How is Crypto Taxed in Different Countries?

Crypto became a hot topic in the fourth industrial revolution, with heated debates and interest among financial institutions, regulators and central banks. Currently, digital assets are the gateway to escaping centralized finance systems; meanwhile, many countries are trying to impose strict regulations on digital assets to prevent them from becoming decentralized.

Major economists believe that without clear regulations and tax regimes, the crypto market and industry will continue to be a wild west. El Salvador and the Central African Republic have adopted Bitcoin as legal tender. Some countries, such as Japan and Switzerland, have introduced new regulations for crypto assets and their service providers. Some countries, like the US, UK, UAE, and European Union, are at the drafting stage.

United States

For federal tax purposes, crypto assets are treated as property. The US’s Internal Revenue Service (IRS) views crypto assets as capital assets, meaning the user has to pay taxes on any profits from selling them. The tax rate on crypto transactions involving staking and mining varies from 0-37% for income tax.

If the user holds a crypto asset for more than a year, the tax rate is comparatively lower, from 0-15% or even up to 20%. And the taxpayers can calculate their crypto assets by using LIFO (last in, first out) or FIFO (first in, first out).

There is no particular tax on cryptocurrency in the United Kingdom. Instead, that crypto will be subject to Income Tax or Capital Gains Tax. The user has to pay 10-20% tax on any crypto gains depending on the specific transactions the user makes with crypto. Unlike many other nations, the UK has no long-term or short-term Capital Gains Tax rate. The payable Capital Gains Tax rate is based on the earnings.

Canada

In Canada, digital currency isn’t treated like a fiat currency. The Canada Revenue Agency (CRA) views crypto as a property taxed either as Income Tax or Capital Gains Tax. The user has to pay 15-33% in terms of Income Tax. Earlier, the CRA announced that they would collaborate with local crypto exchanges to track users’ information.

Australia

In Australia, crypto investment is subject to Capital Gains Tax. If the user holds any crypto assets for one year before disposing of them, the customer will get a 50% discount on capital gains. Meanwhile, if any user trades or earns interest from crypto assets in the previous financial year, they must announce their crypto assets on their Income Tax Return.

Germany

Unlike many other countries, Germany has a unique approach to crypto taxation. In Germany, crypto is treated as a private asset rather than a commodity. The nation only taxes if the crypto was traded in the same year of purchase, and profits up to 600 euros are tax-free.

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other devices. Investing in or trading crypto assets comes with a risk of financial loss.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing