If investing and trading cryptocurrency was your first experience with leveraging your personal money to turn a profit, then you may not have known you may have incurred a tax liability with your gains. What a way to kill the intoxicating afterglow of a big win! Death and taxes, the two guarantees in life.
If you were in the United States, then you definitely owed taxes on your earnings. There are two different types of taxes that you could have owed. They are either long-term capital gains or short-term capital gains. Long-term capital gains taxes are more favorable. The difference between the two is the following:
Short-term Capital Gains
You invested your money into something and then only held your investment under a year and sold it for a profit. So let’s say you bought a Bitcoin on January 1, 2017, and then sold it on December 31st, 2017 and your net profit (Final value of investment-initial cost of investment) was $100.00. You would be liable for your regular income tax bracket, so it could be anywhere from 25-39% depending on your income that year.
Long-term Capital Gains
Let’s go back to the example of you buying a Bitcoin on January 1st, 2017, but you sold it on January 2nd, 2018. You made a net profit of $100.00 you would be liable for 15-20% capital gains tax on this earning. It’s interesting that waiting two days basically cuts your tax liability in half! So this is an advantage to being a “Hodler” in the United States.
But wouldn’t it be great to live in a place where you didn’t have ANY taxes on your gains from Bitcoin and altcoins?
Are there any countries in the world where Bitcoin/altcoins that don’t have capital gains tax?
In Germany, Bitcoin and other cryptos are not considered a commodity, a stock, or any form of money.
Trading bitcoins/altcoins are considered as a private sale under the rule 23 EStG which has tax-free benefits.
EStG states anyone trading bitcoins/altcoins are tax exempt if their capital gains are not more than 600 EUR. Also, if a trader is selling his/her Bitcoin/altcoins after one year or more, then those capital gains are also tax exempt.
Denmark is one of the most Bitcoin/crypto friendly countries in the world.
Bitcoin/altcoin capital gains are tax exempt under Danish law. This policy is unique to cryptocurrencies because they want to be the world’s first cashless economy.
Bitcoin isn’t classified as either currency or a commodity in Singapore.
Private investors are not subject to capital gains tax with cryptocurrency gains, but businesses are subject to capital gains tax.
In December 2017, Alexander Lukashenko legalized cryptocurrencies in Belarus.
He also stated that cryptocurrency mining, trading and capital gains on cryptocurrencies & ICOs would be tax-free until January 1, 2023.
Currently, these are the only countries that officially have Bitcoin/altcoin capital gains tax exemption policies.
Here are some countries that are “unofficially” Bitcoin tax havens because they don’t have capital gains tax on any investment earnings.
● Hong Kong
● New Zealand
If you are from one of the countries mentioned above, then enjoy the tax-exempt status. If you don’t live in one of these countries, then you might want to move to one if you’re making a lot of money on cryptocurrency.