Where can I not pay taxes on cryptocurrency? Part 2. Asia
In our last article, we talked about cryptocurrency taxation in Europe.
Today we will talk about Asian countries.
We have already told many times about cryptocurrency regulations in China and Japan. These countries, despite strict government measures against mining and digital exchanges, are the engines of the crypto market, and Asian exchanges are leading in terms of transaction volume.
We decided today to look at three countries whose regulators are vaguely aware of how cryptocurrencies work, but are keen to get their share of the profits from cryptocurrency transactions.
Today we will talk about Asian countries.
We have already told many times about cryptocurrency regulations in China and Japan. These countries, despite strict government measures against mining and digital exchanges, are the engines of the crypto market, and Asian exchanges are leading in terms of transaction volume.
We decided today to look at three countries whose regulators are vaguely aware of how cryptocurrencies work, but are keen to get their share of the profits from cryptocurrency transactions.
Malaysia: Bitcoin is a security
Since cryptocurrencies in this country are equated to documents with property rights, the Securities Commission Malaysia (SC) is in charge of developing laws in this area of business.
Since January 15, 2019, a law on digital tokens has been in effect here. It is generally restrictive and threatens criminal prosecution and millions of dollars in fines:
- ICO organizers;
- cryptocurrency trading platforms that have not been licensed by the authorities;
- "black" miners.
And it should be noted that law enforcement officials are not turning a blind eye to violations of this law. In July 2021, more than 1,000 ASICs were seized during a police raid in the city of Miri and publicly crushed by a roller. Miners were issued fines ranging from $1500 to $2000 in the process.
At the same time, SC sent a notice to Binance warning that its operations in Malaysia could be forcibly terminated because it was not officially authorized. The exchange has 14 days to wind down trading.
One of the foundations of the Islamic financial system is the unacceptability of maisir (excessive risk of transaction) and gharam (uncertainty of the result). According to Shariah law, money must be a tangible asset, and digital assets do not correspond to it.
Since it is no longer possible to ban cryptocurrencies, a compromise decision was made to recognize them as securities and apply adequate taxation in this area.
Malaysia has a territorial principle of tax payment - any income received in the country (by residents and non-residents) must be paid 25% to the state budget. This applies to all transactions, including the receipt of dividends, royalties, bonuses, interest income and other commercial activities. Only IT companies and companies involved in biotechnology and environmental protection enjoy tax benefits.
This also applies to the securities market. Therefore, all profitable crypto-operations in this Muslim country top up the budget by ¼ of the profit received.Income tax for individuals in Germany is calculated on a progressive scale: from income over €56 000 Germans give the state 42% and profit below €600 is not declared at all. Legal entities pay to the budget from 14 to 17% of net income (the amount is set by municipalities, where companies register the address of their head office).
Since cryptocurrencies in this country are equated to documents with property rights, the Securities Commission Malaysia (SC) is in charge of developing laws in this area of business.
Since January 15, 2019, a law on digital tokens has been in effect here. It is generally restrictive and threatens criminal prosecution and millions of dollars in fines:
- ICO organizers;
- cryptocurrency trading platforms that have not been licensed by the authorities;
- "black" miners.
And it should be noted that law enforcement officials are not turning a blind eye to violations of this law. In July 2021, more than 1,000 ASICs were seized during a police raid in the city of Miri and publicly crushed by a roller. Miners were issued fines ranging from $1500 to $2000 in the process.
At the same time, SC sent a notice to Binance warning that its operations in Malaysia could be forcibly terminated because it was not officially authorized. The exchange has 14 days to wind down trading.
One of the foundations of the Islamic financial system is the unacceptability of maisir (excessive risk of transaction) and gharam (uncertainty of the result). According to Shariah law, money must be a tangible asset, and digital assets do not correspond to it.
Since it is no longer possible to ban cryptocurrencies, a compromise decision was made to recognize them as securities and apply adequate taxation in this area.
