6 Countries with Unusual Crypto Tax Laws
While Switzerland and Malta stand out due to their crypto-friendly tax laws, India, Spain, Denmark, and the Netherlands are among the countries with unusual crypto-tax laws for all the wrong reasons.
In this guide, we will dive into countries with unique crypto tax laws that don’t necessarily follow the usual path of taxing crypto based on capital gains and income taxes.
The Usual Crypto Taxation Framework
Although different countries tax cryptocurrencies differently, there are some commonalities and general trends among the tax laws of most jurisdictions, such as the US, Canada, and Australia.
Capital Gains Taxes
When you sell, trade, or cash out your crypto for a profit, you will probably owe capital gains taxes. These taxes may be fixed or vary based on short-term and long-term gains. Short-term gains (held for less than a year) often have higher tax rates, while long-term gains (held for over a year) may have lower rates or even exemptions in some regions.
Most countries with capital gains taxes allow you to offset losses. So, if you’ve had losses in the crypto market, you can use them to lower your overall tax bill.
Income Taxes
If you earn crypto as a form of compensation or salary for selling products or services, it’s subject to regular income. You will pay income tax based on the fair market value of the crypto at the time of receipt, just like with fiat currency income.
Income taxes can also apply to crypto rewards from activities like staking, lending, and mining.
But here is the twist: if you later sell the crypto you received as income and make a profit, you might also face capital gains taxes. This means you could be taxed twice on the same money.
In a nutshell, while crypto tax rules can differ by country, the basics of capital gains and income taxes are quite universal. To navigate this, consult local tax guidelines or seek advice from a tax professional to understand how crypto taxes work in your area.
Countries with Unusual Crypto Tax Laws
1. Switzerland
Switzerland is renowned for its crypto-friendly approach, earning it the title “Crypto Valley.”
First, The Swiss Federal Tax Administration classifies crypto as private wealth assets, placing them in the same category as traditional investments like stocks and bonds. What sets Switzerland apart is that it doesn’t impose capital gains tax on private wealth assets, including crypto.
Switzerland offers exemptions from capital gains taxes for crypto investors meeting specific criteria. If you’ve held your crypto for at least six months, your gains are less than five times the initial holdings, your net capital gain is under 50% of your total income, and you haven’t used debt financing or derivatives for speculative trading purposes, congratulations – you’re exempt from capital gains taxes.
Check out our complete guide on Switzerland’s crypto taxes for more detailed guidelines.
For those who buy crypto for private investment, Switzerland is a tax haven. But if you’re a self-employed trader or involved in a crypto-related business, you will pay capital gains taxes. Additionally, Switzerland applies income taxes to crypto activities like mining rewards, staking rewards, airdrops, and DeFi protocols.
Lastly, private investors buying crypto for investment purposes may also be subject to wealth taxes, ranging from 0.3% to 1%. Wealth taxes are taxed at the fair market value of the crypto holding at the end of the year.
While Switzerland has unusual crypto tax laws, their approach seems crypto-friendly as opposed to some of the other entries we will discuss in this list.
2. Malta
Often referred to as “The Blockchain Island,” Malta is a standout in the global crypto tax landscape.
Malta classifies cryptocurrencies as Virtual Financial Assets (VFAs) for tax purposes, signaling its progressive stance. Capital gains, often taxed in many countries, are generally not subject to taxation in Malta. However, traders may be subject to taxes ranging from 15% to 35%, depending on their residential status and the extent of their trading activities.
Moreover, crypto mining is recognized as a legitimate business activity subject to regulations and progressive tax rates. However, part-time miners can enjoy zero reporting obligations and a lower fixed tax rate of 10% on income or profits between €10,001 and €12,000. Exceeding this income threshold will subject you to regular income tax rates and reporting obligations.
In addition to its crypto-friendly policies, Malta’s absence of wealth, inheritance, or gift taxes further increases its appeal to crypto enthusiasts and investors.
3. India
India’s approach to crypto taxation has gained a reputation as one of the most challenging in the world, and rightfully so.
First, there is a flat 30% tax rate on all income generated from digital assets or cryptocurrency transactions, which covers crypto-to-crypto trades, crypto-based payments, and earnings from yields and rewards.
This high rate significantly eats into the profits and doesn’t allow for flexibility for different transaction types. Moreover, the inability to offset losses against gains is a significant drawback for Indian taxpayers.
Making matters more complex, Indian tax laws require a 1% Tax Deducted at Source (TDS) when selling a crypto asset. This TDS rule applies if the transaction value goes beyond ₹10,000 or accumulates to ₹50,000 within a financial year.
The idea behind this is to track crypto transactions, but it adds extra paperwork for those involved in the crypto market, especially crypto traders. The Indian crypto market saw a massive drop in trading volumes days after the government introduced these new tax provisions.
Check out our complete guide on Indian crypto laws for more in-depth information.
As the global crypto landscape evolves, India’s tax approach remains a heated issue in the crypto community.
4. Spain & Denmark
Spain and Denmark have introduced crypto tax regulations that, while similar, have some distinctive elements to note.
In Spain, crypto taxation is similar to the United States and Australia, applying capital gains tax rates of 19% to 26% to crypto transactions like selling, spending, and swapping. Activities such as mining, staking, and lending rewards are subjected to general income taxes. Check out our guide on Spain’s tax laws for more information.
Denmark, on the other hand, adopts income taxes for crypto gains and income. Denmark’s income tax system can be intricate, and you should read our guide on it to understand its nuances better.
However, both countries have limited loss-offsetting options. While Spain only allows taxpayers to offset 25% of net capital gains each year, Denmark only allows taxpayers to offset 30% of losses against their total gains. Moreover, Spain further stands out with a wealth tax, ranging from 0.2% to 4%, applied when the cumulative value of all assets (not just limited to crypto) exceeds €700,000.
5. The Netherlands
The crypto tax laws in the Netherlands are undeniably unique and, some might argue, bizarre. In a world where most countries tax real profits from cryptocurrency, the Dutch system takes an unconventional turn.
Here, there are no taxes on the actual gains made from selling or disposing of cryptocurrencies. Instead, the Dutch Tax Authority (Belastingdienst) imposes a flat 31% income tax rate on “fictitious returns.” This means they tax you on profits they assume you’ve made without considering potential losses.
What makes it even more baffling is that they presume you will always make a profit and never incur losses. Not only that, but they also have set rates based on different asset brackets: 1.898% for assets up to €50,001, 4.501% for assets between €50,001 and €950,001, and a whopping 5.69% for assets above €950,001.
This approach has drawn criticism for its lack of fairness, as it ignores the unpredictable nature of the crypto market.
In response to these criticisms, the Netherlands plans to introduce a new tax system in 2025. Finally, moving away from their current tax provisions, this new system will tax individuals based on their actual gains. But until then, Dutch crypto traders and investors must navigate this unconventional tax framework when filing their returns.
Final Thoughts
While some of these countries may have unfavorable crypto tax laws, remember that the regulatory landscape is constantly evolving.
Although it’s difficult to predict the future of crypto taxes, the crypto community is optimistic about better tax regulations supported by their fundamental belief that cryptocurrencies and blockchain technology will play a crucial role in the future of economy and money.