Among all the blockchain-related topics, cryptocurrency taxation is widely regarded as an extra confusing one. And you cannot just turn a blind eye to this subject as it affects absolutely everyone who deals with crypto.
Nobody likes taxes and Bitcoin enthusiasts are no exception. It is hard enough to calculate your regular taxes, let alone wade through innumerable details of tens or hundreds of crypto transactions that you’ve made in one year.
Imagine buying Bitcoin and exchanging it to Ether, then using some of your ETH to purchase a bunch of ICO tokens, then converting them to another ERC20 and making a profit by staking it. It might sound like an exciting money-making journey, but it’s no laughing matter when it comes to filling out a tax form.
Obviously, crypto taxation rules may vary depending on your citizenship and some countries, including several European ones, are considered to be crypto tax havens. Last time, we went into specific detail about crypto taxes in the US and how to calculate them, and it’s about time we took a look at Europe.
Cryptocurrency Taxes in Europe
The good news is that in most European countries, selling cryptocurrency is not subject to VAT, so usually it all comes down to filing your capital gain taxes. On the bright side, these measures are keeping cryptocurrency in the regulated zone and ward off banning.
Crypto Taxes in Germany
- Less than 600 Euro sales are non-taxable
- Long-term (over a year) holdings are non-taxable
As of now, Germany remains one of the most cryptocurrency tolerant countries in the EU, and has developed a set of rules creating a supportive environment. Cryptocurrency in Germany is equated to private sales and if the total amount of your deals doesn’t go beyond 600 euro you’ll be granted remission of taxation.
Apparently, patience is a creditable quality in Germany as holding your crypto assets for more than a year means your gains will not be subjected to taxation. Even if you’ve made millions. As long as you hodl for at least a year, you do not need to pay the capital gain tax.
If you were born in Germany, there is no need for further action. But if you’re looking to move to the country, make sure you do everything right. You can lay your account for the German tax residency when you meet certain requirements such as owning a private residence in the country, staying in the country over 6 months, and others.
Crypto Taxes in Switzerland
- Speculative crypto gains are non-taxable
- Miners, professional traders and those who receive wages in crypto must pay income or business tax
Switzerland, the land of higher average income and one of the most important financial centers of the world, is also known for being quite open and welcoming towards cryptocurrencies. Obviously, the country has developed a set of rules on how to deal with cryptocurrency gains.
Just like in pretty much the rest of the world where cryptocurrency is being regulated, Swiss residents are required to declare the value of crypto assets they’re holding in their local currency, Swiss francs.
Unless you receive your salary in Bitcoin or altcoins or engage in crypto mining activities, you can enjoy a tax-fee lifestyle as speculative gains from crypto trading within your personal account are tax-free and do not have to be declared. However, if you are a professional trader, which means that you have adequate qualifications, you’ll have to pay a business tax.
Crypto Taxes in the UK
- Income tax for salaries, mining, trading, and airdrops
- Capital Gain Tax for investments
- Tax reduction at a loss
Although cryptocurrency in the UK is not legal tender and the industry is not yet regulated, for the purposes of crypto taxation, Her Majesty’s Revenue and Customs (HMRC) has issued a set of rules.
Firstly, you need to pay income tax on the crypto assets that you get as a salary, from mining, transaction confirmation, or even airdrops. Although sometimes it’s hard to tell the difference between trading and investing, the frequency and consistency of trading usually speak for themselves. If you’re engaged in trading activities, you may reduce your Income Tax liability by offsetting any losses from your trade against future profits.
And if you receive cryptocurrency without doing anything in return, the income tax is not applicable.
Investment gains, in turn, are subject to Capital Gain Tax. However, if you sell some of your assets at a loss, you’ll need to report it to HMRC in order to reduce the overall gain. But if your crypto assets are stolen or if you lose your private keys, it won’t be considered a capital loss.
Crypto Tax-Free Countries
On Malta, also known as the blockchain island, digital assets are not subject to tax unless you’re a day trader. In this case, you will have to pay a business income tax.
Cryptocurrency is officially legal in Belarus and on top of that, all gains received from operations with digital currencies, be it trading or mining, are exempt from taxes for the time being.
Another European crypto tax haven is Portugal, where you don’t have to declare any of the profits received by crypto trading or investing.
Easy Ways to Count Your Crypto Taxes: Crypto Tax Software
If your country makes you pay a capital gain tax when trading or investing and you are not ready to move on, you can at least make your life a little easier and use a little help. In the previous article on cryptocurrency taxes we mentioned that there is special software that can calculate your cryptocurrency taxes.
There’s no shortage of crypto tax calculators so you need to pay attention to a few things before choosing one. Firstly, it should come from an established provider. Secondly, some calculator apps are quite pricey so make sure their monthly fee is affordable. You also need to check the additional perks (like crypto portfolio management, etc), the software offers, and how exactly you are going to import your trading data.
- $0, $49, $99, $199, $299 yearly
CryptoTrader.Tax is one of the most well-known softwares that helps you prepare crypto taxes. Compatible with all mainstream exchanges, it allows you to import your trades and download a tax report in a matter of minutes. You are free to import your trades via the API tool or manually upload a file with your trading history.
Another feature pf CryptoTrader.Tax is that the software works with any fiat currency and can be used to make a report for any European country that supports FIFO, LIFO, or specific identification calculation methods.
- $0, $79, $179, $399 yearly
Apart from calculating your taxes, Koinly promises to reduce them for next year. If you’re using an exchange wallet for your trades (which is actually not the best idea, transfer the funds to a secure wallet instead) you can use your API keys & blockchain public addresses to import your trades.
Koinly offers to minimize your taxable gains as well as provide help from their tax experts. It will come in handy for the residents of Germany, UK, Sweden, Ireland, Denmark, and many other European countries.
- $0, $179 yearly
With over 2,500 cryptocurrencies supported, CoinTracker allows you to import data from all the popular exchanges, wallets, as well as DeFi platforms. In the European region, they provide full support for the UK and partial support for every other country.
CoinTracker also offers to automatically track your crypto portfolio.