Malaysia has a territorial principle of tax payment - any income received in the country (by residents and non-residents) must be paid 25% to the state budget. This applies to all transactions, including the receipt of dividends, royalties, bonuses, interest income and other commercial activities. Only IT companies and companies involved in biotechnology and environmental protection enjoy tax benefits.
This also applies to the securities market. Therefore, all profitable crypto-operations in this Muslim country top up the budget by ¼ of the profit received.Income tax for individuals in Germany is calculated on a progressive scale: from income over €56 000 Germans give the state 42% and profit below €600 is not declared at all. Legal entities pay to the budget from 14 to 17% of net income (the amount is set by municipalities, where companies register the address of their head office).
Where can I not pay taxes on cryptocurrency? Part 2. Asia
Singapore: bitcoin is an investment
Cryptocurrencies in Singapore are regulated by Inland Revenue Authority of Singapore (IRAS).
It does not use the capital gains tax as is customary in Europe, but there is a concept of return on investment.
Long-term investments in this country are not taxed, so crypto traders willingly store digital assets in the cold vaults of Singapore's crypto exchanges.
Overall, the Republic can be considered the best place in Asia to do digital business.
- Singapore does not require crypto exchanges and exchanges to have trading licenses.
- Does not regulate the sale and purchase of cryptocurrency for fiat money.
- Does not tax mining activities.
The only exceptions are any transactions with stabelcoins (they are equal to fiat money) and tokens, which are analogous to traditional shares in their characteristics: they give the owners the right to manage the company, a property share in it or the right to receive income from its activities.
Such transactions require licensing and the regulator reserves the right to monitor the transparency and security of transactions. Authorization is required of all participants in share token transactions, and the transparency of transactions is monitored by tax inspectors and IRAS representatives.
Any profits made to the detriment of investors can be withdrawn.
Cryptocurrency income is subject to general corporate income provisions.
For individuals, first-time income up to S$19,999 is tax-free.
Thereafter, the rate is as follows:
- Up to S$10,000 - 2%
- S$10,000 to $40,000 - 7%
- S$40,000 to S$120,000 - 15%
- S$120,000 to S$320,000 - 18%
- over S$320,000 - 20%
Capital gains due to growth in the price of assets are not taken into account in returns.
For legal entities, profits up to S$50,000 are not taxable. This applies to companies which are just starting their financial activities.
Then the tax rate will look like this:
- Up to S$300,000 - 8.5%
- From S$300,000 and above - 17%.
This scheme makes Singapore an attractive jurisdiction for both large digital corporations and small traders.Transactions with utility tokens are taken into account in the declaration, but are not considered to generate direct income. It is up to the taxpayer to specify the type of token, wallet address, bank statement, date of transaction and value of the transaction.
Cryptocurrencies in Singapore are regulated by Inland Revenue Authority of Singapore (IRAS).
It does not use the capital gains tax as is customary in Europe, but there is a concept of return on investment.
Long-term investments in this country are not taxed, so crypto traders willingly store digital assets in the cold vaults of Singapore's crypto exchanges.
Overall, the Republic can be considered the best place in Asia to do digital business.
- Singapore does not require crypto exchanges and exchanges to have trading licenses.
- Does not regulate the sale and purchase of cryptocurrency for fiat money.
- Does not tax mining activities.
The only exceptions are any transactions with stabelcoins (they are equal to fiat money) and tokens, which are analogous to traditional shares in their characteristics: they give the owners the right to manage the company, a property share in it or the right to receive income from its activities.
Such transactions require licensing and the regulator reserves the right to monitor the transparency and security of transactions. Authorization is required of all participants in share token transactions, and the transparency of transactions is monitored by tax inspectors and IRAS representatives.
Any profits made to the detriment of investors can be withdrawn.
Cryptocurrency income is subject to general corporate income provisions.
For individuals, first-time income up to S$19,999 is tax-free.
