Taxes on cryptocurrency in the world

In several countries of the world, cryptocurrency transactions are banned. In other countries, citizens are exempt from taxes on cryptocurrency.

We tell you where it is allowed to pay in cryptocurrency and what taxes investors pay.

What is taxed on cryptocurrency transactions

Cryptocurrency is money that exists only on the Internet. The world’s first cryptocurrency, Bitcoin, was issued in 2009 by a person or group of people under the pseudonym Satoshi Nakamoto. Bitcoin is currently the leader of the crypto market with a share of 59%.

The cryptosystem allows anyone to receive and send payments online anonymously. Banks, tax, judicial and government authorities cannot control transactions with cryptocurrency.

The state can prohibit cryptocurrency or accept it as money, an asset, property or security. The taxation features are related to this.

In 2013, the U.S., Singapore, Switzerland, and Germany were the first countries to think about legal regulation of cryptocurrencies and taxation issues.

To regulate cryptocurrency payments and investments, every country needs special laws. But the lack of legislation on cryptocurrencies does not always mean that they are illegal in the country. In such a case, taxes are calculated based on existing tax regulations or on the instructions of tax authorities.

A broader term for virtual payment systems is crypto-assets. These include:

1. E-money is a digital alternative to cash. For example, e-money is paid through Alipay, a payment system that is part of Alibaba Group. In addition to Alipay services, Russian Railways, Rive Gauche, Ile de Bote, Azbuka Vkusa, GUM, TSUM, Sportmaster, Burger King and other organizations are connected to Alipay in Russia.
2. Unsecured cryptocurrencies – “electronic cash” – are used as a means of payment. In addition to bitcoin, there are about a thousand types of cryptocurrencies. They are used for payment in the country if it is allowed by law.
3. To stabilize the exchange rate, they are tied to national currencies or commodities such as gold or oil. Stablecoins are used for payments or as an analogue of a money market fund or other property complex.
4. Tokenized assets are crypto-assets used for the purpose of securing certain rights to their owner, which can be divided into analogues of debt securities and shares.

Some states issue digital money – a counterpart of the national currency for online payments. Such money does not refer to cryptocurrencies.  For the first time a digital analogue of the national currency appeared in the Caribbean. DCash is an electronic version of the Caribbean dollar.

Cryptocurrency can already be paid for in the Caribbean and Vanuatu, Sweden, Australia, the United States, Japan and other countries.

Rating of countries by index of acceptance of cryptocurrencies

Attitudes toward cryptocurrencies vary around the world, and they are not widely available. In Romania, Taiwan, Vietnam, Algeria, Egypt, Morocco and Bangladesh, cryptocurrencies are banned. In Iceland, there are restrictions on buying coins on exchanges.

In 2021, Chainalysis, a blockchain data company, conducted a study and ranked 154 countries according to the cryptocurrency acceptance index. The researchers took into account the amount of cryptocurrency transactions, the number of cryptocurrency deposits and the volume of P2P (peer-to-peer) trading. The higher the ranking, the more often residents of the country invest in cryptoassets.

Top 20 countries in the cryptocurrency adoption ranking

Country	Place in the ranking
Afghanistan	20
Tanzania	19
Russia	18
Ghana	17
SOUTH AFRICA	16
Philippines	15
Brazil	14
China	13
Thailand	12
Colombia	11
Argentina	10
Togo	9
USA	8
Venezuela	7
Nigeria	6
Kenya	5
Ukraine	4
Pakistan	3
India	2
Vietnam	1

There is no unified approach to the legal regulation of cryptocurrencies in the world. For example, in Japan, Singapore, Belarus, Germany, Estonia and other countries, cryptocurrency is regulated by law and is a legal means of payment. Cryptocurrency exchanges are allowed to trade in the US, Japan and Malta. Trading participants must file tax returns.

But in Portugal, for example, cryptocurrencies are not banned and are not legally regulated in any way. The Central Bank of Portugal does not consider cryptocurrency transactions illegal. At the same time, the bank warns citizens about the lack of protection from the state: if the transaction is unprofitable, losses will not be compensated.

Cryptocurrency taxes in Vanuatu

Vanuatu is a country in the Pacific Ocean with favorable taxation. Tax residents of Vanuatu do not pay taxes on income, luxury, capital gains, dividends and interest. Cryptocurrency transactions are not taxed like in other countries.

