Wealth Tax. You as an individual would not need to pay tax for holding crypto assets if:

• You’ve held your crypto asset for at least six months.
• You have a trading turnover smaller than 5x you’re holding at the beginning of the financial year.
• Your net capital gain is smaller than 50% of your total income throughout the financial year.
• You have no debt financing.
• You use derivatives solely for hedging.

Apart from this, Switzerland has a unique system of regions divided into ‘cantons’ playing heavily into what can and cannot be done. Each of Switzerland’s 26 cantons has its own legal definitions regarding the treatment of cryptocurrency. One Swiss canton may tax cryptocurrency while another may not.

Singapore

The MAS (Monetary Authority of Singapore) or the central bank, views that the cryptocurrency ecosystem must be monitored to prevent laundering and other illegal activity, but that innovation must not be stifled. Singapore Central Bank’s Chief Fintech Officer, Sopnendu Mohanty once said in an interview that the city-state’s financial institutions are looking at “allowing crypto to be an experimental construct”.

The Payment Services Act of 2019 regulates Singapore’s legal environment for crypto. The law sets clear expectations that balance regulatory necessities to prevent illegal activity while balancing a growth environment for crypto. Cryptocurrencies are also exempt from capital gains taxes in Singapore.

Businesses that buy and sell digital tokens in the ordinary course of their business are taxed on the profit derived from trading in the digital token. Profits derived by businesses which mine and trade digital tokens in exchange for money are also subject to tax.

Businesses that buy digital tokens for long-term investment purposes may enjoy capital gains from the disposal of these digital tokens. However, as there are no capital gains taxes in Singapore, such gains are not subject to tax.

Whether gains from the disposal of digital tokens are trading or capital gains depends on the facts and circumstances of each case. Factors such as purpose, frequency of transactions, and holding periods are considered when determining if such gains are taxable.

Malta

The small island nation has long been on the wish list and radar of crypto investors as many crypto exchanges and block chain projects operate from the country. There are a few reasons Malta makes strategic sense for crypto-focused companies as well. Malta is a member of the European Union. That means that crypto projects with operations based in Malta can operate freely throughout the entirety of the European Union.

Malta is also tax free for crypto investors and exempts capital gains tax and VAT and has implemented several crypto friendly virtual currency legislations. Several companies like Revolut, OKex, Nchain, Binance are established crypto firms in Malta.

The tax guidelines differentiate between coins and tokens with tokens being sub-divided into financial tokens and utility tokens. “Coins” are defined by Maltese tax law to be like regular fiat means of payment. To be a “coin” the cryptocurrency must not have features which would make it comparable to classic equity, bond, or another type of financial security. Its value should not be related to its redemption for a service or a good (i.e., it should not be akin to a voucher). When such a type of coin is involved in the transaction, the tax law treats it identically to regular transaction involving a fiat currency.

Thus, for example, any profits made from exchanging coins are treated just like regular fiat exchange profits would be. When a company holds coins as part of its trading stock, any gains or profits are taxed as income. Any coins rewarded from mining activities are treated as regular income as well. If an individual realizes a capital gain from long-term holding of a coin, and he is not doing so as part of his regular trading activity, that should not attract income tax on capital gains.

Whether increased regulation comes to the small Mediterranean island remains to be seen. In the meantime, rich crypto investors from non-EU countries will continue to consider it for its 1.5-million-euro citizenship offer and lax attitude toward crypto.

Cyprus

Cyprus is another Mediterranean island nation known for its lax stance toward cryptocurrencies including Bitcoin. Although cryptocurrency is not yet regulated, the country looks to be on such a path. The Central Bank of Cyprus has flagged the potential for losses and issued official guidelines about crypto risks as far back as 2014. Overall, things remain wide-open for crypto in Cyprus.

ICOs (initial coin offerings) are the one area of crypto that clearly does currently fall under legal jurisdiction in Cyprus now. Funds derived from ICOs are treated as taxable income in Cyprus. At the same time, Cyprus is noted for its attractive 12.5 per cent corporate tax rate. The Cyprus Securities and Exchange Commission (SEC) is pushing for more oversight but for now there looks to be no mining restrictions, reporting requirements, and no legal framework for the treatment of cryptocurrencies within estates.

Bermuda

Bermuda’s Digital Asset Business Act 2018 set out its regime for regulating individuals and entities who undertake the following: issuing, selling, and redeeming cryptocurrency and other digital assets, operating as a crypto payment provider, including the provision of services for fund transfers; operating a cryptocurrency exchange and providing wallet services; and operating a cryptocurrency services vendor.

All of this simply dictates what constitutes digital business within Bermuda, which levies zero income and capital gains tax. It is often seen as a magnet for individuals and businesses as one of the first regimes for digital business.

Regulations and taxation numbers have been sourced from official monetary regulatory authority sources of respective countries and other sub details have been sources from koinly.io

READ | RBI to issue digital rupee based on blockchain technology in 2022-23, fate of Bitcoin unclear

ALSO READ | What is Digital Rupee and how it is different from Bitcoin and other cryptocurrencies