The topic of crypto taxation is gaining prominence in discussions all over the globe. Only a small number of countries still have not passed a law regulating the virtual currency.
Although most countries have implemented a tax on cryptocurrencies, some have managed to stand out unfavourably despite their blockchain-friendly reputation.
This is due to the fact that residents of those nations are subject to ludicrously high taxes on any profits made from cryptocurrency trading.
The 6 countries with higher crypto taxation
Here is a look at the countries with the higher crypto taxation:
1. United States
The Internal Revenue Service (IRS) in the United States classifies cryptocurrency as property rather than currency for tax purposes.
Therefore, your virtual currency is subject to taxation in the same way that stocks, gold, and other assets are. Cryptocurrency transactions include exchanging one cryptocurrency for another, selling cryptocurrency for cash, paying for goods and services with cryptocurrency, being paid in cryptocurrency by an employer, and receiving cryptocurrency as a reward.
However, there will be no tax liability associated with the purchase and storage of cryptocurrency, the exchange of cryptocurrency between wallets, or the donation of cryptocurrency to a tax-exempt charity. Transactions involving cryptocurrencies in the United States reportedly incur a tax of 10% to 20% from the Internal Revenue Service.
In the Netherlands, cryptocurrency gains are exempt from taxation. Instead, cryptocurrency is treated as an asset for tax purposes. If your total assets (crypto and fiat) are worth more than 50,000 EUR, you will be required to pay a net worth tax of 31%.
Government assumes a fixed percentage rate of return on assets for purposes of calculating the net worth tax. No consideration should be given to actual earnings. In contrast, jurisdictions that recognize cryptocurrency as a form of property do not do this. Only when an asset is sold or bought can its gain or loss be calculated in these jurisdictions.
The value used to calculate a person’s tax liability begins fresh every January 1th. That is to say, the presumed output on the asset value from the previous tax year is subject to the wealth tax.
3. United Kingdom
To put it simply, cryptocurrency is in the UK a form of investment property in the United Kingdom. Thus, the capital gains tax rates apply to the disposal of cryptocurrency, which includes the sale of tokens for fiat currency, the exchange of tokens for tokens of a different type, the payment of goods and services with tokens, and the gifting of tokens to another person (except in the case of a spouse or civil partner).
In the United Kingdom, crypto holders must pay taxes on all such sales of cryptocurrency. Capital gains tax on cryptocurrency in the United Kingdom is 20% for those paying at the higher or additional rates and 10% for those paying at the standard rate. Your tax liability depends on your adjusted gross income, the amount of your gain, and any deductions.
Other cryptocurrencies and Bitcoin are neither considered money nor recognized as foreign currency by the Australian government. The ATO instead considers crypto to be property, and thus an asset subject to CGT. Coins, tokens, NFTs, and stablecoins all fall under this category. The maximum tax rate is 50% on long-term capital gains of more than twelve months.
Canada views cryptocurrencies as digital assets, and while buying or holding them does not incur tax, selling them does.
Capital gains from the sale or gift of cryptocurrency, from trading or exchanging cryptocurrency (including the sale of one cryptocurrency to obtain another cryptocurrency), from changing cryptocurrency to government-issued monetary system (such as Canadian dollars), and from using cryptocurrency to purchase goods and services must generally be included in annual taxable income. However, Canada only taxes half of the capital gains.
Indian Finance Minister delivered a major blow to the cryptocurrency industry on February 1st, 2022, as part of her annual Budget speech. The transfer of digital assets (crypto) will be subject to a 30% tax rate and a TDS on payments made in relation to the exchange of virtual digital assets at the rate of 1 percent of such deliberation above a monetary threshold, according to the Budget 2022 announcement.
That’s not all, either. The recipient of such a gift is subject to taxation on the asset’s value, and the loss incurred in making such a transfer cannot be deducted from other income. In addition, other than the cost of acquisition, no deductions may be made when determining such income.
The entire cryptocurrency industry has been eagerly awaiting the new Regulation of Official Digital Currency Bill, which will shed light on the otherwise murky future of cryptocurrency in India. The Reserve Bank of India (RBI) has publicly stated its opposition to cryptocurrency on multiple occasions, adding further uncertainty to the situation.
Read also: 10 crypto tax-free countries