The Vanuatu government legalized cryptocurrencies in 2021 through the Financial Transactions Licensing Act No. 9.

British crypto investor Anthony Welch bought a 300-hectare island in Vanuatu and named it Satoshi – after bitcoin creator Satoshi Nakamoto. In 2023, the owner of the island plans to open a community of digital asset owners with the support of the Vanuatu government. 20,000 candidates from around the world have expressed interest in moving to the island.

Vanuatu citizenship can be obtained for an investment of $130,000 or more. The country may be the first in the world to allow investors to use cryptocurrencies to participate in the citizenship program. At the moment, the investment committee allows for payment for participation in the program with money received from the sale of cryptocurrency

Cryptocurrency taxes in the Caribbean

Bitcoin islands, cryptocities, communities of millionaires who got rich on cryptocurrency are all found in the Caribbean. Cryptoinvestors are attracted by low tax rates or no tax on personal income.

In St. Kitts and Nevis, the sale of crypto-assets after at least one year of ownership is not subject to capital gains tax. If you sell cryptocurrency earlier, you have to pay tax at the rate of 20%.

In 2020, the government of St. Kitts and Nevis passed the Virtual Assets Act. The exchange of cryptocurrency for national currency and the issuance and sale of cryptocurrency are fully legalized.

In Dominica, cryptocurrency transactions are regulated by the world’s first neobank.

Migom Bank has created a regulatory framework for operations with cryptocurrency. Customers can use the service of microcredit against the pledge of crypto-assets.

The bank allows all transactions without withdrawing cryptocurrency to exchanges. The bank creates its own bitcoin wallet inside the bank.

In St. Lucia and Grenada, the status of cryptocurrency is not defined, but there are no direct prohibitions on transactions. There is no tax on global income and capital gains on the islands.

In Antigua and Barbuda, the government is preparing legislation on cryptocurrency transactions. There was information on the Internet that cryptocurrency can be used for payments under the investment program of citizenship, but it is not true: so far there is no such possibility.

We tell you in the video, is it possible to pay in cryptocurrency for participation in the citizenship program for investment in the Caribbean?

Bequia is a “bitcoin island” in the Grenadine archipelago. The island’s owner, crypto investor Storm Gonsalves, plans to build 39 luxury villas, bars, stores, restaurants, a club, a gym and a private cinema on the island. Residents will pay exclusively in cryptocurrency for real estate, goods and services.

Puerto Rico. No capital gains tax and a low income tax rate of 4% attract investors from all over the world.

Puerto Rico’s government promotes the acceptance of cryptocurrencies. In 2019, the San Juan Mercantile Bank Trust International (SJMBT) was created specifically to serve investors.

Some islands in the Caribbean can be purchased exclusively for bitcoins. In 2017, five hectares of Union Island in St. Vincent and the Grenadines were offered for sale for 600 bitcoins.

Taxes on cryptocurrency in the EU

Transactions to exchange national money for bitcoins and back in the European Union are not subject to VAT. This decision was made by the European Court of Justice in 2015. So far, this is the only document regulating cryptocurrencies in the EU countries.

The European Commission published a draft regulation on regulation of the cryptocurrency market. The main goal is to make the financial sphere transparent at the legislative level. The new regulation will set stricter requirements for cryptocurrency companies: for example, it will introduce licensing of company activities and the minimum amount of authorized capital – 350 000 €.

Each state of the European Union independently controls the use and taxation of cryptocurrencies.

In Malta, three laws came into force in 2018: the Virtual Financial Assets Act, the Digital Innovation Work Act and the Innovative Technologies and Services Act. In addition, the Maltese Parliament approved a national strategy for blockchain technology development. Digital currency, according to Prime Minister Joseph Muscat, will be “the inevitable future of money.

For individuals, cryptocurrencies are not subject to income tax. If coins are transferred as part of a coin exchange or trading business, profits are taxed at the standard corporate income tax rate of 35%.

There is no full-fledged regulation of cryptocurrencies in Cyprus. The government recognizes cryptocurrencies as a financial instrument, so Cypriot investment companies can use them legally.

Income from trading cryptocurrencies is taxed. The income tax rate for companies is 12.5%, and for individuals the tax is determined on a progressive scale.

