Written by: imToken
The taxation issues related to cryptocurrency assets have always attracted significant attention in the industry. A report released by PwC on April 30, 2024 (2024 Global Cryptocurrency Taxation Survey) indicates that countries or regions like the United States and the European Union have gradually proposed new tax reporting requirements for cryptocurrency brokers and related intermediaries starting in 2023, aiming to enhance the transparency of cryptocurrency tax information.
In June 2023, the Organization for Economic Cooperation and Development (OECD) released a 'Cryptocurrency Reporting Framework' and updated the Common Reporting Standard for financial institutions to include new types of financial products in the reporting scope. As of December 1, 2023, 54 jurisdictions worldwide have indicated they will adopt the 'Cryptocurrency Reporting Framework,' expected to implement automatic exchange mechanisms for cryptocurrency transaction information by 2027.
At present, what kind of taxation practices are being carried out in the major global cryptocurrency markets? This article organizes public information to give you a brief understanding of the current taxation status of cryptocurrency assets in major global markets.
United States
The Internal Revenue Service of the United States defines cryptocurrency assets as 'assets.' On June 28, 2024, the U.S. Department of the Treasury and the IRS released final regulations implementing bipartisan reporting requirements for sales and exchanges of digital assets, requiring cryptocurrency brokers to report the total income from all digital asset sales in 2025 starting from 2026, and from 2027, brokers must also report the tax basis information of certain digital assets sold in 2026.
On August 9, 2024, the Internal Revenue Service of the United States announced the updated 1099-DA form, requiring cryptocurrency brokers to submit the 1099-DA form to the IRS starting in 2025 to submit relevant tax information.
Europe
European Union: In 2015, Swedish resident David Hedqvis sought to exchange fiat currency for BTC through a company, and whether the swap service provided by that company should be subject to Value Added Tax (VAT) influenced the regulatory thinking of many European countries regarding taxation of cryptocurrency assets.
The court inferred from the judgment in the case of Chicago First National Bank (C-172/96, EU:C:1998:354) that exchanging fiat currency for BTC or exchanging BTC for fiat currency constitutes a taxable service. However, according to EU VAT regulations, the income from the swap service provided by the company is exempt from VAT.
For individuals holding cryptocurrency assets, there are significant differences in taxable behaviors and tax rates among different countries in the European Union.
Germany: Tax authorities regard cryptocurrencies as 'assets,' and income obtained by individuals from selling cryptocurrencies is taxed as 'other income.' Individuals holding cryptocurrencies for more than one year have a tax exemption threshold of 600 euros when selling.
According to an introductory article published by KPMG on June 21, 2022, Germany issued a 24-page circular on May 10, 2022, which clarified the taxation issues related to cryptocurrencies for the first time. In addition to income from sales being taxable, income obtained from participating in mining, staking, lending, and other on-chain activities also needs to be taxed.
Italy: From January 1, 2023, trading cryptocurrencies requires a capital gains tax at a rate of 26%, with no tax applied if annual capital gains do not exceed 2000 euros.
Exchanges between different cryptocurrencies do not generate taxable events.
(European Times) An article published on January 5, 2023, indicates that this is a change following the approval of the new (Preliminary Budget Law) by the Italian Parliament, reflecting the Italian government's attitude toward cryptocurrency assets, which will strengthen regulation of this burgeoning but still very unstable market.
United Kingdom: The UK tax authority classifies cryptocurrencies as 'assets,' and transactions are subject to capital gains tax (CGT) at a rate of up to 24%. According to a report published by blockchain media The Block on December 30, 2024, acquiring cryptocurrencies through mining and other means is considered income and is subject to income tax, and remuneration paid in cryptocurrencies is taxable.
Africa
Nigeria: The (2023 Finance Bill) effective September 1, 2023, expanded the definition of 'assets' in Nigeria's (Capital Gains Tax Act) to include 'digital assets,' with a tax rate of 10%.
In September 2024, the Federal Inland Revenue Service of Nigeria proposed a new tax law to the Parliament, planning to impose a 7.5% VAT on cryptocurrency transactions.
Latin America
Brazil: According to Law No. 14754/2023 enacted in Brazil on December 12, 2023, starting from January 1, 2024, Brazilian residents' income from financial investments held overseas, including virtual asset investments, will be subject to income tax at a rate of 15%, with taxes calculated monthly.
Asia
Japan: The National Tax Agency of Japan currently regards cryptocurrency assets as 'property.' Income from individuals trading cryptocurrency assets is included in the scope of personal income tax as 'miscellaneous income,' with a progressive tax rate ranging from 5% to 45%.
According to the tax reform requirements for the fiscal year 2025 released by the Financial Services Agency of Japan, the section on 'Integration of Financial Income Tax' mentions issues related to the tax treatment of cryptocurrency assets, stating that the tax setup for cryptocurrency assets should be based on the perspective of whether they should be regarded as financial assets with public investment participation.