Thereafter, the rate is as follows:
- Up to S$10,000 - 2%
- S$10,000 to $40,000 - 7%
- S$40,000 to S$120,000 - 15%
- S$120,000 to S$320,000 - 18%
- over S$320,000 - 20%
Capital gains due to growth in the price of assets are not taken into account in returns.
For legal entities, profits up to S$50,000 are not taxable. This applies to companies which are just starting their financial activities.
Then the tax rate will look like this:
- Up to S$300,000 - 8.5%
- From S$300,000 and above - 17%.
This scheme makes Singapore an attractive jurisdiction for both large digital corporations and small traders.Transactions with utility tokens are taken into account in the declaration, but are not considered to generate direct income. It is up to the taxpayer to specify the type of token, wallet address, bank statement, date of transaction and value of the transaction.
Israel: Bitcoin is a digital commodity
The Israel Tax Authority monitors tax charges on income from cryptocurrency transactions.
The Israeli regulator believes that tokens do not have the characteristics of a security because they do not have a single issuer that issues them.
Nor can they be considered an investment, because they are not essentially an investment in working assets.
Therefore, as of 2020, the law stipulates that digital money is a commodity. Accordingly, their exchange is equated to barter, and mining - to production.
This approach entails taxation on capital gains and (in some cases) on the need to pay VAT.
According to the regulation adopted by the ITA, the ICO will also require deductions to the budget.
Residents, non-residents and representative offices of foreign companies engaged in cryptocurrencies are required to contribute to the budget of Israel:
- Individuals - from 10 to 50% if his annual income from cryptocurrency transactions exceeds NIS 6,290 per year. Mining is subject to an additional tax of 18% (VAT). At the same time, the regulator requires written proof of expenses for the activity. If you cannot prove that you purchased the VTS for $13,000 and sold it for $13,500, the amount of the sale will be considered net profit without expenses.
- Legal entities (exchanges, mining centers, exchangers) - capital gains tax at a flat rate of 24%. Non-resident companies doing business in Israel - 25%. For this category is also required to pay VAT. They are also required to submit information to the tax authorities about all users whose annual income from sales exceeds the tax-exempt minimum (6289 NIS)
Perhaps of all Asian countries, Israel is the most disadvantageous jurisdiction for running a crypto business.The absurdity of regulations adopted in Italy is compensated only by the fact that none of the crypto-enthusiasts bothers to enforce them.
The Israel Tax Authority monitors tax charges on income from cryptocurrency transactions.
The Israeli regulator believes that tokens do not have the characteristics of a security because they do not have a single issuer that issues them.
Nor can they be considered an investment, because they are not essentially an investment in working assets.
Therefore, as of 2020, the law stipulates that digital money is a commodity. Accordingly, their exchange is equated to barter, and mining - to production.
This approach entails taxation on capital gains and (in some cases) on the need to pay VAT.
According to the regulation adopted by the ITA, the ICO will also require deductions to the budget.
Residents, non-residents and representative offices of foreign companies engaged in cryptocurrencies are required to contribute to the budget of Israel:
- Individuals - from 10 to 50% if his annual income from cryptocurrency transactions exceeds NIS 6,290 per year. Mining is subject to an additional tax of 18% (VAT). At the same time, the regulator requires written proof of expenses for the activity. If you cannot prove that you purchased the VTS for $13,000 and sold it for $13,500, the amount of the sale will be considered net profit without expenses.
- Legal entities (exchanges, mining centers, exchangers) - capital gains tax at a flat rate of 24%. Non-resident companies doing business in Israel - 25%. For this category is also required to pay VAT. They are also required to submit information to the tax authorities about all users whose annual income from sales exceeds the tax-exempt minimum (6289 NIS)
Perhaps of all Asian countries, Israel is the most disadvantageous jurisdiction for running a crypto business.The absurdity of regulations adopted in Italy is compensated only by the fact that none of the crypto-enthusiasts bothers to enforce them.
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