12 countries to legally live with no taxes on cryptocurrencies

Living without borders and with little or no taxes is the desire of many Staatenlos clients. If you are already a perpetual traveler or still live in your country of origin, but you have a job that allows you to be on the road, you must have thought: how can I legally reduce the amount I pay in taxes?

If this is your particular situation, then rest assured that it is indeed possible, especially for those who operate in one of the most innovative markets today: cryptocurrencies.

As a rather new type of asset – Bitcoin (BTC) only came into the world in 2009 – cryptocurrencies have registered a strong appreciation in recent years. As a consequence, many investors raised real fortunes and achieved financial independence.

At the same time, governments began to follow this movement and, as expected, demanded their share of the business. More and more countries have passed laws and taxes on earnings of those who work in this market, and this is not always good news.

On the other hand, digital nomads don’t have to be stuck in a single country. And just like them, cryptocurrencies are not restricted to the sovereignty of any nation.

There are several internationalization strategies to legally live with less taxes on cryptocurrency earnings. And, of course, we know that many investors prefer not to declare their goods.

But following that path is not always the safest course, especially for those who trade through exchanges. After all, most of these platforms carry out identity verification processes (KYC and AML) that require data from their customers.

Governments can indeed identify certain transactions with cryptocurrencies. And if you intend to spend them in the future, but have not declared them in the past, you may end up having problems with tax authorities.

Fortunately, there are several countries around the world that have decided to warmly embrace cryptocurrencies, creating more friendly legislation and exempting them from taxes. In fact, many of these countries even have zero taxes for certain cryptocurrency transactions.

Legitimacy and the gray area

First of all, if you want to live tax-free operating with cryptocurrencies, be aware that there are many options in countries with tax systems where living without taxes is possible. However, not all of these countries are friendly or look favorably on cryptocurrencies.

In several Southeast Asian nations and even in the Americas, it is possible to live tax-free if your income comes from abroad. However, cryptocurrencies do not have a legal status.

An example of this dichotomy can be found in Uruguay. With one of the most efficient tax systems in the region, the country provides a tax exemption if a resident’s income comes from outside the country.

However, cryptocurrencies do not have specific regulations in Uruguayan law. If you tried to open a bank account in the country and declare that you work with Bitcoin trading, for example, the manager would probably think twice before accepting you as a client.

So, if you want to go to a country with lower taxes, it is important to do research on the legal status of cryptocurrencies in that place. All countries on this list treat cryptocurrencies as legal means and, therefore, give you greater protection as a resident.

Capital gains with cryptocurrencies

Before we go any further, it should be noted that there is a difference between the types of taxes levied on cryptocurrencies or digital assets. Unlike stocks and other types of investment, cryptocurrencies are not companies. Bitcoin, for example, does not generate cash or has an income stream.

Therefore, the main tax levied on these operations is considered a capital gain, that is, when it comes to purchase and sale. In this sense, imagine that you paid $10,000 in some Bitcoin fractions and kept them, without making any further purchases.

A month later, that same fraction is now worth $13,000, meaning it has appreciated by 30%. You decide to sell all Bitcoin fractions and pocket the profit. This profit, according to the law of your country, will be taxed as capital gain.

Another possibility of taxation would be on income from activities with cryptocurrencies, such as work or other types of operation which do not involve capital gains.

In this sense, activities such as cryptocurrency staking fit into this group. “Staking” means leaving part of the cryptocurrencies locked in the blockchain and, as a consequence, receiving cryptocurrencies as a reward for validating operations.

In other words, staking works as a form of passive income with cryptocurrencies and therefore can be taxed as income. Operations such as Proof of Work (PoW) mining, DeFi in general and payments for services provided in cryptocurrencies are also considered income in most cases.

Therefore, capital gains taxation affects gains at the time of purchase and sale of cryptocurrencies, while income taxation involves gains obtained from carrying out market-related activities.

Income tax

If you have income from staking or decentralized finance (DeFi) protocols, this is your group. These are countries where there is no tax on income from these activities.

