Crypto holders are on the move, searching for the best crypto-friendly countries to escape tightening regulations. When you earn your income online, where you choose to live could influence how much tax you pay (or don’t).
Regulators worldwide are still strategizing on how to deal with cryptocurrencies, which operate very differently from traditional financial assets.
Some countries have embraced cryptocurrencies and created regulations to protect investors and promote innovation. In contrast, others have taken a more cautious approach due to money laundering, fraud, and market volatility concerns.
Regulators have adopted several actions that impact crypto holders, such as implementing new tax requirements, cracking down on unregistered exchanges, and in some cases, countries like China, banning or restricting cryptocurrencies altogether.
Digital Crypto Nomads On the Move
Tax offices and governments worldwide haven’t yet figured out how to deal with crypto and its taxation. There is still a discrepancy between how crypto is viewed and how it is taxed worldwide. In some countries, crypto holders will pay multiple taxes on their crypto. While in others, they could see none.
Most countries do not recognize cryptocurrencies as fiat currencies – like dollars or pounds. Instead, it’s most often viewed as a kind of asset or commodity – like a property or a stock. This view matters because it defines the way cryptocurrency is taxed. In most countries, cryptocurrencies will be subject to income tax, capital gains tax, or sometimes both.
For instance, if someone earns crypto – say by mining – and then later sells mined coins, they are liable to pay both income tax and capital gains tax in most countries.
Countries: Crypto-Friendly and Tax Efficient
As mentioned above, how crypto is taxed depends on different geographic regions and their rules and regulations. It’s not relatively so straightforward when it comes to crypto tax. The above is a general overview, but crypto taxation depends on where one resides. Some countries remain crypto tax havens for investors looking to avoid double taxation on their crypto.
Portugal
Portugal is a country that has been increasingly embracing cryptocurrencies and blockchain technology in recent years. The country’s relatively friendly regulatory environment makes it a popular destination for crypto enthusiasts and businesses. Portugal does not impose a value-added tax (VAT) on purchasing or selling cryptocurrencies. It has several banks that are known to be crypto-friendly, including Banco Best and Banco Atlântico Europa.
To entice crypto holders to relocate to Portugal, residents pay no income tax on their crypto or capital gains tax on profits. Cryptocurrency investment income is tax-free.
With a progressive tax policy, the government favors individuals and businesses that invest in innovative technologies like blockchain and cryptocurrencies. Portugal also has a thriving startup ecosystem, with several accelerators and incubators that support blockchain and crypto-related projects.
The government has been exploring blockchain technology to improve various sectors, including public services and voting systems. With efforts to boost the global crypto ecosystem, Portugal hosts several blockchains and crypto-related conferences and events, such as the Lisbon Blockchain Week.
Portugal is a country that is actively embracing cryptocurrencies and blockchain technology, making it an attractive destination for individuals and businesses in the crypto space.
Switzerland
Switzerland has long been known as a hub for finance and innovation. It is also emerging as a hub for cryptocurrencies and blockchain technology. Switzerland is known as a visa-friendly destination, making it an attractive destination for individuals and businesses in the crypto space.
Switzerland offers residents no capital gains tax for individual investors and no income tax or wealth tax on cryptocurrency.
Having some of the most comprehensive crypto regulations in the world, in 2018, the Swiss Financial Market Supervisory Authority (FINMA) introduced guidelines for initial coin offerings (ICOs), which provide greater regulatory clarity and protection for individuals and businesses operating in the crypto space.
The Crypto Valley Association is a non-profit association promoting blockchain and cryptographic technologies development.
Lugano was one of the first cities in Switzerland to accept Bitcoin to pay city taxes. The city’s administration announced in 2016 that it would accept Bitcoin payments for up to 250 Swiss francs (~ USD 275). Additionally, the city of Zug has been dubbed “Crypto Valley” due to its high concentration of blockchain and crypto-related businesses.
Switzerland offers various visa options for individuals and companies, including the Swiss Startup Visa, which allows foreign entrepreneurs to set up a business in Switzerland and stay for up to four years.
Additionally, Switzerland offers a variety of residency visas, including the Swiss Investor Visa and the Swiss Freelance Permit.
United Arab Emirates
The United Arab Emirates (UAE) is increasingly becoming a hub for cryptocurrencies and blockchain technology, with its government taking an active interest in promoting the use of these technologies. It has been working on comprehensive crypto regulations, which are expected to be introduced soon.
In the meantime, the country’s financial regulator, the Abu Dhabi Global Market (ADGM), introduced guidelines for digital asset exchanges operating in its jurisdiction, providing greater regulatory clarity and protection for individuals and businesses working in the crypto space.
UAE has also launched several blockchain initiatives, including the Dubai Blockchain Strategy, which aims to make Dubai the world’s first blockchain-powered government. The Emirates Blockchain Strategy 2021 aims to leverage blockchain technology to transform key sectors, such as healthcare and transportation.
The country is known for its tax-friendly policies, and the government will likely impose significant taxes on cryptocurrency transactions shortly. Just a week ago, Ras Al Khaimah, one of the United Arab Emirates (UAE) seven Emirates, launched a free zone for digital and virtual asset companies as the country’s approach to the industry continues to attract global crypto players.
From a visa standpoint, UAE offers various visa options for individuals and businesses, including the Dubai Startup Visa, which allows foreign entrepreneurs to set up a business in Dubai and stay for up to five years. Additionally, it offers a variety of residency visas, including the UAE Investor Visa and the UAE Freelance Permit.
Other Crypto-Friendly Regions
Malta is a popular destination for cryptocurrency companies due to its favorable regulatory environment. The country has no capital gains tax on cryptocurrencies and has created a regulatory framework for blockchain technology. Malta’s Individual Investor Program offers citizenship to individuals who invest in the country.
Bermuda: Bermuda has no corporate income or capital gains tax, making it a tax haven for cryptocurrency companies. The country has also created a regulatory framework for cryptocurrencies and blockchain technology. Bermuda offers a residency certificate program for individuals who invest in the country.
Belarus: Belarus has created a favorable environment for cryptocurrency companies by legalizing cryptocurrency transactions and exempting them from taxes until 2023. The country also offers a unique visa program for entrepreneurs and investors interested in developing their businesses in Belarus.
Lastly, regions like Malaysia, Porto Rico, and others also make it under the discussed list. While most countries around the world tax subject crypto to capital gains tax or income tax – there are still a few crypto tax havens and countries where one will pay less crypto tax.
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