Bitcoin may have been around for over a decade, but governments have yet to develop ways to regulate cryptocurrency.
Expats investing in crypto have a tougher time than most because holding and trading are treated differently when crossing borders.
To help you keep up with the rapidly changing world of crypto, here is an explanation of the legal and tax treatment of digital currency investments in some leading economies.
The United States is one of the world’s centers for cryptocurrency and blockchain developers. Since China banned crypto-mining in September 2021, the market shifted to make the United States the leader in the discovery of new bitcoins and other “mined” cryptos.
The US financial regulator, the Securities and Exchange Commission (SEC), considers crypto a security. Strict rules to protect investors surround the launch and ongoing administration of securities, such as publishing a detailed prospectus for an initial coin offering (ICO).
Cryptos are not recognized as currency but as property, which means they are not exempt from capital gains tax when sold or income tax when generated. interest or other returns.
Two cases to watch out for are SEC vs. Ripple Labs, the company behind crypto XRP, and the SEC vs. Coinbase, the leading US crypto exchange.
China ordered crypto exchanges to shut down and prevented them from providing services in the country in 2017, prompting Binance, the world’s largest exchange, to uproot and relocate to the Cayman Islands. A ban on crypto mining followed suit in May 2021.
China was the largest crypto mining community in the world until the ban. The miners have now moved to the United States and Kazakhstan.
The government refuses to treat crypto as legal tender.
Crypto is not illegal in the UK, but is treated as property rather than legal tender. This means that capital gains tax applies on disposals and income tax is levied on interest.
Traders may pay tax on profits, depending on the amount of trades they make and the level of profit they make. Companies that trade cryptos pay corporation tax on all profits and gains.
The regulator, the Financial Conduct Authority (FCA), has banned crypto derivative trading.
Cryptocurrency is property, not legal tender in Australia, which triggers capital gains tax on investment profits. ICOs are closely monitored, but exchanges cannot offer privacy coins.
treats cryptocurrency similarly to the UK and Australia. Cryptos are not legal tender but are taxable, but a favorable tax regime means that long-term gains are often tax exempt. However, professional setups, like businesses, pay income tax on regular crypto earnings.
Cryptography is not illegal in the European Union, but the EU is working on a common licensing and regulatory standard. No EU country accepts cryptos as legal tender but treats them as property. How property is taxed varies from state to state. Some apply capital gains and income taxes, while others charge cryptos taxes at a zero rate.
The United States Library of Congress maintains a list of countries where cryptocurrencies are illegal. The lists cover absolute and implied prohibitions.
An absolute prohibition is when any cryptocurrency activity is illegal. An implied ban covers stopping banks and exchanges from trading cryptocurrencies or offering services to trade cryptocurrencies.
Nine countries have absolute bans and 42 have implied bans.
|Country||Crypto ban – Absolute||Crypto Ban – Implicit||Crypto Tax|
|Antigua and Barbuda||No||No||–|
|Central African Republic||No||Yes||–|
|Democratic Republic of Congo||No||Yes||–|
|Isle of man||No||No||No|
|Republic of Congo||No||Yes||–|
|Saint Kitts and Nevis||No||No||Yes|
|United Arab Emirates||No||Yes||Yes|
Taxes on expatriates and cryptocurrencies
How crypto profits are taxed for expats depends on their residency status.
For example, a UK expat on temporary assignment in Germany is a likely UK taxpayer and subject to UK cryptocurrency rules. However, an expat who has moved permanently to Spain is subject to Spanish taxes and crypto laws.
Some cryptos, like Bitcoin, generate new coins when complex equations built into the blockchain are solved. The process of releasing new coins is called mining.
Securities are financial instruments having a monetary value. Titles are generally of three types:
Equity – a property right, such as stocks and shares
Debt – loans with regular payments, such as a mortgage
Hybrids – a mix of debt and equity
ICO stands for Initial Coin Offering. ICO is when a crypto start-up seeks funding from investors, such as a company that goes public and issues shares for the first time.
A blockchain is a database or ledger that underpins a cryptocurrency. The blockchain is decentralized on a peer-to-peer network, so no one person or computer controls the crypto. The P2P network monitors and confirms transactions before they are locked into the blockchain.
Private coins are high-security cryptos designed to protect the identity of the holder. Major privacy coins include Monero, Dash, Z-cash, Verge, and Beam.
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