According to a report by Japan News on December 15, 2024, the Financial Services Agency of Japan is discussing secure trading of cryptocurrency assets with experts and will focus on amending related laws such as the (Payment Services Act) and (Financial Instruments and Exchange Act). If cryptocurrency assets are confirmed to be regarded as financial assets in Japan, the tax system for cryptocurrency assets may be reconsidered, and the tax rate may be lowered.
South Korea: According to reports from the (Korean Economic Daily), the capital gains tax on cryptocurrency assets originally planned to be implemented in 2025 may be postponed until 2027.
Singapore: The Singapore tax authority believes that taxing Digital Tokens used as a medium of exchange creates two taxable points: taxing the purchase of Digital Tokens and taxing the consumption behavior of using Digital Tokens to pay for other goods and services.
However, according to the electronic tax guide of the Singapore tax authority, as of January 1, 2020, using Digital Tokens to purchase goods or services in Singapore is no longer subject to Goods and Services Tax (GST).
Singapore does not have a capital gains tax, and the profits from trading cryptocurrency assets by enterprises and individuals are not subject to capital gains tax.
Indonesia: Starting from May 1, 2022, providing cryptocurrency trading services is considered a taxable activity under VAT. In addition, income from investment in cryptocurrency assets for enterprises or individuals is subject to a 0.1% income tax.
Hong Kong, China: On March 27, 2020, the Hong Kong tax authority released (Tax Interpretation and Implementation Guidelines No. 39 - Profits Tax Digital Economy, E-commerce, Digital Assets), mentioning the direction of taxation implementation for digital assets (including cryptocurrencies, crypto assets, or digital tokens, excluding asset types or trading activities classified as 'securities').
Among them, any profits from the disposal of digital assets (including those purchased through ICOs or trading platforms) used for long-term investment are exempt from capital gains tax.
At the same time, an analysis article released by KPMG on April 5, 2020, stated that the Hong Kong tax authority believes that profits obtained from digital assets acquired through ICOs can be subject to profits tax under the general principle of Article 14 of the Hong Kong (Taxation Ordinance), provided no specific exemptions for taxation are violated.
If employees engaged in the digital asset-related industry receive remuneration paid in cryptocurrencies, the tax regulations related to remuneration in Hong Kong also apply to such income, with the declared amount calculated at the market value of cryptocurrencies.
Additionally, according to news released by Bloomberg on October 28, 2024, the Hong Kong government proposed to expand tax relief policies for cryptocurrencies and other digital assets.
On November 28, 2024, news from Reuters showed that Hong Kong plans to exempt hedge funds, private equity funds, and certain family offices from taxes on investment returns obtained from cryptocurrencies and other alternative assets to enhance Hong Kong's attractiveness as a wealth management center.
Although many countries or regions have begun to implement taxation practices on cryptocurrency assets, it is evident from the brief overview that there is still much room for discussion regarding how to tax cryptocurrency assets and whether they should be taxed.
Current taxation practices on cryptocurrency assets mainly involve capital gains tax, income tax, and VAT, with the taxed subjects including individuals and enterprises holding or using cryptocurrency assets, as well as digital brokers providing cryptocurrency services.
In terms of taxable behavior, most countries or regions that practice cryptocurrency taxation generally regard cryptocurrency assets as 'property' or 'assets' and consider the act of selling cryptocurrency assets to obtain income as the main taxable behavior. Therefore, in high-tax countries where the income tax rates are already high, the tax rates related to cryptocurrency assets will also appear particularly high.
In regions promoting Digital Tokens as a medium of exchange and for payment functions, using Digital Tokens for payment in exchange for other goods and services is also considered a taxable consumption behavior, similar to using fiat currency for payment.
Some countries or regions also categorize income obtained from mining cryptocurrency and staking assets on-chain as subject to income tax, but the necessity of taxing these on-chain activities based on income needs clarification. On one hand, in a PoW mechanism chain, the assets obtained through mining are essentially incentives, and in a PoS mechanism chain, staking rewards are also to incentivize more validators to participate in maintaining blockchain network security; on the other hand, there are existing consumption mechanisms for on-chain activities, such as Gas Fees on Ethereum, which essentially should not be subject to secondary taxation in the real world.
However, with regard to mining activities alone, if there is a need to save energy and reduce electricity consumption in the real world, taxes related to energy conservation can be levied, but not as income tax.
Overall, in existing practices, the taxation path for cryptocurrency assets cannot be said to be very clear, and the tax setup lacks consideration for the demands of building a decentralized world in Web3.
However, it is certain that imposing VAT or business tax on digital brokers providing cryptocurrency services and taxing the transactions between cryptocurrency and fiat currency in the real world, and even trading with stablecoins, is currently a tax setup beneficial for the balanced development of the real world and the decentralized world. As for many on-chain activities, such as the exchange between various cryptocurrency assets and wallet account transfers, these will only be considered taxable scenarios when cryptocurrency assets are widely applied in the real world.