Dateline: Mérida, Mexico
What if I told you that there was an easy way for you to digitally pay for products and services all over the world without incurring high fees, having to exchange currencies, or needing to involve a bank?
Sounds pretty good, right?
Well, the future is here.
Cryptocurrency has come a long way since it emerged back in 2008.
Instead of just being thought of as an alternative currency, it has now become a sought-after investment.
In fact, some argue that crypto is the future. And that’s why every nomad needs bitcoin.
While physical, printed cash is still the medium that most countries use, many are adopting digital forms of currency.
But not so fast, in some countries, that adoption comes laden with regulations.
Yet, you may be able to escape those regulations by adding digital assets to your wealth portfolio. They’re liquid and mobile, which makes for a perfect asset to move offshore.
Plus, there are at least 13 countries to consider that don’t levy tax on bitcoin capital gains.
In this article, we will discuss the future of bitcoin and which countries won’t tax you.
If you’re not already familiar with cryptocurrency, don’t worry. You can explore the basics of bitcoin or get a quick Crypto 101 crash course before you proceed.
The Future of Bitcoin
Gold is dead — at least according to Michael Saylor.
Instead, digital gold is where it’s at, as in lots of digital gold coins otherwise known as bitcoin.
If, like Saylor, you’re coming out of the first year of the pandemic with a desire to keep more of your wealth rather than lose it to monetary inflation, then finding an alternative source of currency is a good way to keep your assets safe.
And moving to bitcoin is a perfect way to unlink those assets from fiat cash flows.
Bitcoin is working — it’s growing at 200% a year. The companies that are plugged into a digital monetary network like bitcoin are working, too.
According to Saylor, bitcoin is the biggest thing that has happened in our lifetime. Countries that want to prosper will need to eventually embrace a digital monetary system. And if an economy collapses, why not rebuild it with a digital currency?
It would also be wise for individuals and businesses to own assets that are liquid, mobile, and tangible. Bitcoin happens to fit the bill on all three.
And since more and more government regulations will presumably be imposed on bitcoin, it would be wise to make your assets mobile sooner than later.
In fact, the US began adding a virtual asset question to its Tax Form 1040 in 2020. While the government officially categorized virtual currencies as “property” back in 2014, the Internal Revenue Service (IRS) is becoming increasingly vigilant about collecting taxes on cryptocurrencies.
This means that in the US, your bitcoin is subject to capital gains tax and income tax, depending on your activities. You also have to report your capital losses, but there are no taxes incurred if you gift crypto.
With that being said, taxes levied on cryptocurrency can be extensive. I even know a cryptocurrency investor in the US that lost nearly $1 million due to high US taxes last year. This is why having to pay high taxes is worse than you think.
He found that out the hard way when he received his first tax bill for $375,000, which was about half of what he made.
But you can get around this if you look at the opportunity cost of tax. It would be wise to consider not only what you have to pay, but what that money could help you achieve if you had access to it.
Going offshore is a great strategy for retaining access to more of your money in order to grow your business at will.
The cost of going offshore is far less than the value you could lose to taxes if you stay in your country.
And if you happen to choose Antigua, you will most likely run into Roger Ver at a meetup. Here, he would argue that there is a digital asset that is a step-up from bitcoin itself — bitcoin cash.
In short, bitcoin cash is the result of a scaling issue that occurred with bitcoin. When more and more people started accessing the digital monetary network, the blocks of the chain became full. This translated to higher transaction fees and a slower system.
To solve this issue, some people within the bitcoin community advocated increasing the blockchain size to allow for more transactions, which would result in lower fees and more reliable transactions.
This idea then generated what is known as “the hard fork,” where the blockchain split at a specific point — with one chain for bitcoin cash and one chain for bitcoin (core).
The shift allowed bitcoin to be once again used as cash and to continue to pursue its status as “cash for the world.”
Tax on Bitcoin Gains
While many countries may follow suit with the US and start taxing capital gains on bitcoin, there are still several countries that don’t.
