How are cryptocurrencies taxed across the globe?
With rising crypto adoption, understanding cryptocurrency taxation globally is becoming increasingly important. Whether you're a casual crypto investor or an experienced techie looking to expand your trading horizons, taxes can be confusing and hard to figure out - especially in cryptocurrency investing. Navigating crypto taxation can be daunting with different laws across multiple countries. In this blog post, we will break down the complex landscape of global crypto taxation so that you can make informed decisions on structuring your investments while staying compliant and saving up on taxes!
Anything from selling crypto for fiat, trading one token for another, using crypto to pay for real-world assets, to earning compensation in crypto is subject to taxation by the U.K. government.
Capital gains from cryptocurrency that exceed the £12,300 tax-free threshold will be taxed at 10% or 20%. You'll pay tax on any cryptocurrency income that exceeds your limit, which ranges from 20% to 45%. The actual amount you'll pay is determined by the transaction, the applicable tax, and the Income Tax band you fall into.
But, you will not always have to pay tax on cryptocurrency in the UK. Tax-free transactions include the following:
- Purchasing cryptocurrency using GBP.
- Investing in cryptocurrency.
- Moving cryptocurrency between your own wallets.
- Donating cryptocurrency to charity.
- Gift cryptocurrency to your spouse.
In the United States, cryptocurrency transactions are subject to taxes as other property-related transactions. So, if you
- sell cryptocurrency for fiat currency (USD, GBP, etc.),
- receive cryptocurrency from an airdrop,
- mine cryptocurrency, or
- stake cryptocurrency
It will be taxed according to U.S. law. Generally, it's a 37% tax on short-term capital gains for assets held for less than a year. A lower tax rate between 0% to 20% is levied on long-term capital gains for assets held for more than a year.
Italy is one of the few countries that has actively taken steps to regulate crypto trading, viewing it as a financial instrument and applying capital gains taxes. Those with a cryptocurrency portfolio exceeding 2000 Euros are subject to Italy's standard 26% tax rate on capital gains. Even simple activities like exchanging one token for another, selling crypto for fiat currency or using crypto to pay for real-world assets all incur taxation in Italy.
Under German law, any small transactions, such as those involving the sale of cryptocurrency under 600 Euros, are exempt from taxation. That means if you purchase 50 euros worth of Bitcoin and then sell it in the future at around 150 euros after a few months, Germany won't be taking any taxes out of these profits! Additionally, holding cryptocurrencies for over a year doesn't incur any tax liability on your earnings, regardless of how much the market value increases.
The Indian government has categorized digital assets under virtual digital assets, including cryptocurrencies such as Bitcoin, Ethereum and Non-Fungible Tokens (NFTs). At the same time, India has also levied income tax (at 30%) on transfers of these virtual digital assets.
Due to the absence of a Capital Gains Tax, Singapore is becoming an increasingly attractive destination for crypto exchanges like KuCoin and Phemex. This means investors and businesses won't have to pay taxes when they sell their cryptocurrency, making Singapore a crypto tax haven. Also, Singapore regards cryptocurrencies as intangible property, meaning cryptocurrency payments are treated as barter trades, allowing you to avoid paying additional Goods and Services Tax (GST).
Taxes may not be pleasant. Taxing cryptocurrencies does establish that cryptocurrencies are getting recognised by governments and are no more “illegal” or “shady” investments. As many experts believe, regulations are key to making crypto sustainable. Scallop uses regulations and compliances in its ecosystem and products with the same objective, preparing it for the long haul in the crypto space.
Last modified 6mo ago