For territorial taxation countries, this is only valid for income from outside of the country. Therefore, it is important to make sure that the brokerage or protocol are not linked to the country where you have your tax residency.

Another type of income comes from buying and selling cryptocurrencies, classified in many countries as professional trading. At first glance, countries that do not tax income from abroad seem like a good option, but this is not always the case.

Countries such as Malta and Hong Kong do not extend this exemption to those who enter the “professional trader” category, and in many cases, frequent and systematic cryptocurrency operations are viewed in the same way.

Each country sets its criteria for determining whether a trader qualifies as a professional trader. Generally, the number of operations, their frequency, and other trading criteria are taken into account.

Understand the capital gains exemption

Taxation models may vary according to the legislation of each country. There are countries that exempt transactions from capital tax and also allow living tax-free on income from cryptocurrencies.

This is the case in countries with land taxes, where only income earned within the country is subject to tax. In these places, income earned outside the country is tax-exempt.

In other words, if you do staking and DeFi operations and convert those profits into fiat currency from a broker located abroad, in many cases, this is enough to be tax exempt.

It is also possible to live without any taxes on cryptocurrencies in countries that do not charge direct taxes. But these are generally more expensive countries, isolated or with difficult access for immigrants, which makes emigration there unfeasible for many.

Apart from territorial countries and no direct taxes, the most common case is countries that offer tax exemptions for capital gains but not for income.

But the status of a professional trader should always be considered. Generally speaking, individuals who trade cryptocurrencies as investors are not taxed in many countries. But if these operations are defined as a professional activity, then taxation might take place.

The definition of professional activity varies from country to country, so keep an eye out on local legislation.

In addition, we also have countries that tax capital gains on a personal level even in the case of non-professional investors, but cryptocurrencies are excluded from that definition. If you carry out operations of this type, those gains will not be taxed.

Finally, there are countries that combine the best of both worlds and simply don’t have capital gains taxes, either personally or professionally. Any capital gains with cryptocurrencies are tax free.

Now, let’s explore some countries in which it is possible to live with cryptos and no taxes in all these scenarios.

Hong Kong

Hong Kong’s tax policy has a distinct feature: it is a territorial tax system. That means it does not tax income from abroad, including activities with cryptocurrencies.

Generally speaking, individuals do not pay taxes on transactions involving cryptocurrencies. However, professional traders are taxed under the progressive income tax regime.

Regarding companies, Hong Kong’s corporate income tax is levied only on income from activities carried out within Hong Kong.

Hong Kong currently does not charge value added tax (VAT). Therefore, cryptocurrency transactions are currently exempt from VAT. The city currently does not tax capital gains, which means that an investor can pocket all of their earnings by trading cryptocurrencies there.

However, when it comes to companies, capital gains on the disposition of assets may be subject to corporate tax in certain circumstances.

As for income, Hong Kong legislation stipulates different types of cases in order to determine whether income generated by cryptocurrency activity is subject to income tax. First, it is necessary to determine whether they are related to capital goods or commercial shares.

If the activity is intended for long-term investments, profits are capital in nature and relate to capital goods. Therefore, they are tax-exempt in Hong Kong.

However, professional traders are taxed under the progressive income tax regime as the profits from their activities are related to stock trading.

Switzerland

Switzerland is one of the freest countries in the world and also the most welcoming to the use of cryptocurrencies. At least two regions (Zug and the city of Lugano) have an excellent tax structure in this regard.

In fact, the city of Lugano made Bitcoin a legal tender in March. Therefore, as a currency, the use and earnings of Bitcoin are tax-exempt in the city.

In all other cases, Switzerland has a great deal of internal autonomy. This means that there are taxes levied at the federal, cantonal and municipal levels.

In August 2019, the FTA published a work document related to the tax treatment of cryptocurrencies and digital assets based on blockchain technology in Switzerland.

In general, private individuals do not pay capital gains or income tax on most transactions involving cryptocurrencies at the federal level. As for the cantonal level tax charges, they vary according to the respective canton of residence.

