Tax laws have been at the forefront of the crypto struggle for legitimacy. Governments do not want to legalize cryptocurrencies because there is no framework for taxing them. However, any revenue-generating economic activity must be taxed, and regulatory bodies have worked hard to include cryptocurrencies.
This article explored nations that have the best crypto tax laws on the globe.
Tax Laws are Only Positive If They Don’t Hurt Investors
In the past, the United States has moved to curb the growth of cryptocurrencies by imposing heavy taxes on the proceeds of crypto. Pushed under capital gains, crypto investors who cashed their profits were subject to hefty taxes of up to 50%. While this has been reduced, it is still significantly higher compared to other nations.
If you are in the United States in 2024, you will pay up to 37% tax on short-term capital gains and crypto income. If it’s long-term capital gains, you will part with anywhere between 0% to 20%. NFTs attract a 28% tax.
Coincub released a report on nations with the best crypto tax laws.
Switzerland – 0%
Switzerland is quite simply the crypto capital of the world. The nation’s city of Zurich accommodates over 750 crypto companies. Counting crypto firms in the entire country, the number exceeds 1120 companies. Switzerland has managed to maintain a non-hostile environment for the growth of crypto companies.
Recently, the nation has entered into the growing list of countries adopting CBDC. This was only a matter of time as the country’s laws are highly accommodating of anything crypt-related. The chairman of the Swiss central bank remarked that the CBDC being developed will be equivalent to real money.
El Salvador – 0%
El Salvador is one of the crypto safe havens and racked up a whole lot of news when it decided to make Bitcoin legal tender. That, therefore, meant that the nations would automatically become a crypto hub.
The government of El Salvador charges a 0% tax on long-term crypto gains (crypto held for longer than 1 year).
UAE – 0%
In some circles, you will find UAE listed as the best crypto tax law country – and it certainly has received a lot of media coverage. In May 2023, UAE and Hong Kong central banks collaborated to establish crypto regulations that will facilitate cross-border trade between the two nations.
Moreover, the UAE has been working on their own CBDC program. The first phase of the program would be to launch a digital dirham around May 2024. The two nations also collaborated to build mBridge, a blockchain that supports multiple CBDCs for cross-border payments.
The Bahamas – 0%
The Bahamas has been hospitable to several crypto firms including Binance. In September 2021, the fallen giant, FTX, saw fit to relocate from Hong Kong to the Bahamas because it was (and still is) Bitcoin-friendly.
The nation of Bahamas is one of the few places on the globe with a comprehensive framework for handling crypto. In a Digital Assets and Registered Exchanges (DARE) Bill passed in late 2020, Bahamas extended licensing to crypto and other Fintech firms. It is this bill that later enabled the country to amicably handle the FTX drama.
Bulgaria – 10%
Bulgaria came into the limelight with respect to crypto when the Nexo scandal broke out. The crypto lender was headquartered in Sofia, Bulgaria. Following the drama that ensued, the state of crypto regulations in the country was closely scrutinized.
The country did not handle the Nexo situation well, compared to FTX and the Bahamas. While having a crypto tax rate of 10%, Bulgaria still ranks lower in the list of nations with crypto-friendly laws.
Hong Kong – 16.5%
Hong Kong’s situation is exceptional. The region is only recovering from a crypto ban and they have managed to reduce tax rates to less than 20%. Compared to the United States which is charging 37%, it is a great improvement.
Recently, due to the onslaught of lawsuits filed against crypto companies by the SEC, big crypto companies have begun fleeing toward the East. One of the latest companies to start migrating is Huobi. The tier-1 crypto exchange opened a trading service in Hong Kong in June 2023 and is now working in partnership with the Hong Kong Virtual Assets Consortium (HKVAC).
As mentioned above, Hong Kong has formed deep ties with the UAE (which is quite high in this crypto tax-friendly countries list). It is therefore expected that with time, Hong Kong will drop its relatively high tax rates to accommodate crypto adoption.
Brazil – 22.5%
While this percentage is high, Brazil is one of the core nations forming the BRICS alliance. Recently, the alliance signalled their support for cryptocurrencies by hinting they might consider BTC as a currency.
Therefore, even though the rates are high right now, in the future it could go way low – perhaps even to zero.
Final Thoughts
Crypto tax is a pain point for many crypto companies and this list is not entirely the best in terms of the amount of taxes charged, but in terms of regulatory approval of cryptocurrencies. Although China banned crypto together and South Africa is charging a 45% crypto tax, these nations have the best chances of promoting crypto adoption in their respective continents.