Cryptocurrency tax issues continue to be a focal point in the industry. A report titled “2024 Global Cryptocurrency Asset Taxation Survey” published by PricewaterhouseCoopers (PwC) on April 30, 2024, highlights that the United States, the European Union, and other regions implemented new tax reporting requirements for cryptocurrency brokers and intermediaries in 2023. These measures are designed to increase the transparency of tax information regarding cryptocurrency assets.

In June 2023, the Organization for Economic Cooperation and Development (OECD) introduced the “Cryptocurrency Asset Reporting Framework” and revised the Common Reporting Standard to include new financial products. By December 1, 2023, 54 jurisdictions worldwide had agreed to adopt this framework, with a commitment to start the automatic exchange of information on cryptocurrency transactions by 2027.

So, what are the prevailing tax practices in the world’s major cryptocurrency markets today? This article, drawing on publicly available information, offers a concise overview of the current state of cryptocurrency taxation across these key markets.

USA

In the U.S., cryptocurrencies are classified as ‘assets’ by the IRS. On June 28, 2024, the U.S. Treasury and the IRS issued final regulations requiring digital asset brokers to start reporting total revenues from all digital asset sales for 2025 in 2026. Additionally, starting in 2027, brokers will be required to report the tax base details of certain digital asset sales made in 2026.

The IRS updated the 1099-DA form on August 9, 2024. Digital asset brokers will need to start submitting this form to the IRS from 2025 to provide necessary tax information.

Europe

In the EU, a 2015 case involving Swedish resident David Hedqvis, who sought to exchange fiat for BTC, shaped the tax regulatory framework for cryptocurrencies across many European nations.

The court inferred from the First National Bank of Chicago case (C-172/96, EU:C:1998:354) that exchanging fiat currency for BTC or vice versa constitutes a taxable supply of services. However, according to EU VAT regulations, the exchange services provided are exempt from VAT.

Taxation varies significantly across different EU countries for individuals holding cryptocurrencies.

Germany: Tax authorities view cryptocurrencies as ‘assets’, and income from selling cryptocurrencies is taxed as ‘other income’. Individuals who hold cryptocurrencies for more than a year enjoy a tax exemption of 600 euros on the income derived from their sale.

As per a KPMG article published on June 21, 2022, Germany released a 24-page Circular on May 10, 2022, which clarified taxation issues related to cryptocurrencies. Individuals need to pay taxes on income from selling cryptocurrencies and from mining, staking, and lending activities.

Italy: Starting from January 1, 2023, trading in Cryptocurrencies will be subject to a capital gains tax of 26%, with no tax on capital gains up to €2,000 per year.

Exchanges between different cryptocurrencies do not create taxable events.

According to an article published by the European Times on January 5, 2023, this change reflects the Italian government’s stance on cryptocurrencies following the new ‘Budget Law’, indicating stronger regulation of the volatile market.

U.K: In the UK, the tax authority classifies cryptocurrencies as “assets”, and transactions are subject to capital gains tax (CGT) up to 24%. According to a report by The Block on December 30, 2024, cryptocurrencies obtained through mining are considered income and are subject to income tax, as are salaries paid in cryptocurrencies.

Africa

Nigeria: In Nigeria, the Financial Act of 2023, effective from September 1, 2023, broadened the scope of ‘assets’ under the Capital Gains Tax Act to encompass ‘digital assets’, subjecting them to a 10% tax rate.

By September 2024, the Nigerian Federal Inland Revenue Service had submitted a proposal to parliament to levy a 7.5% Value Added Tax (VAT) on cryptocurrency transactions.

Latin America

Brazil: In Brazil, as per Law No. 14754/2023 enacted on December 12, 2023, residents holding financial investments overseas, including virtual assets, are mandated to pay a 15% income tax starting January 1, 2024. This tax is computed on a monthly basis.

Asia

Japan: In Japan, the National Tax Agency treats cryptocurrencies as ‘property’. The income from trading cryptocurrencies is classified under personal income tax as ‘miscellaneous income’, subject to progressive rates between 5% and 45%.

According to the financial reform requirements for the fiscal year 2025 published by Japan’s Financial Services Agency, the section “Financial Income Tax Integration” under the chapter “Achieving the ‘Asset Income Doubling Plan’ and ‘Asset Management Nation’” addresses the tax treatment of cryptocurrencies, suggesting that the tax regime should consider whether cryptocurrencies are publicly invested financial assets.

