As the popularity of cryptocurrencies continues to rise, tax authorities have sharpened their focus on this industry. Whether you're a huddler, a mining mogul, or an NFT player, once you engage in cryptocurrency trading or earnings, the tax 'radar' won’t miss you.

To prevent your wallet from being drained by sudden tax bills, we’ll quickly outline the crypto tax rules in the US, UK, and EU—mastering this knowledge will help you go further in your investment journey.

USA: Buying crypto is laid-back, spending it is 'thrilling'.

In the US, cryptocurrencies are considered 'digital assets', and the IRS regulates them similarly to stocks and bonds. In simple terms, buying and holding is fine, but once you 'move' it, such as selling, exchanging, or using it, the tax bill will follow. Here are a few typical scenarios:

  • Non-taxable events:

    • Buying crypto and holding it? No problem!

    • Donating to charity can also earn you a tax deduction.

    • Receiving cryptocurrency gifts from friends? As long as you don’t move it, the IRS will turn a blind eye.

  • Taxable events:

    • Selling crypto: If the selling price is higher than the buying price, consider capital gains tax.

    • Exchanging crypto: Exchanging Bitcoin for Ethereum? The IRS considers this the same as selling, making it a taxable event.

    • Buying goods: Buying a coffee with cryptocurrency? Congratulations, you owe capital gains tax again.

    • Mining and staking: The value of the tokens received will be treated as income and may even be subject to self-employment tax.

Tip: In the US, there is a strategy called 'tax loss harvesting' — if you incur losses, you can offset them against your earnings to pay less tax, which is a small consolation.

UK: The tax rules are detailed to the point of being 'tear-jerking'.

The UK's HMRC views cryptocurrency as: 'Earn more, pay more.' They treat cryptocurrencies as assets, meaning all 'disposal' actions trigger tax events, including selling, using for purchases, exchanging, or even gifting.

  • Capital Gains Tax (CGT):

    • Basic tax rate: 10% (applicable to basic taxpayers)

    • High-income tax rate: Up to 24%

    • Benefits: There's an annual tax-free allowance of £3,000; don't forget to utilize it!

  • Income Tax:

    • Mining earnings and salaries paid in cryptocurrency are subject to personal income tax, and employers also need to pay national insurance contributions for crypto wages.

In short, the UK keeps a close eye on cryptocurrency earnings; the more you earn, the more you pay, and high earners need to be especially vigilant.

EU: The road to unified regulation is still long.

The EU's crypto tax policy can be summed up in one sentence: 'One EU, different tax laws.' Each country sets its own rates and rules, leading to a tax environment that is both complex and diverse. Here are some representative national policies:

  • Germany:

    • A paradise for laid-back investors: Hold for over a year, and earnings are tax-free!

    • A nightmare for short-term investors: Selling within a year incurs a tax rate of up to 45%, plus an additional 5.5% solidarity tax.

  • Spain:

    • The tax rate is straightforward, with earnings uniformly taxed at 19%-28%. Holding time is irrelevant; taxes are due on earnings.

  • Portugal:

    • This once 'crypto paradise' has changed its tune, with tax rates ranging from 14.5% to 53%, and a capital gains tax of 28%, including taxes on mining earnings.

Although the EU is working to unify standards through the (Crypto Assets Market) (MiCA) regulatory framework, tax policies vary significantly among countries. If you're investing in cryptocurrency in the EU, understanding local tax laws is crucial.

The future: Tax regulation will only get stricter.

As global attention on cryptocurrencies grows, tax authorities are gradually enhancing their scrutiny mechanisms. For example, US exchanges are required to report customer holdings, and the EU is advancing new tax transparency directives, indicating that the era of tax evasion loopholes is over.

Paybis CEO Konstantin Vasilenko states: 'Many crypto investors initially don’t understand the importance of tax reporting. But as new regulations take shape, 2025 will be a turning point for enhanced regulation.'