Tax rates for individuals in Cyprus

Amount of annual income	Income tax rate
Up to 19 500 €	0%
From 19,501 € to 28,000 €	20%
From 28,001 to 36,300 €	25%
From 36,301 € to 60,000 €	30%
From 60,001 €	35%

In Portugal, the use of cryptocurrency is not prohibited, but also not regulated by law. The Portuguese Tax Authority explained that transactions with cryptocurrencies are not subject to VAT.

The Central Bank of Portugal places all responsibility for the risks of operations with virtual currencies on the citizens themselves.

In Germany, cryptocurrencies are a digital value. Cryptocurrency can be transferred, stored and bought.

Cryptocurrency transactions are exempt from VAT and are not subject to capital gains tax. If crypto-assets are sold within 12 months of purchase, the gain on sale will be subject to an income tax of 45%.

Cryptocurrency taxes in the U.S. and Canada

In the U.S., cryptocurrency is legal tender. Starting in 2022, individuals and companies must declare income from cryptocurrency transactions. The U.S. Internal Revenue Service explains in detail how to pay taxes.

Cryptocurrency in the U.S. is considered property. Taxation depends on the period of investment and the amount of profit or loss the user made.

If an investor does not sell a cryptocurrency for more than a year, it is considered a long-term investment. In this case, starting from $41,676 of profit received, the tax rate is 15%. And if the cryptocurrency has brought the owner more than $459,750, the tax rate increases to 20%.

Investments in cryptocurrency for up to a year are considered ordinary income of an individual, and profits from them are taxed from 10 to 37%. The income tax rate depends on the taxable amount and the taxpayer’s marital status.

Capital gains tax rates in the U.S. on the sale of cryptocurrencies during the year

Rate	One complainant	A married couple with a joint declaration	The head of the family is unmarried and lives with at least one relative
10%	Up to $9950	Up to $19,900	Up to $19,900
12%	From $9,951 to $40,525	From $19,901 to $81,050	From $19,901 to $54,200
22%	From $40,526 to $86,375	From $81,051 to $172,750	From $54,201 to $86,350
24%	From $86,376 to $164,925	From $172,751 to $329,850	From $86,351 to $164,900
32%	From $164,926 to $209,425	From $329,851 to $418,850	From $164,901 to $209,400
35%	From $209,426 to $523,600	From $418,851 to $628,300	From $209,401 to $523,600
37%	$523,601 and up	$628,301 and up	$523,601 and up

If a cryptocurrency holder suffers a loss due to an unsuccessful investment, they can claim a tax deduction of up to $3,000. If a person receives cryptocurrency for any service, he must declare such earnings at the market rate on the day the payment is received.

Canada allows the use of cryptocurrencies, but does not consider them a means of payment.

The Canadian Tax Agency defines cryptocurrency as a commodity. Using cryptocurrency to pay for goods or services is considered a barter transaction. Otherwise, cryptocurrency transactions are subject to Canadian tax laws and regulations, including the Income Tax Act.

Any income from cryptocurrency transactions is treated by the tax agency as a business income tax or capital gains tax. Only 50% of capital gains are taxable.

The final tax rate is determined by total income and the province. Each province in Canada has different income tax rates.

For cryptocurrency transactions, you need to register with the Financial Transaction Analysis and Reporting Center (FINTRAC) at a cryptocurrency exchange. Registration requires user verification. Mining for commercial purposes is also subject to income tax.

Taxes on cryptocurrency in Asia

Singapore supports cryptocurrency projects. There are research centers overseen by government agencies that study distributed ledger technology.

In January 2020, a law came out that introduced licensing for crypto-activities.

In 2014, the Internal Revenue Service (IRAS) defined bitcoin as a commodity. All transactions with it are subject to fees. Companies that buy and sell bitcoin must pay income tax.

Two types of taxes apply:

1. On goods and services (GST) – a rate of 7%.
2. Corporate income tax – 17% of the amount of transactions.

Japan was one of the first countries to recognize cryptocurrencies as legal tender. This makes it possible to pay for goods and services all over the country.

Cryptocurrency is treated as property.

The amount of tax for crypto gains depends on the personal income tax category in which the investor is located. The tax rate ranges from 5 to 45%. Municipal tax is 10% and is added to any rate, resulting in a maximum tax rate of 55%.

