TL;DR
Crypto holders and traders have a few certainties in life: their net worth is never the same from one day to the next. Another one is that the taxman knows where you live. But wait, what if you move? Indeed, there are huge differences between the way different countries tax crypto. A crucial component is how they deal with capital gains. Let’s have a look at the best countries for crypto taxes.
I’ll zoom in from a broad perspective. So let’s start with the question which countries, in general, are considered good home bases for asset holders? And then I’ll zoom in on crypto tax environments.
Capital Gains Tax in the US
As many readers of this piece are from the US, I’ll first talk a bit about that first. The United States is one of the few countries that taxes its citizens on worldwide income, regardless of where they live. This includes capital gains tax.
So, if you’re a US citizen, moving abroad won’t release you from the taxman (there are exceptions: US citizens can exclude part of their overseas earned income from taxation if they meet a physical presence test in the foreign country and paid taxes there).
What is Capital Gains Tax?
Capital gains tax, like people in the US and many other countries pay – is a type of tax on the profits earned from the sale of assets such as stocks, real estate, or a business.
In the United States, for example, if you’ve realized a profit on an investment in a taxable account, then you’ve earned a capital gain and you’ll have to pay tax on it. For example, if you buy 1000 dollars of Tesla stock in May and sell it in October for $1500, you’ll have to pay a percentage of your $500 gain to the IRS. If you’re in the 22 percent tax bracket, you must pay the IRS $110 of your $500 capital gains.
Short-Term and Long-Term Capital Gains Tax
The above example assumes you bought and sold within 12 months. But there’s a nuance. Capital gains taxes in the US are divided into two big groups, short-term and long-term, depending on how long you’ve held the asset.
- Short-term capital gains tax is a tax applied to profits from selling an asset you’ve held for less than a year. Short-term capital gains percentages are equal to the percentages of your income, such as wages.
- Long-term capital gains tax in the US applies to assets held for more than a year. The long-term capital gains tax rates are 0%, 15%, and 20%, depending on your income.
Let’s continue the example. If you hold on to the Tesla stock until the following December and then sell – let’s say for $1700, it qualifies as a long-term capital gain. So what is the capital gains tax percentage you have to pay? If your total yearly income is $50,000, then you’ll fall in the 15% bracket for that long-term capital gain. Instead of paying $110, you’ll pay 0.15 x 700 = $105 – a lower tax on a higher gain.
Crypto assets in the US fall under this capital gains tax regime. If you sell your BTC, ETH or PEPE for a profit, you will pay capital gains taxes.
Capital Gains Tax Regimes per Country
A country could ‘favor’ a certain asset class over another, tax-wise. Some countries may have favorable tax treatment for specific types of income, such as long-term capital gains. The tax treatment of real estate investment gains, including…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
