Cryptocurrency trading’s growing popularity has resulted in many individuals making decent profits from the financial instrument.
While governments of countries across the world largely ignored the profits made from trading cryptos in the past, most changed their stance after the huge bitcoin rise late last year.
Many of these countries have enacted tax policies that are designed to get a share of some of those profits. Some of these are still in the works, others are already full-fledged. We’ll be looking at the top countries with established and semi-established tax rates.
If you’re new to trading cryptos or are unaware of government tax policies, this article should serve as a guide of sorts to help you determine what your country’s tax rates.

United States

According to the US Internal Revenue Service (IRS), cryptocurrency’s tax status is categorized as property. As a result, trading your cryptos and making a profit from it subjects you to paying capital gains tax.
If you’re unclear about how they arrived at this decision, you might want to check out their general guidance reports of cryptocurrency taxation. The document, named Notice 2014-21,
“all received or mined cryptocurrencies must be included in computing gross income with fair market value of the virtual currency as of the date it was received. The taxes are calculated based on that value. Hence, gifts, mining and crypto-to-crypto swaps are all taxable events, estimated by the value of the coins on the day those events occurred”.
Unfortunately, reporting the profits from crypto trading is a hassle for many traders, owing to some exchanges not issuing 1099 disclosure forms. These forms which essentially include details about any other income apart from your personal income are hard to file.
The good news is some exchanges like US based Coinbase are providing these information, making it easy for you to just download the data and file it with your regular taxes.
In fact, early this year, Coinbase had to send a notice to over 13,000 customers informing them of their compliance with the IRS after the IRS requested information on traders’ data.
Of course, many traders were outraged at the request, but nothing could be done about the request. So, if you’re resident in the US, it would behoove you to include proceeds from your crypto trades when filing your capital gains tax.

United Kingdom

Taxation is a key revenue generator for the UK economy, so it’s not surprising that the country is big on taxing cryptocurrency trade profits too. Cryptocurrencies are categorized as investments or working capital in the UK.
This depends on the size and scale of your trades as well as frequency of use. It qualifies as working capital if you trade them frequently, and investment if the trading capital isn’t huge. Trading gains lower than £11,850 are often tax-free. But once it exceeds that, government taxation percentages can be as high as 45 percent. The bands are as follows:
  • Proceeds between £11,851 and £46,350 attract a 20 percent tax
  • Proceeds between £46,351 and £150,000 attract a 40 percent tax
  • Proceeds above £150,000 attract a 45 percent tax.
These directives were introduced by Her Majesty’s Revenue and Customs (HMRC), a tax collection agency that’s similar to the United States’ IRS. The agency’s guide to cryptocurrency taxation indicates that crypto proceeds can be subjects to one or more of the following tax categories:
  • Income tax
  • Capital gains tax
  • Corporation tax
As a result, tax rates are dependent on the agency’s discretion. So, just because your trading profits were in the personal income category last year doesn’t mean it will be the same this year. The category can change based on certain details.
The good news though, is that the majority of traders are liable to paying capital gains tax as against corporation or income tax. To be more specific, HMRC clear states that
“Where an asset (including Bitcoin) is held as an investment — as opposed to being working capital in a trading activity — the presumption is that any profit or gain on its disposal will be charged to Capital Gains Tax.”

Canada

Cryptos are categorized as intangible property in Canada. However, this doesn’t mean that they won’t tax profits made from crypto trading and investing. Therefore, it’s not surprising that the government issued a release to that effect, stating that the use of digital currencies doesn’t exempt residents from paying their taxes.
As a result, all income from trading cryptos are subject to the Income Tax Act. So, whether you’re trading, investing long term, doing crypto exchanges and profiting from it or mining, all crypto based activities attract between 25 percent and 50 percent tax.
The 25 percent tax is for day traders who frequently trade the cryptocurrency, while the 50 percent tax is for capital gains gotten from long term crypto investing.

