As you all know, unlike fiat currencies, cryptocurrencies offer their users great freedom. Taxation is a major hindrance to this freedom. Many countries follow crypto-friendly policies in terms of taxation. They do not burden the users with hefty taxes for the crypto transactions.
On the other hand, several other countries are lying huge percentages of taxes for crypto transactions, making the decentralized finance sector unattractive and troublesome for users.
In this article, you will read about the method through which crypto taxes are imposed and collected and learn about the top 7 countries in the world with high crypto taxes.
More About Crypto Taxes
Cryptocurrency taxations are levied on transactions such as buying and selling and earning profit. You pay tax for the capital gain you make. When you receive cryptocurrencies as a business income, you have to pay taxes on this behalf. Cryptocurrency gains from mining or as rewards on the blockchain are taxed as ordinary income.
Here is a list of taxable events related to cryptocurrencies.
- Sale of a digital asset for any fiat currency
- Exchange or trade of a digital asset for property, goods, or services
- One digital item is being traded or exchanged for another
- Receipt of a digital asset as payment for goods or services
- Receipt of a digital asset as a result of a hard fork
- Receipt of a digital asset as a result of mining or staking activities
- Receipt of a digital asset through airdrop
- Any other financial transaction where a digital asset is involved
The 7 Countries Leading In High Crypto Taxes
In this section, you will read about the top 7 countries that levy heavy taxes for cryptocurrency transactions.
1. Japan
Japan is a country that levies the most amount of crypto taxes. Japan levies 15% to 55% tax for crypto transactions. Both casual traders and professional users come under the ambit of cryptocurrency taxes in Japan.
For professionals, the rate of tax depends on their total income and residency taxes. They will be charged a progressive income tax between 5% to 45% and an inhabitant tax of 10%. Businesses in Japan that transact using cryptocurrencies have to pay a corporate tax of 30%.
2. Belgium
Crypto users from Belgium are charged a 33% tax on their capital gains. Moreover, they have to pay an income tax ranging from 25% to 50%. The criteria used for taxing crypto mining and staking in Belgium are still unclear.
Taxes are mandatorily charged in cases such as investing more than 25% of movable assets, corporate investments, mining, and active trading.
3. Canada
Cryptocurrencies are considered as a property in Canada. They are taxed as either business income or as capital gains. If it is capital gain, then 50% of it would be considered taxable. In the case of cryptocurrency being business income, 100% of it is taxed. The taxes are levied by the Canada Revenue Agency (CRA). Canada levies up to 33% tax on its users.
However, several activities such as purchasing and holding crypto in exchange for fiat, accepting cryptocurrencies as gifts, moving crypto between the wallet you own, and cryptocurrencies created by a Decentralized Autonomous Organization (DAO) are exempt from taxes in Canada.
4. United States
The United States charges crypto taxes anywhere between 0% and 37%. In the US, short-term and long-term capital gains are taxed differently. Short-term capital gains are taxed between 0% and 20%, and long-term capital gains are taxed between 10% and 37%.
The taxable events involving a cryptocurrency in the US involve selling cryptocurrencies for fiat, exchanging one crypto for another, using crypto for buying goods and services, rewards earned through crypto mining and staking, tokens received through airdrop, and converting crypto to stablecoins.
5. United Kingdom
In the United Kingdom, you will be levied taxes ranging from 10% to 20% on profits made through capital gains. For income earned through cryptocurrency transactions, you need to pay an income tax ranging from 0% to 45%. Capital gain taxes are levied for various activities such as selling crypto for fiat, swapping, spending, or gifting crypto, and selling NFTs.
Income taxes on crypto are levied for transactions such as employee remuneration, mining, staking, lending, and liquidity mining rewards and bounties.
6. Spain
In Spain, cryptocurrencies are taxed as digital assets. They are subject to a capital gains tax anywhere between 19% and 28%. Spain uses the First In First Out (FIFO) method to calculate capital gains. The activity of crypto mining is taxed at a rate between 19% to 47%.
A wealth tax of 0.2% to 3% is levied based on the region where you trade the crypto. Cryptocurrencies received as an inheritance or a gift are taxable from 7% to 36.5%.
7. Denmark
Cryptocurrency investments are taxed in Denmark if you invest in crypto for speculative activities. Cryptocurrencies are considered personal income and are taxed up to 52% for purposes such as selling them against the Danish Krone, or for another cryptocurrency, spending crypto on goods and services, gaining from crypto airdrops, gains from mining and staking rewards, and getting paid in crypto.
Stablecoin transactions are considered capital income and are taxed at a rate of up to 42%. However, activities such as transferring cryptocurrencies between your wallets or donating crypto are not taxable.
The Bottom Line
The cryptocurrency taxes levied by each country is different in one way or the other. Some countries are crypto-friendly with negligible crypto taxes but other countries may tax upto 50% of various crypto transactions. You must form a clear idea about all these specialties of taxation and make decisions accordingly.
