Cryptocurrencies are digital assets that theoretically work in a decentralized system independent of traditional financial institutions. However, since cryptocurrency’s popularity has skyrocketed over the years, many government agencies, including the US Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), and the European Union, have modified their regulations to end money laundering and other illicit usage of crypto assets.
Today, most jurisdictions around the world consider cryptocurrency as a digital commodity, or security, and impose taxes similar to traditional markets. However, some countries allow you to cash out crypto possessions without paying taxes. In this article, we will explore the top crypto tax-free countries in the world.
What Crypto Transactions Are Taxable in the US?
The Internal Revenue Services (IRS) consider all assets recorded on blockchains as “digital assets”. All assets that show the characteristics of a digital currency such as non-fungible tokens (NFTs), cryptocurrencies, and stablecoins are treated as digital assets for federal income tax purposes.
However, not all cryptocurrency transactions are taxable. There are some exceptions similar to traditional traditional assets and currencies. Crypto transactions that come under the below categories are usually non-taxable:
- Buying cryptocurrency with fiat money
- Transferring assets between your wallets
- Gifting cryptocurrencies (may trigger the IRS in case of large transactions)
- Donating to charity (an actual tax-deductible)
Below are the kinds of cryptocurrency transactions that are taxable in the United States:
- Cashing out (selling crypto for cash)
- Paying with cryptocurrencies
- Receiving mining, staking, or airdrop rewards
- Trading a cryptocurrency for another
- Receiving crypto payments
- Gaining interest or yield from crypto platforms
According to your capital crypto gains, and household status, the tax rates can vary from 10% to 37%.
List of Crypto Tax-Free Countries
In 2024, most countries around the world apply tax on cryptocurrencies. However, if you look deep you can still find some countries that either impose low or no tax for crypto. Here is a list of top crypto tax-free countries that you should know about:
1. El Salvador
El Salvador is a quaint country situated in Central America. The country is known for being the early adopter of Bitcoin as a legal tender. El Salvador became a tax haven for crypto investors when they eliminated all taxes associated with “technological innovation” including income tax, property tax, and capital gains tax. As cryptocurrencies are considered a technological innovation, crypto investors can also enjoy the same benefits.
El Salvador believes that the favorable regulations towards these massive assets such as cryptocurrencies, and NFTs, can potentially open up new employment, business, and investment opportunities in the country.
2. Germany
Germany is not a “crypto tax-free country”, technically. However, the country has taken remarkably crypto investor-friendly regulations, that create a lot of roundabouts for avoiding crypto taxes. Some of the investor-friendly regulations in Germany include income tax and capital gains tax relief for any crypto held for more than 12 months, and tax exclusion for short-term investments of €600 or less.
So, if you are familiar with the crypto tax regulations in Germany, you can definitely find ways to avoid tax at the time of cashing out.
3. Bermuda
Bermuda is a British overseas territory in the western North Atlantic Ocean. It is a popular tourist destination famous for pink beaches, Historic St. George Town, snorkeling, scuba diving activities, and many more. However, Bermuda has become a popular destination for investors for another reason.
Bermuda does not impose any capital gains or income tax of any kind. But, before packing your bags and relocating to Bermuda, you should know that the cost of living in this tax paradise on earth is really high.
4. Belarus
Belarus is a land-locked country in Eastern Europe that shares its borders with Russia, Ukraine, Lithuania, and Latvia. Belarus is a country known best for its clean and fresh air. Crypto investors in Belarus can also take deep breaths of relief because the country has exempted individuals and entities from crypto taxes.
The law was created in 2018, to promote the adoption of the digital economy, and investment in the country. Although the law was originally intended to last till 2023, it has been extended till January 2025.
5. Singapore
Singapore is another crypto-friendly country, that has a zero capital gains tax policy. So, the capital gains, you earn from HODLING cryptocurrencies for a long time, do not come under a taxable asset in Singapore. However, crypto trading gains come under the category of income, which is subjected to income tax.
Conclusion
Gains from cryptocurrencies and other digital assets are taxable in many parts of the world. However, some countries including El Salvador, Germany, Bermuda, Belarus, and Singapore, have more progressive and crypto-friendly tax regulations. That being said, you should beware that not all transactions even in these tax havens are non-taxable. You need enough knowledge about the regulations to evade taxes.
