Cryptocurrency Taxation in the US and Europe

November 24, 2017

Understanding Cryptocurrency Taxation in the US and Europe is crucial for global investors, as different countries apply varying taxation models. This article explores how cryptocurrencies are taxed around the world, with a focus on the key regulations in major economies.

How Cryptocurrency Is Taxed Around the World

Unless you live in Italy, Cyprus, or other countries where cryptocurrency gains aren’t taxed at the moment, you’ll soon be trying to figure out how to properly account for your Bitcoin or other cryptocurrency holdings ahead of the upcoming tax season and beyond.

This article analyzes the taxation models applied to cryptocurrencies in some of the world’s largest economies to better understand the current international regulatory environment.

The Three Main Taxation Models

Most countries classify crypto use into one of three main taxation categories:

• Income Tax: For legal entities receiving crypto as income. Transfer pricing rules also apply.

• Company Tax: For large-scale enterprise operations (e.g., cloud mining companies like Genesis Mining).

• Capital Gains Tax: For individuals or traders who invest in crypto with the goal of making speculative gains.

  
  

North America

USA

• The IRS considers cryptocurrencies as property.

• Short-term capital gains apply if crypto is sold within one year, taxed at the same rate as your income tax.

• Long-term capital gains apply if held for more than one year: 0%, 15%, or 20% depending on the tax bracket.

• The proposed Cryptocurrency Fairness in Taxation Act (CFTA) would exempt transactions under $600.

  
  

Canada

• The CRA classifies crypto as a commodity.

• Profits are taxed either as business income or capital gains.

Mexico

• Legal framework is not finalized, but lawmakers are actively developing regulations.

Europe

UK

• VAT on crypto was repealed in 2014.

• HM Treasury treats crypto as assets.

  • Traders pay income tax; investors pay capital gains tax.

  • £11,300 annual tax-free allowance per individual.

  • Strategic planning around the tax year can double the non-taxable amount for couples.

Switzerland

• Bitcoin is considered a foreign currency.

• No capital gains tax for most individuals.

The Netherlands

• Cryptocurrencies treated as barter items.

• Taxed at the basic income tax rate.

Germany

• No VAT applied to crypto.

• Capital gains up to €800 are tax-free.

• Gains from simply holding crypto long-term are also tax-exempt.

• Mining operations are taxed as companies.

Italy

• As of Q3 2017, zero taxation on cryptocurrencies.

Russia

• Taxation for individuals is still undefined, but regulation for large mining operations is underway.

Asia

China

• Crypto exchanges and ICOs banned (as of Q3 2017).

• Government concerns include money laundering and tax evasion.

• Regulatory framework is being developed.

Japan

• Bitcoin is considered a commodity.

• Consumption tax removed in July 2017.

• Users subject to income, capital gains, and corporate tax.

South Korea

• Exploring multiple taxation options: VAT, gift tax, income tax, capital gains tax.

Thailand

• Bitcoin was banned in 2013, re-allowed in 2014 with heavy restrictions.

Other Countries

Israel

• Cryptocurrencies are treated as assets and subject to capital gains tax.

Australia

• Ended the double tax by exempting cryptocurrencies from the GST.

Bolivia

• Complete ban on cryptocurrencies due to tax evasion concerns.

Turkey

• Crypto is taxed like any other financial instrument.

Brazil

• Cryptocurrencies are categorized as assets.

• Subject to 15% capital gains tax.

Conclusion: Most Nations Treat Crypto as Property

Globally, most regulators consider cryptocurrencies as property or assets rather than currencies. While this classification influences how gains are taxed, it's still a developing area in many regions.

Expect more regulatory scrutiny and evolving tax policies in the years to come as crypto continues to grow in importance.