Now it is common to tax income and capital gains from Bitcoin and other cryptocurrencies. However, there are many countries that are interested in seeing how this growing property class develops and promoting innovation. Even in these countries, tax laws are subject to change and are often complex. Tax liability is an important resource for anyone investing in Bitcoin and other digital assets. Overall, some have described this as nothing more than a dream.

But while some countries are putting pressure on investors to tax income and capital gains from bitcoin transactions, many are taking a different approach – often with the aim of promoting better adoption and innovation in the crypto industry. They have enforced friendly law and allow investors to buy, sell or own digital assets without tax breaks.

Here is a list of the most crypto-friendly tax jurisdictions from the latest records.

1.Germany

Germany offers a unique initiative to tax digital currencies such as Bitcoin. Unlike other states, Europe’s largest economy treats bitcoin as a private currency rather than a currency, commodity or stock. In the case of German residents, any cryptocurrency held for more than one year is tax deductible regardless of the amount. If the assets are held for less than a year, capital gains tax will not be added to sales until that amount exceeds 600 euros ($ 692).

However, this is a different matter for businesses; A start-up incorporated in Germany, like any other asset, must pay corporate income taxes on cryptocurrency gains. But in 2021, a controversial new tax law came into force that effectively killed the crypto derivative trade in Germany because losses could no longer be deducted. This law reflects moves to regulate derivations across Europe.

2.Malaysia 

Malaysian law does not tax long-term capital gains on any investment applicable to crypto investments, nor does VAT apply to crypto trading. Even day trading in cryptocurrency was considered tax-free until recently, making all transactions involving cryptocurrency tax-free.

However, according to the most recent discussions, traders who are active in cryptocurrency should declare their profit from trading. If the profits made by buying and selling cryptocurrency are income in nature, they will be taxed as business income under income tax. New guidelines on the taxation of cryptocurrency will be issued soon to ensure that there is more clarity on this issue in Malaysia. 

3.Switzerland

Not surprisingly, Switzerland, the birthplace of the so-called “Crypto Valley” innovation center, has one of the most forward-thinking tax policies. Cryptocurrency profits made by a qualified person through investment and trade are considered tax-deductible capital gains. Not surprisingly, Switzerland, the birthplace of the so-called “Crypto Valley” innovation center, has one of the most forward-thinking tax policies.

Cryptocurrency profits made by a qualified person through investment and trade are considered tax-deductible capital gains.

4.Portugal

Portugal is another great way when looking for crypto friendly tax havens. Portugal has widely adopted cryptocurrency and is considered one of the most crypto friendly countries. The Portuguese Tax Authority has announced that trading and transactions in cryptocurrency are tax deductible for individuals.

No person is taxed for exchanging cryptocurrency for regular currency, and there is no income tax or capital gains tax on profits arising from trading in cryptocurrency. VAT does not apply to purchases and sales and cryptocurrencies, crypto offers almost no tax exemption for individuals!

Portugal is also now an important nomadic hub, and all nomads should keep it on their radar because it has an easy tax settlement process and is friendly in terms of digital currency taxation. However, this relief is only for individuals, and companies that accept payment in digital currencies are liable for VAT and income tax arising from these sales.

5.Singapore

There is no capital gains tax in Singapore, so individuals or companies holding cryptocurrency are not liable. But Singapore-based companies are liable for income tax if their main business is cryptocurrency trading, or if they accept cryptocurrency as a fee. Officials consider fee tokens, such as Bitcoin, to be more of an “extraordinary asset” than a legal tender, and payment in cryptocurrency is a “barter trade” that taxes goods and services, but not a token.

6.Slovenia

Slovenia is another country that treats individuals and businesses separately under its cryptocurrency tax system. Individuals are not subject to capital gains tax when they sell bitcoin, and profits are not considered income. However, companies that receive money in cryptocurrencies or through mining are required to pay taxes at the corporate rate.

In particular, the Mediterranean country does not allow trading activities in cryptocurrency only (such as accepting bitcoins only as a fee). At the end of 2020, the Slovenia Times announced that its crypto communities were working closely with regulators and tax authorities to clarify its tax law.

7.Hong Kong

According to the new guidelines issued regarding the taxation of cryptocurrencies, Hong Kong taxes cryptocurrencies according to their use. Accordingly, if cryptocurrencies are purchased for the purpose of long-term investment, they are not subject to income tax. However, for companies, any profits made by cryptocurrency trading as a business activity will be taxed. For the purpose of corporate taxation, cryptocurrency is considered a virtual commodity.

Conclusion

As you can see, most countries mentioned in this article consider Crypto currencies as property or an asset, which attracts capital gains on disposal. As many countries are exchanging information on income and assets with other countries, holding foreign Crypto can cause income tax or capital gains tax implications in the country where you ordinarily reside.