How do some token traders compliantly shelter their gains from the taxman? A common way is to move somewhere that doesn’t tax cryptocurrency gains.
Cryptocurrency Tax-Friendly Locale #1: Germany
Germany, like many western nations, doesn’t recognize cryptocurrencies as money, but instead as an asset property. As such, it’s not subject to the country’s VAT taxes. Moreover, Germany’s capital gain’s tax only applies to short-term trading. So people who hold onto tokens for over a year can avoid capital gains tax burdens. This strategy, however, only works for individuals, not businesses.
To become a tax resident of Germany, you must reside in the country for longer than six months. European Union citizens can just pick up and move to Germany. Citizens from other countries must first apply for residency and then go through the citizenship process.
Cryptocurrency Tax-Friendly Locale #2: Portugal
Portugal exempts personal gains derived from cryptocurrency trading from both VAT and income taxes. The operative word in that sentence is “personal.” Businesses must pay taxes on crypto-related gains.
People who own a house in Portugal or stay longer than 183 days qualify as tax residents. EU citizens only need a registration certificate to move to the country; everyone else must obtain a visa and then apply through the permanent residency program.
Ex-pats in Portugal are amongst the most content. The country is exceptionally affordable, it’s home to excellent co-working facilities, and work-cafés are top-notch.
Cryptocurrency Tax-Friendly Locale #3: Malta
In Malta, the government doesn’t tax long-held bonds nor cryptocurrencies. But the operative word here is “long-held.” Day traders in the country are subject to business income, so if you sell within a few days of buying, you will incur a tax burden.
EU, EEA, and Swiss citizens can move to Malta whenever they want. Everyone else must adhere to the Global Residence Program, which involves buying a property worth at least €275,000 or pay rent up to €9,600 euros a year. Plus, people in the program must spend a minimum tax of €15,000.
Cryptocurrency Tax-Friendly Locale #4: Malaysia
Malaysia doesn’t have capital gains taxes. As such, crypto transactions don’t carry a tax burden. (Note: International tax law murmurings suggest that Malaysia may add a capital gain’s requirement in coming years.) The local government treat individuals who stay in Malaysia for more than 182 days in a year as tax residents. People can establish permanent residency in five different ways, including buying in, being an expert, being a professional, marrying a Malaysian citizen, or meeting the immigration points system.
Cryptocurrency Tax-Friendly Locale #5: Belarus
Crypto mining and investment trading are not taxed in Belarus, and that won’t change until at least 2023 when lawmakers have vowed to revisit the issue. Tax residency is established by living in the country for longer than 183 days, but people looking to stay longer than 90 days must obtain a permit.
Be warned, though, that many people refer to Belarus as “Europe’s last dictatorship.” To give you an idea: The country has had the same president since 1994.
The Caveat
Here’s the rub. If you want to take advantage of lax cryptocurrency tax laws in other countries, you’ll have to give up your U.S. citizenship. U.S. citizens are taxed on worldwide income, regardless of where they live or trade. The only way to not pay U.S. tax on capital gains would be to expatriate or get rid of your U.S. citizenship.
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The Internal Revenue Service is on the prowl for cryptocurrency gains, and the Securities and Exchange Commission is on the hunt for blockchain businesses that are evading registration requirements. Our team of cryptocurrency attorneys helps individuals and companies on everything from token tax positioning to ICO formation. We’re an international firm that has worked with clients across the United States, Canada, Europe, Asia, and Europe.
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