As in Hong Kong, Switzerland differentiates between professional investors and traders. If a private individual qualifies as a professional investor/trader, he is also taxed under the progressive income tax regime at the federal level.

Croatia

Croatia has already been pointed out in the Staatenlos Mastermind Group attractive destination for cryptocurrency investors. The reason is its attractive tax regime for those operating in this market, as the country has decided not to tax transactions between cryptocurrencies.

The country also has a full tax exemption as long as a 2-year grace period is met. In this process, the investor can earn their profits in trading, leave them in a stablecoin and simply wait for the deadline.

Here is an example: imagine that you buy 10,000 euros in Bitcoin today (05/02/2022) and carry out trading operations, transforming this capital into 100,000 euros. Then you take the profit and keep it in your wallet, in some stablecoin pegged to euros.

If you do not withdraw this money before 05/01/2024, you will not pay any tax. And even if you make other transactions at a later date, the starting date for the purposes of the exemption will always be the first purchase.

If you need to withdraw money before the 2-year period, then you will have to pay 10% tax on profits, a rate that is still very attractive.

The only problem is that Croatia taxes other sources of income from cryptocurrencies, such as staking, mining and lending. In these cases, there is a progressive income tax of 20% up to 45,000 euros.

Portugal

Portugal is seen as a tax haven when it comes to cryptocurrencies. Portuguese financial legislation does not have specific rules on cryptocurrencies, however there is a binding consultation from the Portuguese tax authority that determines which cryptocurrency gains are tax-exempt.

That is why Portugal does not charge any type of capital gains tax on cryptocurrency transactions, as long as the income does not come from a professional activity. The country does not tax certain types of income from abroad, as long as the resident is within the NHR regime and meets certain conditions, which is another advantage for those who settle there.

Finally, there is also Madeira Island, a region administratively linked to Portugal and with a highly competitive tax regime. The president of the government of Madeira, Miguel Albuquerque, recently stated that residents of the island will not need to pay income tax on the purchase and sale of Bitcoin.

El Salvador

A small nation located in Central America, El Salvador was the first country in the world to adopt Bitcoin as its official currency. The cryptocurrency joins the US dollar, which has been the country’s official currency since their old one, the colón, collapsed in 2001.

With legal tender status, the use of Bitcoin in El Salvador is completely tax-free. There is no capital gains charge if you use cryptocurrencies to purchase goods and services in the country.

In addition, there is a project for the construction of a city entirely dedicated to companies and Bitcoin enthusiasts. The so-called Bitcoin City will have a complete exemption from several taxes:

• Income tax;
• Capital gains;
• Property taxes;
• Payroll;
• Municipal taxes.

There will only be a 20% VAT charge, but it will not directly affect cryptocurrencies.

Panama

With no central bank, an attractive tax system and the dollar as its official currency, Panama is a safe haven in the midst of the instability that dominates Central America. And the use of cryptocurrencies is legalized under Panamanian law.

First of all, Panama has very low stay requirements for anyone who wants to have a residence permit in the country – it is only necessary to spend a minimum of one day in the country every two years. That is, you can make the country your home without having to live there most of the year.

Second, the country adopts the territorial tax system, taxing only income from within Panama. So, if you own a business and the revenue comes from abroad, there is no tax charge.

Regarding converting cryptocurrencies to fiat currency, it is also possible to avoid paying taxes. If the brokerage company you trade with is headquartered abroad, or if you use an offshore company and receive dividends from abroad, this income is also tax-exempt.

Malaysia

Southeast Asia has become a stronghold for digital nomads, making places like Bangkok and Chiang Mai true global hubs. Malaysia is also in this group, featuring one of the best and most affordable offshore structures.

In the case of cryptocurrencies, Malaysia does not have a specific regulation on this subject. Cryptocurrencies are not considered currencies or assets by the country’s central bank (BNM).

As a result, gains from cryptocurrency transactions made by individual investors are not taxed. But gains from trading operations are taxable, which can reach up to 28%.

