Cryptocurrency has changed the face of finance and investment and is likely to continue to do so in the future. However, even though crypto is popular everywhere in the world, not all locations are crypto-friendly. Some countries have stricter rules regarding digital assets and other monetary regulations. Others may only accept crypto payments as a payment option and nothing more.
Wondering which jurisdictions have a softer approach to crypto in terms of regulations and taxes? Want to build your own crypto project and save on taxes and fees? Read this article to discover the top crypto-friendly countries and regions in 2022.
Bermuda's comprehensive regulatory regime governing cryptocurrency is one of the first legal and regulatory regimes in the world specifically designed to govern and support digital asset development and related business interests. Bermuda imposes no taxes on income, capital gains, or withholding taxes on cryptocurrency transactions. Moreover, Bermuda law does not require companies to be local to conduct token sales.Such favorable conditions make Bermuda one of the best places for crypto investors and those working on blockchain projects, especially building NFT marketplaces.By the way, Bermuda was the first country to start accepting cryptocurrencies when paying taxes and fees.
The next location on the list of the most crypto-tax-friendly countries is Portugal. Individual investors don’t have to pay taxes on income and capital gains here. If they exchange one cryptocurrency for another, they don’t pay taxes either. Moreover, they don’t have to pay taxes after getting paid in crypto.As for the businesses accepting crypto payments, they have to pay income tax. For this reason, Portugal may not be the number one choice for companies searching for the most crypto-friendly countries.
El-Salvador is famous for declaring Bitcoin as a legal tender. The key reasons behind this decision included:
- Attracting foreign investments;
- Lowering the dependency on the US dollar.
To stimulate the inflow of Bitcoin to El Salvador from abroad, the country’s tax authorities impose no taxes on income and capital gains.To convert BTC to USD and vice versa, El Salvador’s government has introduced the Chivo wallet. To drive the popularity of Bitcoin among citizens, tax authorities are accepting tax payments in it.Besides, when paying with Chivo wallet, customers can get discounts at certain gas stations.El-Salvador may look like the most crypto-friendly country at a first glance, but the regulatory framework here is still not mature enough. This immaturity creates potential risks for investors.
Being a country with one of the most stable economies and a fintech hub, Singapore is also pro-crypto. To keep the country innovative, the Monetary Authority of Singapore aims to maintain a balance between:
- Absence of excessive regulation of virtual currencies;
- Preventive monitoring to spot illegal activities.
There is no tax on capital gains in Singapore for both individuals and companies. As for income tax, Singapore-based businesses have to pay it if they accept payments in crypto or operate as crypto trading companies.
As a country with affordable hydroelectric power, Georgia has quickly become a center for crypto mining. In Georgia, cryptocurrencies are properties, not legal tender. To attract foreign investment, the Ministry of Finance has introduced favorable tax conditions. For individual investors, there is no tax on capital gains. For Georgia-based companies with Small Business Status (SBS), the taxation is a bit more complex. In the future, the National Bank of Georgia may consider crypto trading a “currency operation”. Organizations with SBS cannot perform such operations. So, trading as an individual rather than a legal entity seems to be a more appealing option. Companies owning crypto have to pay the following taxes:
- 15% corporate income tax;
- 5% personal dividend tax (at the time of distribution).
As to Cyprus, there is no legal framework to regulate cryptocurrencies at the time of writing this article. Consequently, there are no legal provisions on how to tax gains from cryptocurrencies. So, being an individual investor, you won’t have to pay taxes on profits made from crypto trading most likely.Legal entities in Cyprus have to pay a 12.5% tax on all the income generated. But dividends generated from crypto trading are not subject to taxation.
For many investors, Switzerland is among the most crypto-friendly countries in the world. Why is that? First, Swiss banks were the first to serve crypto companies with business accounts and to start accepting Bitcoins. Second, Switzerland is home to “Crypto Valley” constantly attracting new startups and crypto investors. Third, crypto miners in Switzerland can benefit from free access to electricity. When it comes to tax regulations, the legal requirements may differ across cantons. For example, Zurich, and Lucerne feature a zero-capital-gains tax on trading crypto. But in Bern, income generated from crypto mining and trading is subject to taxation. So, Switzerland as a whole may not be the most crypto-friendly country. But, certain cantons offer very favorable conditions for crypto investors.
One of the most crypto tax-friendly countries is Slovenia, one of Europe’s best jurisdictions to pile into Bitcoin. To stimulate foreign investments, the authorities do not tax individual capital gains on crypto trading. As for businesses, they have to pay corporate income tax if they receive payments in crypto. Besides, laws don’t allow Slovenian companies to set crypto payments as the only way to pay for their products or services. Slovenia’s capital Ljubljana is home to crypto start-ups such as Bitstamp and has four BTC ATMs and over 200 merchants that accept bitcoins.
Laws in Germany treat cryptocurrencies as private money for individuals. Germany is one of the best places to hold crypto. German residents who keep cryptocurrency for over a year don’t pay taxes on it. But for investors who hold a digital currency for a shorter period, taxes on capital gains apply to amounts above 600 EUR (approximately $712).The tax regulations for companies when it comes to corporate income taxes are not that favorable though. Businesses in Germany are subject to capital gains tax.
In Estonia, cryptocurrencies aren’t legal tender. The country's authorities treat them as “value represented in digital form”. Considered to be digital assets, cryptocurrencies are not subject to VAT. When an individual gains income from crypto, this income is subject to taxation. An individual investor has to declare the income to pay the tax. For companies, there is no specific crypto-related tax. Businesses pay all the regular taxes that are common in Estonia.What makes Estonia one of the most crypto-friendly countries is an established legal framework for crypto. This framework imposes certain obligations on cryptocurrency market players. Following this framework aims at making the whole crypto environment, including crypto transactions and crypto exchanges, more trustworthy and lower risk.
Last but not least destination on the list of the top crypto tax-friendly countries is Malta. This country was the first to introduce a comprehensive regulatory package for the crypto ecosystem. What makes Malta a tax haven for those engaged in crypto? Foreign companies and individual investors don’t have to pay income and capital gains tax for long-term investment in crypto. But, trading income is subject to a 35% income tax. Nevertheless, the country’s financial system offers structuring options to a non-resident that can help lower the tax to 0–5%.
Digital currencies are becoming more and more accepted as a store of value. They have all the potential to expand into the world of more conventional investment. The crypto-friendly countries we have covered acquired a significant competitive advantage over their neighbors and made a bold step into the future. So if you are preparing your business for Web 3.0, it could be wise to consider jurisdictions with the most favorable conditions. Which of these most crypto-friendly countries is the best for you? Be sure to do thorough research on cryptocurrency regulation in different countries. Then you will be able to decide what matters most to you - either low capital gains tax or an established crypto regulation framework.