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How Is Cryptocurrency Taxed Around The World Vs In India?

Jessy
March 30, 2022

While cryptocurrency has been around for a while, the last few years have seen a massive boom in the crypto space. Governments across the globe have been silent on the legality of cryptocurrencies. Still, they have slowly started understanding that the need for regulations around crypto is a must, especially for the citizens' benefit and investments.

Budget 2022 brought with it a 30% tax imposition on cryptocurrencies, amongst other charges that have been discussed in detail here. Leaving barely any room for investors to trade freely, the tax that India has placed on crypto assets certainly came as a huge blow. Not only that, the tax on crypto in India is much higher than the tax on other forms of income in India.

But, India was not the first country to impose taxes on crypto. Is it the country with the highest tax rate on crypto? Let’s find out!

USA

Treating cryptocurrency as a capital asset, the IRS of the USA only impose a tax on the sale of crypto. If held for less than a year, the gains will attract a short-term capital gain tax, and if held for more than a year, the gains will be considered a long-term capital gain.

This also means that until an investor sells the crypto investments, no tax is attracted. Further, allowing losses to be set off against the tax on other income of up to $3,000 makes it easier for investors to undertake a little more risk.

Short-term capital gains attract up to 37% in tax, based on the individual's overall income. Some transactions below a threshold can also be tax-free. Gains from crypto held for more than a year attracts anywhere between 0 to 20% tax.

Compared to India, the USA offers the benefit of setting off losses and lower rates for a long-term holding period, neither of which is offered by India at the moment when it comes to crypto taxes.

Canada

Even in Canada, cryptocurrency is seen as a capital asset where the crypto tax is attracted only upon sale. Canada offers a direct deduction wherein only 50% of the capital gains will be subjected to tax.

Canadian investors pay between 15% to 33% of their crypto gains as taxes based on income divided into slab rates. The Canadian government also announced that they would be tracking crypto transactions through exchanges to ensure investors don’t evade crypto taxes.

By allowing a 50% deduction on crypto gains before it is taxed, Canada has taken into consideration the expenses incurred to make profits from crypto, unlike India, where no expenses can be deducted against the gains from virtual digital assets.

United Kingdom

Though the UK doesn’t have a direct rule for taxation on cryptocurrencies, investors assume that they will treat their crypto income as capital gains or as income. There is no differentiation between short-term and long-term rates; therefore, the holding period of the crypto asset does not matter for crypto taxes in the UK. Based on the amount of income, the tax rates differ. The lower-income bands attract 10% tax while the higher ones attract 20% tax.

Compared to India, where a flat applies to all, the UK offers a comparatively lower rate for small investors. However, the UK might impose a special tax on crypto in the future.

Germany

Taking a unique stance, Germany views cryptocurrency as private money as opposed to a capital asset. Any crypto held for more than a year will not be taxed. Even crypto below €600 will not be taxed even though the holding period was less than 1 year.

However, if you use your crypto to earn more income through staking, the entire income will be subject to tax regardless of the holding period. Once you cross the time-year mark for staked crypto, it can be claimed tax-free when sold.  

Offering a base limit and some benefits depending on the holding period set Germany apart from India’s crypto tax regulations, wherein the period of holding does not matter, and neither is there any minimum limit of exemption from taxation.

Australia

Through a shared system with Australian crypto exchanges, the Australian government tracks all crypto transactions, ensuring proper tax disclosures. Following taxation based on slab rates, Australia recognises crypto as a capital asset. The slab rates make aggregate capital gains of up to $ 18,900 completely tax-free, but the slabs can go up to 45% tax for income beyond $180,000. Further, holding crypto assets for more than one year will directly reduce the taxability by 50%. 

Allowing tax based on slab rates gives a certain freedom to small investors looking to invest and earn from crypto. On the other hand, India has imposed a flat rate for income of any volume.

Netherlands

Unlike all its counterparts, the Netherlands imposes a wealth tax instead of a capital gains tax. Based on a presumed amount at the beginning of the year, a person’s assets minus liabilities are subjected to a tax of around 31%.

Parting Thoughts

The objective of all countries remains the same - they want to ensure they track the money being routed through crypto to ensure the overall safety of the country and its citizens. However, how these taxes may not sit well with genuine crypto investors looking for a decentralised space to get good returns without sharing it with the governments. 

Until the governments offer relaxations, investors will have to adhere to the regulations and pay the taxes on their crypto investments. While the ever-chaning regulations around crypto taxes may get confusing for an investor to keep track of, various tools make it easier for investors to manage their crypto investments seamlessly. Crypto tax calculators like Kuber Tax make it easier for you to find out your crypto tax liability hassle-free, with all the latest updates incorporated in one place!

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