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Key Takeaways
- Portugal are introducing a 28% capital gains tax on cryptocurrency
- El Salvador remain the top tax destination for crypto investors
- Cayman Islands’ lax tax laws extend to crypto, placing it behind El Salvador as next best destination
- Seven of top twelve countries are European, as nations push to establish themselves as crypto hubs – including Slovenia, Malta, Georgia, Belarus and Germany
- Bitcoin is de facto legal tender in Madeira, Portugal and Lugano, Switzerland
- Asian countries of Malaysia and Singapore also have friendly tax laws for digital assets
Introduction
about the introduction of a 28% capital gains tax on cryptocurrency, slated for 2023, and how that could jeopardise Portugal’s goal to become European crypto hub.
talked to Paolo Ardoino, who dialled in from the Swiss city of Lugano where Tether and are de facto legal tender, I began to wonder which nations were top of the ranks with regards to cryptocurrency-friendly jurisdictions.
In the first part of what may turn into a series, I am looking at tax. Which countries are the world’s most lax when it comes to crypto tax laws?
Splitting the assessment into three broad areas – short term capital gains tax, long term capital gains tax and income tax – we put together a table outlining the most tax friendly nations.
Of course, this comes with the massive caveat that tax is complicated and many loopholes, extra catches and other idiosyncrasies exist with these laws. But on a holistic basis, the below ranks are indicative of where you may see tax-hating crypto peeps head to in future.
El Salvador is the biggest crypto tax haven
Surprise, surprise. El Salvador is really above and beyond when it comes to everything crypto, and this extends to tax.
There is zero capitals gains tax, either short term or long term, and pretty much every law is built around encouraging crypto adoption. Having visited there myself this summer, I saw in person the mass push towards cryptocurrency. Notably, all the laws extend to foreign investors.
Legal advisor to President Bukele, Javier Argueta, made it clear when he said “if a person has assets in Bitcoin and makes high profits, there will be no tax…there will be no taxes to pay on either the capital increase or the income”.
Adding that “this is done obviously to encourage foreign investment”, it’s all aboard the Bitcoin experiment in the small and beautiful (volcanoes!) Latin American nation.
Cayman Islands come second
Mention Cayman Islands to someone, and the first response you get is likely to be “tax”.
The British Overseas Territory, nestled in Caribbean paradise, has zero corporate tax, capital gains tax or income tax – in all areas. Therefore it is nothing specific to crypto, but these laws have been confirmed as including digital assets.
Relying mainly on tourism to fund its small economy, the island of 65,000 people may well see some crypto investors don their swimsuits soon for a bath in the Caribbean Sea.
Europe making push for crypto
Lugano, a city in Switzerland, and Madeira, a Portugese island, have declared Bitcoin as de facto legal tender (Tender has the same status in Lugano – I interviewed Paolo Ardoino on this back in March).
Both these nations also feature friendly tax laws. Portugal was discussed above, and while the 28% capital gains tax law bumps it down the list to sixth, it still presents a refuge for crypto enthusiasts.
Switzerland places eighth, but it is fellow Europeans Slovenia who perhaps surprise in third. The nation is aiming to adopt a 10% flat tax for exchanging crypto for fiat. This is quite low on the grand scheme of things.
But it boasts many more initiatives and its plans for the future appear welcoming. On a non-trax related note, there is also more physical locations accepting Bitcoin than in the entire US, while the nation’s biggest shopping centre is named “BTC”.
The other European nation worth mentioning is Belarus, where there is no tax on mining, day trading or pretty much anything crypto-related. The caveat is that it is all coming up for review in 2023. Obviously, there are other concerns here too, with its ties to Russia amid the Ukraine war meaning no crypto investors will want to be relocating there anytime soon.
This all could change
Of course, this all could change – as we are seeing with Portugal.
Regulation is still catching up with crypto, and this ties into tax, too. Not only that, but many caveats and exceptions exist to the above laws, and the regulations also change around foreign investors.
Thus far, however, the above nations have separated themselves from the crowd when it comes to crypto tax laws.