A report by Japan News on December 15, 2024, mentioned that the Japanese Financial Services Agency is discussing secure cryptocurrency transactions with experts and considering amendments to the Payment Services Act and the Financial Instruments and Exchange Act. If cryptocurrencies are recognized as financial assets, the tax regime may be reconsidered, potentially lowering the tax rate.

South Korea: Korea has delayed the implementation of cryptocurrency capital gains tax from 2025 to 2027, indicating a cautious approach to cryptocurrency regulation.

Singapore:The Inland Revenue Authority of Singapore views the use of Digital Tokens as a medium of exchange as creating two taxable events: the act of purchasing Digital Tokens and the consumption behavior of using Digital Tokens to exchange for other goods and services.

However, as per the electronic tax guide of the Inland Revenue Authority, from January 1, 2020, using Digital Tokens to purchase goods or services is no longer subject to Goods and Services Tax (GST).

Singapore does not levy capital gains tax, so profits from trading cryptocurrencies by businesses and individuals are not taxed.

Indonesia:Since May 2022, providing cryptocurrency transaction services in Indonesia attracts value-added tax, while income from corporate or personal cryptocurrency investments incurs a minimal income tax rate of 0.1%.

Hong Kong, China:On March 27, 2020, the Hong Kong Inland Revenue Department published Interpretation and Practice Note No. 39 regarding Profits Tax for the Digital Economy, E-commerce, and Digital Assets, discussing the tax implementation direction for digital assets (including cryptocurrencies and digital tokens, but excluding assets or activities classified as “securities”).

Among them, if the digital assets obtained (including purchased through ICO or trading platform) are used for long-term investment, any profits from disposal will not be subject to profits tax.

KPMG released an analysis on April 5, 2020, stating that according to Hong Kong’s Tax Ordinance Section 14, profits from digital assets acquired through ICOs are subject to profits tax unless specific tax exemptions apply.

If employees in the digital asset industry receive their salaries in cryptocurrencies, the relevant tax provisions for salaries in Hong Kong apply, and such income is declared based on the market value of the cryptocurrencies.

A news report by Boomberge on October 28, 2024, suggested that the Hong Kong government proposed expanding tax exemption policies for digital assets like cryptocurrencies.

On November 28, 2024, Reuters reported that Hong Kong plans to exempt hedge funds, private equity funds, and some family offices from taxes on investment gains from cryptocurrencies and other alternative assets, aiming to enhance Hong Kong’s appeal as a wealth management hub.

While many countries and regions have started taxing cryptocurrencies, there is significant variation in how they are taxed.

Existing tax practices mainly involve capital gains tax, income tax, and value-added tax, targeting individuals, businesses, and digital brokers who hold or use cryptocurrencies.

In most places, cryptocurrencies are treated as “property” or “assets”, and the act of selling them for income is the primary taxable event. High-tax countries typically have high tax rates on cryptocurrency-related activities.

In regions where Digital Tokens are used as a medium of transaction and for payment functions, the act of using Digital Tokens to pay for goods and services is also a taxable event, similar to using fiat currency.

Some countries or regions also include income from crypto assets obtained through Mining and assets pledged on the chain as subject to income tax.However, it remains to be discussed whether these on-chain activities require income tax based on income.On the one hand, on the chain of the PoW mechanism, the assets obtained by Mining behavior are essentially an incentive, while on the chain of the PoS mechanism, the pledge income is essentially to encourage more validators to participate in order to maintain the security of the blockchain network; On the other hand, on-chain behaviors already have corresponding consumption mechanisms, such as Gas Fee on Ethereum. In essence, such on-chain behaviors should not be taxed twice in the real world.

However, as far as mining behavior is concerned, if we look at the need to save energy and reduce power losses in the real world, energy-saving taxes can be levied, but they are not taxed on income.

Overall, in existing practice, the taxation path for crypto assets cannot be said to be very clear, and the setting of taxation ideas basically lacks consideration of the needs for building a decentralized world in Web3.

But what is certain is that levying value-added tax or business tax on digital brokers that provide crypto-asset services, and taxing the fiat currency transactions between crypto-assets and the real world, or even the transactions with Stablecoins, are beneficial to the real world and decentralization at this stage. The tax setting for the balanced development of the world. As for many on-chain behaviors, such as swaps between various crypto-assets and wallet account transfers, taxable scenarios can only be explored when crypto-assets are widely used in the real world.

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