11 Countries That Don't Tax Bitcoin Gains (2021)

Tax liability is a major source of concern for anyone invested in Bitcoin and other digital assets. In sum, some have described it as nothing short of a nightmare.

But while some countries are putting pressure on investors and levying taxes on income and capital gains from Bitcoin transactions, many are taking a different approach—often with the aim of promoting better adoption and innovation within the crypto industry. They’ve implemented friendlier legislation, and allow investors to buy, sell, or hold digital assets with no tax liability.

Here’s our list of the most crypto-friendly tax jurisdictions, updated for 2021.

1. Belarus

Belarus is taking an experimental approach to cryptocurrencies. In March 2018, a new law legalized cryptocurrency activities in the East European state, exempting individuals and businesses involved in them from taxes until 2023 (when it will come up for review.) 

Under the law, mining and investing in cryptocurrencies are deemed personal investments, and so exempt from income tax and capital gains.

The liberal laws aim to boost the development of a digital economy, and technological innovation. The country was recently ranked third in Eastern Europe and 19th globally in levels of P2P crypto trading.

2. Germany

Germany offers a unique take on taxing digital currencies such as Bitcoin. Unlike most other states, Europe’s biggest economy regards Bitcoin as private money, as opposed to a currency, commodity, or stock. 

For German residents, any cryptocurrency held for over a year is tax-exempt, regardless of the amount. If the assets are held for less than a year, capital gains tax doesn’t accrue on a sale, as long as the amount does not exceed 600 euros ($692).

However, for businesses it’s a different matter; a startup incorporated in Germany still needs to pay corporate income taxes on cryptocurrency gains, just as it would with any other asset.

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But in 2021, a controversial new tax law came into force which effectively kills crypto derivatives trading in Germany, as losses can no longer be deducted. The legislation reflects moves across Europe to regulate derivatives.

3. Hong Kong

It isn't a country per se, but a Special Administrative Region of China, with theoretical autonomy over its own affairs. And Hong Kong’s tax legislation on cryptocurrencies is a broad brush affair, even after new guidance was issued in 2020.   

Essentially, whether cryptocurrencies are taxed or not depends on their use, according to Henri Arslanian, a global crypto leader at PwC.

South Korean lawmakers propose tax on crypto profits

South Koreans may soon find their crypto dealings at the mercy of the tax man. The South Korean Ministry of Strategy and Finance proposed a tax on profits made through crypto-fiat transactions earlier this week, including tokens sold by crypto mining organizations and through initial coin offerings (ICO).  Regulators intend to release the full proposal in July and submit the tax amendment to the South Korean regular assembly in September, as reported by local South Korean news outlet Edaily. In...

“If digital assets are bought for long-term investment purposes, any profits from disposal would not be chargeable to profits tax,” he wrote in March when the directive was introduced. But he added that this doesn’t apply to corporations—their Hong Kong-sourced profits from cryptocurrency business activities are taxable.

PwC clarified that Bitcoin is considered a virtual commodity for tax purposes, in a comprehensive guide to crypto tax treatment in various jurisdictions, at the end of 2020.

4.El Salvador

Following the passing of a law to make Bitcoin legal tender in El Salvador, the country will reportedly exempt foreign investors from paying tax on their Bitcoin gains. That's according to Javier Argueta, legal advisor to President Nayib Bukele, who told AFP that, "If a person has assets in Bitcoin and makes high profits, there will be no tax. This is done obviously to encourage foreign investment." Argueta added that, "There will be no taxes to pay on either the capital increase or the income."

El Salvador Passes Law to Make Bitcoin Legal Tender

With 62 favorable votes, the Legislative Assembly of El Salvador has approved a bill proposed by President Nayib Bukele to recognize Bitcoin as legal tender in the country. At approximately 8pm local time, President Nayib Bukele announced via his Twitter account that he had introduced the "Bitcoin Law" to his legislature. The new law not only gives Bitcoin the status of legal tender but compels merchants throughout El Salvador to accept it as a payment option. Just two hours after the announceme...

While a legal framework has yet to be put in place around these tax exemptions, it's a clear indication of the country's intention to lure foreign investors with crypto portfolios.

5. Malaysia

In Malaysia, cryptocurrency transactions are currently tax-free, and cryptocurrencies don’t qualify for capital gains tax, because digital currencies are not considered assets or legal tender by the authorities.

