A Taxpayer’s Paradise? International Cryptocurrency Taxation Trends Revealed

Cryptocurrencies have been on the rise since their creation, and the number of people investing in digital assets has skyrocketed. Trading digital assets have become increasingly popular, and yet, only a small percentage of investors are actually abiding by their local tax laws. This begs the question – just how many people pay taxes on their digital assets and what are the cryptocurrency taxation trends across the world?

A revealing new report from the Swedish tax firm Divly attempts to answer these questions, and the answer may come as a surprise – less than one percent of investors paid taxes on their cryptocurrency in 2022. According to the research, the payment rate varied from over four percent in Finland to just 0.03% in the Philippines.

When it comes to countries with the highest payment rate, Finland comes in at the top with 4.09%, followed by Australia at 3.65%. The USA fared relatively well, ranking tenth with 1.62%, while India, Indonesia and the Philippines had the lowest payment rates at just 0.07%, 0.04% and 0.03%, respectively.

The analysis failed to explain why the figures varied so much across countries. One potential explanation could be the fact that many countries have different regulations related to cryptocurrency taxation.

For example, people in Italy only had to declare their crypto holdings if its value exceeded €51,645. This threshold could reduce in the future with new regulations for the 2023 budget. Similarly, residents of the Philippines are only taxed at a rate of 35% if their income from crypto trading exceeds $4,500.

Germany, however, takes the crown when it comes to the best cryptocurrency tax legislation. Last year, the Ministry of Finance declared that private individuals don’t have to pay a tax if they hold digital assets for more than a year. This amendment reduced the term from the original 10-year exemption for digital currencies.

The Coincub research also placed Italy second, while Switzerland – where taxation varies in each canton – rounded off the podium. The country’s provinces don’t require any taxes to be paid on the profits generated from cryptocurrencies.

The report also suggested that there’s a potential 95.5% of investors not paying taxes on their digital assets. Though it may be true that awareness of crypto taxes is rising slowly, the situation could change in the future once governments impose amendments and better enforce laws.

Tax specialists have cast doubt on the research results, with global head of tax at crypto tax software Koinly, Danny Talwar, pointing out the difficulty of avoiding crypto taxes. Chartered accountant Greg Valles, a board member of Blockchain Australia, also said it’s likely for anyone not complying with the rules to eventually get caught, as government technology is getting more sophisticated.

So, is the cryptocurrency world a taxpayer’s paradise? It appears not. Though digital currencies offer a lot of advantages, taxation does need to be addressed. As regulations become stricter and governmental control intensifies, it’s important that investors take the necessary steps to comply with the law.

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Kassidy Florette
Kassidy followed her friends to buy her first Bitcoin in 2015, has been participating in various projects since 2019 as a marketing communication lead. Her knowledge and passion brings her in as a contributor.