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Crypto Taxes in the UK and the EU

Michiel Mulders
September 7, 2020
crypto taxes, crypto tax UK, crypto tax EU

Crypto trading has become popular around the world. Many are doing it out of interest and also for professional reasons. Let's recap the main benefit of cryptocurrency before we dive deep into the crypto taxation aspect. The central theme around cryptocurrencies is that there's no one in absolute control over them. This idea has been attracting many crypto enthusiasts for a long time now. 

If given a choice, most of us would not like to give any part of our crypto profit to the taxman. Yet ambiguity around crypto taxation isn't good for the growth of the crypto industry. It’s an undeniable fact that clear taxation rules will help make the crypto industry legal. Hence, it will grant legitimacy to crypto coins. It may even establish cryptocurrencies as an alternative to the global fiat currencies. 

Countries around the world have different sets of taxation rules when it comes to cryptocurrencies. Our guide will help you learn about how the crypto taxation system works in the United Kingdom and the European Union’s countries. 

Crypto Taxes in the United Kingdom 

The United Kingdom is a financial powerhouse. Even after Brexit, the United Kingdom still stands as the financial capital of the European region. It means that a proper set of crypto taxation and legislation in the UK can compel other countries in the region to do the same. 

#1. HMRC's Crypto Taxation Guidelines 

If you are a UK-based crypto trader, you will benefit greatly from the HMRC's crypto taxation guidelines. HMRC is Her Majesty's Revenue and Customs department of the United Kingdom. The crypto taxation guide covers everything from business activities to payments to trading. It also provides you information about crypto-based gifts. 

If you are planning for paper filing, then 31 October 2020 is the tax deadline for it. The tax deadline for online filing is 31 January 2021. Both these deadlines are for the previous tax year, which ends on 5th April 2020. 

#2. What are the Crypto Taxes Like in the UK?

As of now, cryptocurrencies are categorized as property in the UK. Hence, it taxes cryptocurrencies as such. Are you a HODLer that doesn't actively trade? You will be subject to a 10% capital gains tax. On the other hand, if you are trading cryptocurrencies actively, then it will be covered under income tax. 

You don't have to pay anything in taxes if your total income from crypto trading and other sources doesn't exceed £12500. If your total income goes above £12500, then you will have to pay income tax in the range of 20% to 45%. If you had any losses in crypto trading, then you can use it to reduce your taxable income. 

Furthermore, have you received cryptocurrencies through an airdrop or giveaway? You will have to pay income tax on it in the United Kingdom. You will also have to pay income tax if you receive cryptocurrency rewards through mining activities. Moreover, if you receive your salary in crypto, then it is also subject to taxes in the United Kingdom. 

There are also taxation rules when it comes to a business engaging in crypto. If business profits from crypto trading, then they will have to pay income tax on it. It’s because, in the case of crypto trading, income tax is prioritized over capital gains tax in the UK.  

Crypto Taxes in the European Union 

Germany

Germany is pretty lenient when it comes to crypto taxes. Some HODLers may even consider Germany as a crypto tax haven. The German tax authorities won't ask you to pay any taxes on your crypto holding if you hold it over a year and then sell it. 

Did you buy and sell any crypto tokens within a year? Even in this case, you won't have to pay any taxes if your crypto trading profit doesn't exceed €600 in the tax year. In any other case, you will have to pay tax on your gains. The taxes can be as high as 45% in Germany. Keep in mind that your taxable income will factor in all your income within a tax year.

France

The French tax department will consider your crypto profits as taxable income only if you trade actively. When it comes to one-time transactions, it will come under a net of 66% tax on your profits. But many factors will influence your tax rate. Factors such as - if you are making your tax payments on a monthly or quarterly basis, if you hired a chartered accountant to assist you, among other things. 

More info: Check out esilv.fr for info on the French crypto taxation policy.

Portugal

Portugal is a crypto haven in real terms. They don't tax your crypto profits. Your income by selling your crypto-assets does not even come under the purview of capital gains tax in Portugal. 

Spain

In Spain, the total duration for which you held on to your crypto assets is an important factor. It will influence your tax rate. If a crypto trader engages in buying and selling a cryptocurrency within 12 months, their tax rate will be 24.75% to 52%. When it comes to long term investments, a crypto trader will have to pay taxes in the range of 19% to 23%. 

Estonia

Estonia has a reputation for being a digital asset and digitization-friendly country. As of now, Estonia considers cryptocurrencies as property. They charge a flat income tax of 20% on your crypto profits. But you won't be able to deduct your losses from your taxable income in Estonia. 

More info: Check out the blockchain and crypto regulations for 2020 in Estonia by GLI

Croatia

A crypto trader has to pay taxes on their profits in Croatia. The current capital gains tax, known as "final income" in Croatia is 12%. A trader can claim capital losses to reduce their taxable income, but it is only allowed for the year from their capital gains. 

Switzerland

There is no income tax as such on your profits after selling any cryptocurrencies. But you will have to pay a wealth tax, depending upon the value of your crypto assets. Your income comes under the purview of wealth tax if the total worth of your crypto assets is over 100,000 CHF. The value is calculated as per the actual exchange rates in terms of CHF on December 31st. The wealth tax is between 0.13% to 0.94%. 

Slovenia

Slovenia is one of the most popular crypto havens in the crypto world. There is no tax on your crypto profits in Slovenia as there is no tax on capital gains in the country. But you will have to pay income tax if you get paid in cryptocurrencies. 

Conclusion

The crypto industry is still growing and many governments around the world are yet to decide on how to tax them. At the same time, the crypto adoption is increasing at a rapid pace, and governments will soon have to implement crystal clear guidelines regarding crypto assets globally. 

When it comes to crypto taxes, the following elements often determine how much you’ll be taxed:

  • Holding period
  • Crypto losses to reduce taxable income
  • Trade frequency

In the end, you may or may not prefer to pay taxes on your crypto assets. Yet we should be happy regarding the attention that the crypto market is receiving worldwide. This increased adoption of cryptocurrencies will benefit every crypto enthusiast.

About the Author
Contributor

Michiel Mulders is a blockchain developer with a passion for the crypto space. His interests include blockchain, entrepreneurship, marketing, and carefully crafted beers. Cheers!

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