However, profits from active crypto trading may be regarded as revenue, and thus considered taxable income. 

“If the transaction is more of a capital gain, passive, or as done occasionally, unplanned or unsystematic, then the profit from such sale and purchase is a tax-free income," Ranjeet Kaur, communications director at the Malaysian Inland Revenue Board (LHDN), told The Malayan Reserve. However, active, systemic and repeated trading means that "the party is considered to have conducted a transaction or profession," with the profits generated from those transactions subject to income tax.

Businesses involved in cryptocurrency are likewise subject to Malaysian income tax.

6. Malta

The government of the so-called “Blockchain Island” recognizes Bitcoin “as a unit of account, medium of exchange, or a store of value.” 

Malta doesn’t apply capital gains tax to long-held digital currencies like Bitcoin, but crypto trades are considered similar to day trading in stocks or shares, and attract business income tax at the rate of 35%. However, this can be mitigated to between five percent and zero, through “structuring options” available under the Maltese system. 

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Malta’s fiscal guidelines, published in 2018, also discriminate between Bitcoin and so-called “financial tokens,” equivalent to dividends, interest or premiums. The latter are treated as income and taxed at the applicable rate.

Malta came second after Liechtenstein in PwC’s 2020 Crypto Tax Index, which ranks jurisdictions based on how comprehensive their guidance is.

7. Portugal

Portugal has one of the most crypto-friendly tax regimes in the world. 

Proceeds from the sale of cryptocurrencies by individuals have been tax-exempt since 2018, and cryptocurrency trading is not considered investment income (which is normally subject to a 28% tax rate.) 

However, businesses that accept digital currencies as payment for goods and services are liable to income tax.

8. Singapore

Capital gains tax does not exist in Singapore, so neither individuals nor corporations holding cryptocurrency are liable. 

But companies based in Singapore are liable to income tax, if their core business is cryptocurrency trading, or if they accept cryptocurrency as payment.

Bitcoin tax: the U.S. & Singapore go to extremes

Last week, Singapore proposed to exempt Bitcoin and cryptocurrency transactions from value-added tax (VAT.) In America, meanwhile, it seems things are about to get a whole lot more taxing.  The Internal Revenue Service (IRS) is expected to issue new guidance on how cryptocurrencies will be taxed in the coming weeks, and the taxman is licking his lips. Using Bitcoin and other cryptocurrencies to pay for goods and services, trading, selling, mining and airdrops are all currently taxable in the U.S...

The authorities consider payment tokens such as Bitcoin to be “intangible property” rather than legal tender, and payment in the cryptocurrency constitutes a “barter trade” where the goods and services are taxed, but not the payment token itself.

9. Slovenia

Slovenia is another country that treats individuals and businesses separately under its cryptocurrency tax system. 

No capital gains tax is levied on individuals when they sell Bitcoin, and gains are not considered income. However, companies that receive payment in cryptocurrencies, or through mining, are required to pay tax at the corporate rate. Token distribution during ICOs is also subject to tax rates of up to 50%.

Notably, the Mediterranean country doesn’t permit business operations in cryptocurrency alone (such as only accepting Bitcoin as payment.)

At the end of 2020, the Slovenia Times reported that crypto communities in the country are working closely with the regulators and taxing authorities in order to bring clarity to its tax law.

10. Switzerland

It’s no surprise that Switzerland, home to the innovation hub known as “Crypto Valley”, has one of the most forward-thinking tax policies too. 

Cryptocurrency profits made by a qualified individual through investing and trading are treated as tax-exempt capital gains.

However, income from professional trading and mining is subject to income tax. Notably, tax laws differ regionally, and an annual “wealth tax" is levied on the total amount of cryptocurrencies owned, along with the rest of an individual’s net worth.

11. Bermuda

There's another type of country that doesn't tax cryptocurrency gains, of course; tax havens where digital assets aren't singled out for special consideration, but which have a blanket low-tax regime.

The island nation of Bermuda is one such territory; it doesn't impose income, capital gains, withholding, or other taxes on digital assets, or on transactions involving digital assets.

What taxes there are can now be paid for using cryptocurrency, too; in October 2019, Bermuda became the first government to accept payments for taxes, fees, and other government services using USD Coin (USDC).