Japan

Japan’s Minister of Finance recently recommended that the tax rate that’s between 15 and 55 percent can be replaced with a flat 20 percent, in conjunction with the current tax rates for profits from forex or stock trading. This is not surprising considering the huge volume of crypto trading happening in the Asian country.
Cryptocurrencies are considered a legal method of payment in japan. This means, you can actually pay for your transactions with recognized and known cryptocurrencies. So, any gains made from trading these currencies are categorized as miscellaneous income. With the Japanese National Tax Agency regulating these rates, the current 15 to 55 percent tax rates are dependent on trading volume and to be decided according to an income band, upon the traders filing their taxes.
Traders whose crypto gains exceed $365,000 or 40 million yen will be taxed at the higher end of the band. While those who earn less will be somewhere in between. Naturally, this policy has resulted in a huge number of traders exiting the country in favor of countries like Singapore with less stringent tax terms.
This is partly why the Japanese finance minister is advocating for a flat tax rate as against the current progressive tax rates.

South Korea

Another country in which cryptocurrencies are widely accepted, these digital currencies are considered a legal form of payment here. Yet, in spite of the huge trading volumes from South Korean residents, there are no taxes on capital gains made while trading cryptos.
So, all profits made from trading cryptos in this country are tax free and directly under the control of the investors. While this doesn’t apply to regular investors, exchanges are taxed at 24.2 percent.
So, it just might be possible that traders are indirectly paying taxes through the fees they charged by the various exchanges that are resident in South Korea. Whatever the case, it looks like the country may be on a path to taxing capital gains made from trading cryptos in the country soon.
According to a report published by the Fuji News Network in April, the country’s Ministry of Strategy and Finance may introduce a general taxation framework for cryptos soon that will mandate all traders who make profits from trading cryptos pay taxes.

Russia

There are quite a few popular cryptos and exchanges based out of Russia. Yet, in spite of its popularity in this country, there’s no legally known status for cryptos here. Of course, this doesn’t mean that the country isn’t taxing capital gains from crypto trading as seen in their 13 percent tax.
The government though, it trying to introduce a more solid framework regarding crypto taxation in the country. Until then, the government has asked residents to declare their capital gains from trading cryptos as well as approximate their tax rates on the basis of personal income tax while filing pending when there’s an official taxation framework in place. Whether residents adhere to this or not is not clear.

Switzerland

There’s no official stance on the status of cryptocurrencies in this country. This doesn’t mean they will not tax any profits made by residents who trade and exchange it. To this end, cryptocurrency gains are categorized as wealth tax and are often required of professionals who trade it in huge volumes.
So, regular citizens who dabble will not have to pay any taxes. There’s no set percentage for crypto related taxes. It is often determined at the end of the year –precisely the 31st of December every year.

South Africa

Cryptocurrencies are currently categorized as assets of intangible nature in South Africa. But that hasn’t stopped the government from taxing all crypto related profits. The government currently has an 18 percent capital gains tax as well as an 18 to 45 percent band for personal income tax.
The country’s official stance on crypto related taxes is that it is in the same category as personal income. This is why its South African Revenue Service (SARS) insists that regular income taxes will be applied to crypto gains and profits.
While there’s no current tax framework for cryptos, the body states that,
“there is an existing tax framework that can guide SARS and affected taxpayers on the tax implications of cryptocurrencies, making a separate Interpretation Note unnecessary for now.”.
In essence, when you file your taxes, you’ll need to consider where your crypto gains fall into. Regular crypto profits from daily or frequent trades will be categorized as the normal income tax, while profits made from medium or long term crypto investments (in essence, profits realized from buying and holding until the cryptos appreciate and selling) will fall into the capital gains tax category.

Germany

According to the German Finance Ministry, Germany considers cryptocurrencies as private money. Capital gains gotten from trading them attracts a 25 to 28 percent tax, as long as the traders file their tax within a year. However, if they are held as assets for over a year, whatever profits accrued from them are tax free.
So, smart German residents looking to not pay those taxes can simply hold their cryptos in safe keeping while they appreciate in value, and sell or trade them after one year. Whatever profits they make from the transaction becomes solely theirs.
While this list is by no means complete, the reality is that crypto related activities are higher in all the countries mentioned in this article. If you feel we missed any, leave a comment and we’ll update the article.