Here are 13 for your consideration:
- Belarus. In 2018, Belarus created a ground-breaking law that legalized cryptocurrency. This means that until at least 2023, individuals and businesses that mine for or invest in cryptocurrencies are exempt from paying taxes on them. In Bulgaria crypto is considered a personal investment, so you can mine, buy, or sell cryptocurrencies here freely.
- Bermuda. Bermuda does not impose taxes on digital assets or their transactions. That includes no income tax, capital gains, withholding, or other taxes. And as of 2019, any taxes that you do incur there can be paid with USD Coin, another digital coin.
- British Virgin Islands. This tax haven is neutral when it comes to capital gains, corporate, income, or withholding taxes. And for the time being, that includes cryptocurrency as well. This means that there are no specific taxes imposed against cryptocurrencies in the British Virgin Islands.
- Cayman Islands. Like the British Virgin Islands, the Cayman Islands are already a tax haven. This means that the processes of issuing, holding, or transferring digital assets will not be subject to taxes here either.
- Germany. In Germany, cryptocurrencies are considered to be private money. As such, they are exempt from taxes. However, you must hold said cryptocurrencies for over a year to be entitled to this perk. And if you sell any assets that have not been held for at least a year, the tax won’t accrue if the sale is less than 600 euros. Unfortunately, businesses in Germany are not as lucky and must pay corporate income taxes on any cryptocurrency gains.
- Gibraltar. Already famous for low taxation, Gibraltar does not subject cryptocurrency investments to capital gains taxes. However, there is a fixed 10% corporate tax rate that is applied to crypto-trading.
- Hong Kong. In Hong Kong, as long as individual cryptocurrency activities are for investment purposes, there is no capital gains tax. But for corporations, when digital assets are traded as a normal part of business, they are then subject to an income tax.
- Malaysia. You will want to be careful in Malaysia. Currently, if you make cryptocurrency transactions infrequently, then you will not be subject to taxes. However, if you are an “active trader,” your virtual assets can incur a capital gains tax.
- Malta. Malta is known as “Blockchain Island” and one of the most crypto-friendly countries. Here, you will not have to worry about capital gains tax for any long-held cryptocurrencies. However, if you make same-day trades, you will be subject to income tax as you would with day-trading stocks.
- Portugal. Portugal’s tax regime is incredibly tax-friendly. Here, there are no taxes when you trade or transact in cryptocurrency. However, if you are a business that accepts digital currencies as a form of payment, you could be liable to pay value-added tax (VAT) or income tax.
- Singapore. Capital gains tax doesn’t exist in Singapore. Therefore, individuals and businesses that hold cryptocurrencies are not subject to such a tax. However, businesses are liable to pay income tax on any gains.
- Slovenia. As with many of these countries, Slovenia applies a different tax law to individuals and to businesses. Here, an individual will not incur a capital gains tax on any cryptocurrency that they sell. However, they will be subject to income tax on their profits and corporations will be liable to pay income tax at the corporate rate.
- Switzerland. Considered a crypto-havens, Switzerland also has a few tax breaks for cryptocurrency traders. Individuals that buy, sell, or hold cryptocurrencies will not have to pay a capital gains tax. However, this country considers cryptocurrency mining as self-employment, so an income tax will be applied to any resulting income from this activity. For professional cryptocurrency traders, a business income tax will be applied. It is also important to note that Switzerland has other wealth and cantonal taxes that may apply.
Additionally, there are other countries that are extremely crypto-friendly that you might want to keep your eye on. Though, they may not have the tax incentives that you’re hoping for.
For Ver, Antigua is at the top of his list. He claims that there is a large amount of cryptocurrency adoption by both the government and the rest of the island. Proof of this can be seen in nearly every restaurant now allowing payments with bitcoin cash and about 100 people attending bitcoin meetups, a fair number for such a small population.
He also attests that Japan is welcoming, too. As bitcoin was created in Japan by someone under the pseudonym Satoshi Nakamoto, the government shows a lot of pride in such an innovation.
If you’re a seven- or eight-figure entrepreneur that wants to move your assets to a country where you won’t lose half of your wealth, contact the Nomad Capitalist team. We’re ready to help you create an offshore strategy for your digital assets.
No matter whether you choose to invest in digital gold or digital cash, you’ll be moving towards the future.