Cryptocurrency is completely banned in China. But the Central Bank of China is actively introducing the digital yuan. Sometimes it is called the state cryptocurrency, but that is not quite true. Digital yuan is not listed on exchanges and is not created for long-term investment and speculation, unlike cryptocurrency.

Taxes and regulation of cryptocurrencies in Russia, Belarus and Ukraine

In Russia, cryptocurrency operations are in the process of legalization.

The current law “On Digital Financial Assets” does not regulate the taxation of cryptocurrency. At the same time, the law prohibits the use of cryptocurrencies as a means of payment in Russia.

In 2018, the Ministry of Finance clarified the tax payment procedure in Letter No. 03-04-07/33234 dated May 17, 2018. Cryptocurrency is equated to property and income from its sale is subject to personal income tax. In this case, the tax rate of 13% applies, and on income over 5 million rubles – 15%. The tax is paid on the difference between the income from the sale of a cryptocurrency and the cost of the purchase.

For inadvertent non-payment of tax on cryptocurrencies, article 122 of the Tax Code of the Russian Federation provides for liability in the amount of 20% of the unpaid tax. For non-payment of tax with intent – 40%.

If the personal income tax arrears for three financial years exceeds 2.7 million rubles, a citizen is held criminally liable up to a year in prison. If the unpaid amount for three financial years exceeds 13 million rubles, it threatens with imprisonment for up to three years.

In 2022, the Ministry of Finance submitted a draft law on the regulation of cryptocurrencies to the government for discussion. It still prohibits the use of cryptocurrencies as a means of payment in Russia, but allows investment. All transactions with cryptocurrencies are proposed to be conducted through bank accounts to make it easier to identify investors.

According to the project, citizens are required to undergo online testing before purchasing a cryptocurrency. This will determine the level of knowledge about the peculiarities of investments in digital currencies and possible risks.

Russians will be able to invest up to 600,000 ₽ annually in digital currencies. If the test is not passed, the investment limit will be limited to 50,000 ₽. Qualified investors and legal entities will make transactions without restrictions.

Cryptocurrency is fully legalized in Belarus. For the first time in the world, legislation on cryptocurrency is allocated as a separate industry.

The High Tech Park is a special zone where you can engage in mining and trade in cryptocurrencies. It is not necessary to pay taxes on the income from operations until January 1, 2023. It is possible that the preferential tax regime will be extended.

There are regulated cryptocurrency exchangers in Belarus – for example, the instant exchange service from cryptocurrency exchange FREE2EX and Whitebird exchanger. All of them are residents of Hi-Tech Park and fully comply with the requirements of Decree No. 8 “On Development of Digital Technologies.

To buy bitcoins on the regulated Belarusian marketplace, you will need to register and be verified. To do so, you need to upload a passport photo and selfies with it, as well as take a short survey on understanding blockchain technology.

Ukraine adopted a law “On virtual assets” on 17 February 2022. Operations with cryptocurrency will be regulated by the National Bank of Ukraine and the National Commission for Securities and Stock Market.

The new law provides individuals with a tax break for five years. During this period, taxation of profits from operations with virtual assets is 5% of personal income tax and 1.5% of the military levy. After the grace period – 18 and 1.5%. For miners, the sale of created cryptocurrency is taxed at a rate of 5% personal income tax and 1.5% of the military fee.

Legal entities for which operations with virtual assets is the only type of activity will be able to pay tax at the rate of 5% on profits. Other companies will pay the standard 18% on profits from such operations.

Is it possible to get citizenship for investing in cryptocurrency

Caribbean countries promote the creation of cryptocommunities on their islands and accept bitcoins as a means of payment.

Paying in bitcoins for participation in citizenship investment programs is not yet possible: the governments of the Caribbean states have not officially stated that investing in cryptocurrencies is allowed.

Conditions for participating in Vanuatu and Caribbean investment citizenship programs

Country	Minimum investment amount	Deadline for issuing a passport
St. Kitts and Nevis	From $150,000	2-6 months
Antigua and Barbuda	From $100,000	4-6 months
St. Lucia	From $100,000	3-4 months
Dominica	From $100,000	2-6 months
Grenada	From $150,000	4-6 months
Vanuatu	From $130,000	2 months

An investor can sell cryptoassets on a regulated marketplace in Switzerland or the United States and pay taxes. After that – confirm the origin of the money for the investment with the transaction documents and tax returns. The Investment Program Department decides whether to approve or reject such an application.