SLOVENIA – December 27, 2018: Bitcoin tax photo
With tax season having finished, many people know that most tax agencies expect tax of some kind to be paid on cryptocurrencies — and that tax agencies are actively looking for those who are evading taxes. There are however, a few countries where cryptocurrencies are not taxed under some or all circumstances, notably for those who buy, hold and sell cryptocurrencies — where it is completely legal and state-sanctioned not to pay taxes on cryptocurrency investment gains.
Here’s a list of these jurisdictions, along with travel and residency conditions for them, and a bit of a proxy of how livable they are through NomadScore. Gaining tax residency in one jurisdiction often means you are not subjected to taxes in another residency, except for countries like the United States where you are taxed by citizenship and your worldwide income is liable. None of this should be taken as legal or accounting advice — merely information on where the most tax-favorable treatment of individual cryptocurrency investment might lie.
Germany has exempted bitcoin transactions from VAT and while it stipulates that bitcoin is not a currency, the capital gains exemption on assets held for more than one year kicks in on bitcoin: meaning that if you’ve held your bitcoin for one year (and assumably other cryptocurrencies), you are not taxed from an income standpoint (since it’s not money) and the gains that accrue are not taxed from a capital gains standpoint due to the exemption. Businesses, however, still need to pay taxes on gains deriving from bitcoin through corporate income taxes.
Tax Residency: For residency purposes, if you’re an EU citizen, you’re free to move to Germany and take up residence. Non-Europeans can take up residence and apply for a residence permit if they come from certain countries (like the United States or Canada). Tax residency in Germany is dependent on whether or not there is a residence in Germany, and whether that person has physically stayed longer than 6 months. In cases where there is dueling residency between two countries, tax residency in Germany is determined by “the contracting state in which the employee has a centre of vital (personal and economical) interests.”
Score: The capital of Germany, Berlin, boasts a high 4.42 NomadScore with fast internet, safety, the great nightlife, freedom of speech, English-speaking, LGBT-friendly components helping to boost that score.
Businesses based in Singapore that buy and sell virtual currencies in the course of their business will be taxed on the profits as if they were income. However, businesses and individuals who hold cryptocurrencies for long-term investment purposes are not taxed in Singapore as there is no capital gains tax in Singapore itself.
Tax Residency: In Singapore, corporate tax residency is determined by where the business is operated from, while individuals are considered a tax resident of Singapore if they spend more than 183 days in the country. Singapore offers entry visas and permits for foreign entrepreneurs that make it relatively easy for qualified applicants to establish residence in Singapore.
Score: Singapore offers a solid 3.47 NomadScore — there are concerns about cost and freedom of speech, but the internet is super fast and the city itself is super safe with great walkability.
Cryptocurrency is exempt from VAT tax and from personal income taxes in Portugal, though businesses need to pay taxes on any profits from cryptocurrency gains. Guidance on this was released as recently as 2018.
Tax Residency: You are considered a Portuguese tax resident if you own a house in Portugal or if you stay in the country for more than 183 days. EU citizens can move to Portugal but need a registration certificate to stay longer than three months. All other citizens must have the right visa then start the process for permanent residence.
Score: Lisbon, the capital of Portugal, has a reasonably high 3.87 NomadScore, brought up by its affordability, great walkability and traffic safety, and great co-working/cafes to work out of.
Just like with taxes on long-held bonds in Malta, long-held cryptocurrencies are not taxed. However, if you make cryptocurrency trades within a day, it’s considered similar to day trading in stocks or currency pairs, and taxed as business income.
Tax Residency: Tax residency is determined by regular residency: EU/EEA/Swiss citizens are allowed to freely move to Malta, but non-EU/EEA/Swiss citizens will have to take advantage of the Global Residence Programme and buy property worth at least 275000 Euros, or pay rent up to 9,600 Euros a year. Be aware that there is a minimum tax for those on the Global Residence Programme of 15,000 Euros.
Score: The city of Sliema in Malta boasts an average 2.63 NomadScore, dragged down by its high priciness and okay hospitals and nightlife, but boosted by its fast Internet, good walkability and safety.
Similar to neighboring Singapore, there are no capital gains tax in Malaysia. The latest 2019 budget had no proposal for one either, though there are rumors that may change in future budgets. For now, though, cryptocurrencies and their transactions are tax-free in Malaysia.
Tax Residency: Generally, an individual who stays in Malaysia for more than 182 days is considered a tax resident. There are five categories for establishing permanent residency in Malaysia, ranging from high net worth individuals with a minimum of $2m USD in a Malaysian bank account to experts and professionals.
Score: Kuala Lumpur, the capital of Malaysia, has a healthy 3.59 NomadScore as an affordable city with great places to work with (but only okay nightlife, and few startups).
By March 2018, a new law legalized cryptocurrency activities in Belarus and made them exempt from different taxes. Cryptocurrency mining and cryptocurrency investment are considered personal investments and are exempt from taxes until at least 2023 under this new law.
Tax Residency: Individuals are treated as tax residents if they stay in Belarus more than 183 days in a year or critically, if an individual does not have tax residence anywhere else, they are also considered a tax resident if they have a residence permit in Belarus or if they are Belarusian citizens no matter where they reside. A residence permit must be obtained to live in Belarus for more than 90 days if you are not a Belarusian citizen.
Score: Minsk has a solid 3.66 NomadScore with affordable cost of living, great places to work, and a friendly atmosphere to foreigners.
Switzerland is known for being a crypto-friendly jurisdiction, with Crypto Valley, the Ethereum Foundation and now the Libra Association all being headquartered there. The tax treatment of cryptocurrencies is interesting, with mining income typically declared as self-employment income (and taxed through income tax). The professional trading of cryptocurrencies is subject to business tax, depending on whether or not somebody is qualified as a professional trader. If you receive cryptocurrency as wage income, that will still need to be declared as income tax.
However, if you are qualified as somebody who invests and trades for their individual account, cryptocurrency gains are treated as tax-exempt capital gains.
Note that Switzerland has canton taxes that differ based on what region of Switzerland you’re in, and that the annual wealth tax it levies includes taxes on your total amount of cryptocurrencies along with the rest of your net worth.
Tax Residency: Swiss tax residents are taxed on worldwide wealth and income. Swiss tax residency is established by somebody deciding to establish their home in Switzerland, or staying in Switzerland for at least 30 days while looking to work or at least 90 days in a row without looking for work. There are different residence permit categories and requirements for EU and non-EU citizens.
Score: Zurich has a 3.06 NomadScore, brought down by a very expensive cost of living, but brought up by great factors otherwise, from safety to places to work from, to freedom of speech.