“Individuals who hold foreign currencies and earn gains on the conversion or use of the foreign currency are not taxable, for reasons that they carry out for personal purposes with no intention of trading. However, individuals who frequently trade currencies will be taxed as commercial income.”, claims the BNM.

However, if you are a Malaysian resident, this tax can be avoided if you own an offshore company and distribute the profits from your operations through dividends.

Malta

Nicknamed “Blockchain Island”, Malta has a complete structure that encourages businesses focused on this area. For example, the country recognizes Bitcoin “as a unit of account, medium of exchange or store of value”.

Malta does not apply capital gains tax to cryptocurrencies as long as the investment is focused on the long term. For professional traders, the rate is quite expensive: up to 35%. This is because the country considers the activity similar to day trading of stocks, which has the same rate.

However, the Maltese system has “structuring options”, such as holding companies, which allow this tax to be drastically reduced. Final rates can drop to 5% or even zero, depending on the structure used.

Finally, Malta also does not tax income from abroad, as long as it is not transferred to or used in the country. In this regard, staking and mining profits, as well as lending, end up being tax-exempt if not repatriated.

Singapore

Singapore is one of the places with the best wealth and quality of life in the world. It is also one of the best tax havens for those who trade cryptocurrencies and stocks.

Capital gains tax does not exist in Singapore under any circumstances. Therefore, neither individuals nor companies in the cryptocurrency field whose headquarters are located abroad are taxed.

But Singapore-based companies are subject to corporate tax if their main business is cryptocurrency trading or if they accept cryptocurrencies as a form of payment.

Thailand

With beautiful beaches, lush landscapes and a multitude of global citizens, Thailand is an excellent destination to experience new landscapes and cultures. And the Thai tax system has interesting structures to live without taxes.

Like other countries on the list, Thailand does not tax income from abroad. But there is a detail: this income is only exempt if the repatriation of income to Thailand takes place outside the calendar year in which it was obtained.

For example, let’s say you made an income of 10,000 euros from cryptocurrency transactions in 2021 and you want to spend that income. You can use an offshore company and distribute these profits in the form of dividends, but they will only be tax free if the distribution to Thailand takes place in 2022.

Romania

If you are self-employed or a small business owner, you will be happy to know that Romania, the EU’s best micro-business regime country, is also crypto-friendly.

The country exempts transactions between cryptocurrencies from taxes, that is, the purchase of Bitcoin with payment in Ether, for example. If you decide to convert the amount into fiat currency, there is a 10% tax on capital gains. Income earned from cryptocurrencies is also taxed at 10% on a personal level, but can be reduced down to 6% through a local business.

This is because the country charges a rate of only 1% on revenues for micro-enterprises with a turnover of up to 1,000,000 euros per year. With a 5% withholding tax on dividends, the total charge goes up to 6%.

Costa Rica

Breathtaking natural landscapes, great quality of life, access to two oceans and several tax advantages. Costa Rica has already been the subject of an article by Staatenlos because of its very advantageous tax system, which does not tax income obtained from sources abroad.

The country treats cryptocurrencies as “intangible assets”, i.e. digital goods, and there is a 15% tax on capital gains. However, as long as the operations are carried out in a company outside the country, the amount is not taxed, even if repatriated.

And if you have a monthly income above $2,500, you can get a “rental” visa aimed at entrepreneurs and freelancers. There is also the digital nomad visa, whose required income is US$ 3,000 per month and grants the right to reside in the country for one year, with the possibility of extending it for another additional year.

Conclusion

The cryptocurrency market is very young, and regulations are still being built. Some governments have already seen them as a threat and imposed heavy taxes, while others have created a friendlier environment for cryptocurrency companies and investors.

If you are interested about this subject and want to emigrate to any of the countries mentioned in this list, feel free to contact us. If you enjoyed the list but still have doubts about which country is the best option for you, schedule a consultation and we will help you make your choice.

Because your life – and your money – are yours!