In many countries around the world, the taxman is pushing for either the implementation or stricter enforcement of a Bitcoin tax. As the old saying goes, only two things are certain in life: death and taxes. While the more than 375 reports of Bitcoin’s death have all proven to be grossly exaggerated, it seems there’s no evading that grimmest of all reapers, the taxman… Or is there?
In our recent news summary for August, we covered how the Internal Revenue Service in the United States and Her Majesty’s Revenue & Customs in the United Kingdom are both gunning for crypto users. Such moves are only the start; tax agencies may not be able to track transactions over the blockchain but they can easily monitor any centralized service where fiat and crypto are traded.
As regulated crypto exchanges have no legal choice but to comply with their national tax agency, they can be expected to surrender all customer information and trading information when so ordered. This means that there’s no effective way to evade taxation while enjoying the convenience of centralized exchanges.
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For those looking to avoid crypto tax, there are only two options: use decentralized exchanges exclusively and guard your financial privacy jealously, or move to a jurisdiction without any Bitcoin tax! The first option involves a great deal of inconvenience and precludes one from all kinds of activities, like crypto trading or running any kind of legitimate crypto business. Places without crypto regulation tend to also be weak on the rule of law, respect for property rights, and essential infrastructure and services.
For someone who wants to both conduct crypto business and comply with the law, the best option is to relocate to a region with a permissive crypto taxation regime; a so-called Bitcoin tax haven. As an added incentive, many of the nations with a friendly approach to Bitcoin taxes also boast excellent climates, beautiful environments, and high standards of living.
Here are some destinations which we consider to be excellent Bitcoin tax havens…
Malta is a small island south of Sicily which is home to about half a million people Given Malta’s small size of about 195 square miles / 315 square kilometers, Malta has an extremely high population density. Malta is very prosperous and advanced, being ranked 29th in the world by HDI (Human Development Index).
Malta is part of the European Union and uses the Euro as currency. Maltese are generally very prosperous; the country has an average per capita GDP (Gross Domestic Product) of $48,286. This is exceeded by only the wealthiest countries in the world:
Malta has a long and illustrious history as an important trading and military port. The country also contains many important religious sites and is known as a popular tourist destination, owing to its warm Mediterranean climate, lively culture, unique architecture, and historical significance.
Malta has adopted some very favorable policies regarding Bitcoin and cryptocurrency; so favorable in fact that the world’s largest crypto-only exchange by volume rebased to Malta following China banned bank access to crypto exchanges. Several other major crypto firms are also headquartered in Malta. Malta’s favorable and clearly-formulated regulations for crypto, designed to attract investment to its shores, have led to the country being dubbed “The Blockchain Island.”
As for the Bitcoin tax in Malta, according to the “Welcome Center Malta” national info site, cryptocurrency is untaxed under existing VAT (Value Added Tax) or capital gains tax regimes. Cryptos may be traded for fiat or one another without incurring tax, however goods or services traded for crypto incur VAT. Profitable crypto trading or even mining (Malta has low electricity costs by EU standards) is considered income, however, and so taxed under the country’s income tax laws at 35%. Income generated outside the country is not taxed unless remitted to Malta, whereupon it’s taxed at 15%. Capital gains realized outside Malta are not taxed.
Malta is not a cheap place to live or relocate to, but it does have a fast-track, 4 month residency by investment program, which includes visa-free access to European countries. This program does impose a minimum annual tax of €15,000 and requires either a property purchase of €275,000 or an annual rental of €9,600.
In summary, Malta’s low taxes, clear rules, and fast internet make it a great base of operations for wealthy Bitcoiners.
While there are many islands known for being Bitcoin tax havens, including Malta, Gibraltar, Seychelles, and the Bahamas, the island life is not for everyone!
One of the premier Bitcoin tax havens on the European mainland is undoubtedly Portugal. Whereas Germany, Switzerland, and the tiny nation of Lichtenstein all have a progressive regulatory and lenient taxation approach to cryptocurrency, at the end of August, Portugal waived all tax on crypto trading and transacting.
Under the new rules, all crypto transactions and the exchange of crypto for fiat or another form of crypto are exempt from VAT. Transactions involving the exchange of goods or services for crypto will still attract VAT as with regular fiat sales however. Notable for traders, Portugal will apply no income tax on the exchange of crypto for fiat or for fiat.
This income tax exemption makes Portugal’s crypto tax laws some of the most lenient on the books. Not only are income tax laws a large expense for crypto traders, they’re also extremely difficult to comply with, given complexity of crypto trading, with its rapidly-changing prices, often frequent trading and multiple special considerations outside the laws governing Forex or stock trading. The lifting of this compliance burden may be worth more to traders than the money saved!
Portugal has a high standard of living, being ranked 41st by HDI, with a temperate climate. There are about 10.5 million Portuguese citizens spread over 92,212 km2 / 36,603 miles2, giving the country a fairly low population density. Indeed, Portugal is enacting various favorable taxation and regulatory policies to counter its declining and aging population. To this end, Portugal operates a so-called Golden Visa program, which grants permanent residency and citizenship to anyone who invests €500,000 into Portuguese real estate.
It goes without saying that Portugal has advanced infrastructure and a fascinating history. It also has several idyllic island archipelagos as part of its territory, including Madeira and the Azores.
Portugal is part of the EU and uses the Euro. It is a moderately prosperous country, with an average GDP per capita of $33,166. It must be said that Portugal’s economy is not the strongest in Europe and required a bailout in 2011. Like many Southern European countries, its state is deeply indebted.
Portugal’s new crypto tax laws, combined with its relatively low property, living and residency program costs, make it one of the best emigration/residency destinations in Western Europe for crypto trading or business, particularly for ones on a budget.
While the majority of Bitcoin tax havens are either European or islands scattered around the globe, the East has some strong options too. Japan is a strong contender, with an established and healthy crypto economy, which includes high levels of adoption and banking / corporate integration. However, while Japan has a clear regulatory framework for crypto and no special crypto taxes, the country’s relatively steep income taxes (for anyone earning a medium to high salary) certainly apply to crypto.
Malaysia is a more compelling option for those looking to avoid Bitcoin taxes. As with nearby Singapore, another potential Bitcoin tax haven, the country has no capital gains tax and no plans to implement one in the near term. Furthermore, crypto trades – whether for fiat or another crypto – are untaxed in Malaysia. This may change should Bitcoin become recognized as legal tender in Malaysia.
In 2014, a Malaysian tax expert opined that goods and services exchanged for crypto are likely to go untaxed in practice, due to the difficulty of enforcement. This situation should not be taken for granted, particularly as Malaysian crypto regulations are tightening, as evidenced by the country’s fairly new licensing requirements for crypto exchanges.
Malaysia’s economy has expanded rapidly in the past half-century, growing at over 6% over that period. The country’s 32 million citizens are spread across 330,800 km2 / 127,000 miles2 , making for low population density. The country is wealthy, with average per capita GDP around $32,501, tying the country with Portugal for 41st place. Malaysia uses the Ringgit as currency.
Malaysia’s territory is spread across multiple islands, offering a range of tropical environments that attracts eco-tourism. Malaysia has a rich and diverse culture, with an ethnic makeup of Malay, Chinese, and Indian populations.