Cryptocurrency holders are constantly on the move, looking for the best crypto-friendly countries to avoid tightening regulations. When you earn money online, where you live can affect how much tax you pay (or not).
Regulators around the world are still developing strategies to deal with cryptocurrencies that operate very differently from traditional financial assets.
Some countries have adopted cryptocurrencies and created regulations to protect investors and promote innovation. Others have taken a more cautious approach due to concerns about money laundering, fraud and market volatility.
Regulators have taken several actions that affect cryptocurrency holders, such as implementing new tax requirements, cracking down on unregistered exchanges, and in some cases in countries like China, banning or restricting cryptocurrencies altogether.
Digital crypto nomads on the move
Tax offices and governments around the world have yet to figure out how to deal with cryptocurrencies and their taxation. There is still a discrepancy between how cryptocurrencies are perceived and how they are taxed around the world. In some countries, cryptocurrency holders will pay a lot of taxes on their cryptocurrencies. While in others they saw none.
Most countries do not recognize cryptocurrencies as fiat currencies – such as dollars or pounds. Instead, it is most often seen as a type of asset or commodity – like real estate or shares. This view matters because it determines how cryptocurrency is taxed. In most countries, cryptocurrencies will be subject to income tax, capital gains tax, and sometimes both.
For example, if someone makes money from cryptocurrencies – say by mining – and then sells the 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 cryptocurrencies are taxed depends on different geographic regions and their rules and regulations. It is not relatively straightforward when it comes to the cryptocurrency tax. The above is a general overview, but the taxation of cryptocurrencies depends on where you live. Some countries remain crypto tax havens for investors who want to avoid double taxation of their cryptocurrencies.
Portugal is a country that has been increasingly using cryptocurrencies and blockchain technology in recent years. The country’s relatively friendly regulatory environment makes it a popular destination among cryptocurrency enthusiasts and businesses. Portugal does not impose value added tax (VAT) on the purchase or sale of cryptocurrencies. It has several banks known to be crypto-friendly, including Banco Best and Banco Atlântico Europa.
To encourage cryptocurrency holders to relocate to Portugal, residents pay no income tax on their cryptocurrencies or capital gains tax on profits. Income from investing in cryptocurrencies is tax-free.
Thanks to its progressive tax policy, the government favors individuals and companies that invest in innovative technologies such as blockchain and cryptocurrencies. Portugal also has a thriving startup ecosystem, with several accelerators and incubators supporting blockchain and cryptocurrency projects.
The government is exploring blockchain technology to improve various sectors, including public services and voting systems. In an effort to boost the global crypto ecosystem, Portugal hosts several blockchain and cryptocurrency related conferences and events, such as Lisbon Blockchain Week.
Portugal is a country that actively uses cryptocurrencies and blockchain technology, which makes it an attractive destination for individuals and businesses in the crypto space.
Switzerland has long been known as a center of finance and innovation. It is also emerging as a hub for cryptocurrency and blockchain technology. Switzerland is known as a visa-friendly destination, which makes it an attractive destination for individuals and businesses in the crypto space.
Switzerland does not offer residents any capital gains tax for individual investors and no income tax or wealth tax on cryptocurrencies.
With some of the most comprehensive cryptocurrency regulations in the world, in 2018 the Swiss Financial Market Authority (FINMA) introduced Initial Coin Offerings (ICO) guidelines that provide greater regulatory clarity and protection for individuals and companies operating in the crypto space.
The Crypto Valley Association is a non-profit association promoting the development of blockchain and cryptographic technologies.
Lugano was one of the first cities in Switzerland to accept Bitcoin for paying city taxes. The city administration announced in 2016 that it would accept Bitcoin payments up to 250 Swiss francs (~$275). In addition, the city of Zug has been dubbed “Crypto Valley” due to the high concentration of blockchain and cryptocurrency related companies.
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 up to four years.
In addition, Switzerland offers various residence visas, including the Swiss investor visa and the Swiss freelancer permit.
United Arab Emirates
The United Arab Emirates (UAE) is increasingly becoming a hub for cryptocurrency and blockchain technology, and its government has an active interest in promoting the use of these technologies. He is working on comprehensive regulations for cryptocurrencies, which are to be introduced soon.
Meanwhile, the country’s financial regulator, 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 operating in the crypto space.
The UAE has also launched several blockchain initiatives, including the Dubai Blockchain Strategy, which aims to make Dubai the world’s first blockchain-based government. The Emirates Blockchain Strategy 2021 aims to use blockchain technology to transform key sectors such as healthcare and transport.
The country is known for its tax-friendly policies, and the government is likely to impose significant taxes on cryptocurrency transactions soon. Just a week ago, Ras Al Khaimah, one of the seven emirates of the United Arab Emirates (UAE), 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 point of view, the UAE offers various visa options for individuals and companies, including the Dubai Startup Visa, which allows foreign entrepreneurs to set up a business in Dubai and stay for up to five years. Moreover, it offers various residency visas including UAE Investor Visa and UAE Freelance Work Permit.
Other crypto-friendly regions
Malta is a popular destination for cryptocurrency companies due to its favorable regulatory environment. The country has no tax on cryptocurrency capital gains and has created a regulatory framework for blockchain technology. The Malta Individual Investor Scheme offers citizenship to those who invest in the country.
Bermuda: Bermuda has no corporate income tax 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 people 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.
Finally, regions such as Malaysia, Puerto Rico and others are also on this list. While most countries around the world will tax cryptocurrencies with capital gains tax or income tax – there are still a few cryptocurrencies and countries that will pay lower crypto tax.
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