Beginning in 2023, non-UK residents who purchase digital currencies through authorized local brokers and investment managers will be eligible for tax benefits. According to HMRC, the exemption is “an important factor in attracting global investors.” The tax exemption, which was announced in December, is part of Prime Minister Rishi Sunak’s plans to transform the UK into a cryptocurrency powerhouse.
UK’s crypto tax exemption
According to the document addressing Tax on Foreign Crypto Purchases, the new tax break goes into effect on January 1, 2023, and applies to the 2022/2023 tax year and “subsequent income tax years.” Nonetheless, it relates to current accounting periods as of the date the regulations were promulgated (19 December 2022).
This exemption is an important factor in attracting global investors, meaning foreign investors won’t be brought into UK tax simply by appointing UK-based investment managers. To build upon the UK’s position as an investment management hub, this exemption has been extended to include crypto assets so that funds which include them aren’t put off from appointing UK managers.
The HM Revenue and Customs
Notably, the country has published a tax guide for local cryptocurrency merchants. In July, HM Revenue and Customs released a consultation to solicit the opinions of investors and professionals regarding the taxation of decentralized finance (DeFi).
The guide advises that investors who have accumulated capital gains in excess of the £12,300 tax-free allowance must pay 10% or 20% tax. On the other hand, investors who earn additional money through crypto will be subject to a tax rate between 20% and 45%.
UK’s parliament is currently discussing the Financial Services and Markets Bill, which, if enacted, would grant local financial regulators expanded authority over cryptocurrencies. In the next weeks, the UK Treasury intends to launch a consultation on how the cryptocurrency industry can be regulated.
Crypto free-tax countries
Imagine being able to sell and trade cryptocurrencies tax-free. While investors in countries such as the United States and Australia may be required to pay thousands of dollars in crypto taxes, other nations provide more accommodating policies for those willing to relocate. Belarus is one of the countries without a crypto tax framework.
Belarus enacted a law in 2018 that exempts cryptocurrency from capital gains and income taxes for enterprises and individuals until 2023. However, it is essential to remember that these policies will be reviewed in 2023. It is unknown how cryptocurrencies may be taxed in the future in Belarus.
In Portugal, cryptocurrency is practically tax-free for the majority of investors. The majority of Portuguese people are not obligated to pay income tax or capital gains tax on cryptocurrencies. However, you may be subject to income tax if you engage in professional cryptocurrency trading. This is determined by a number of factors, including the frequency of your transactions and the proportion of your income derived from bitcoin activities.
Malta is one of the most cryptocurrency-friendly nations in the world and has been dubbed “Blockchain Island.” There is no long-term capital gains tax on cryptocurrencies in Malta. However, bitcoin trading may be considered taxable income subject to a maximum 35% tax rate.
It is crucial to know that the Maltese government considers various variables when determining how to tax your income, including the amount you earn from cryptocurrencies and your domicile. Consequently, your trading revenue may be subject to low as 0-5% tax rates.
El Salvador is widely recognized as the first nation to accept Bitcoin as legal money. El Salvador does not tax foreign investors’ Bitcoin income or capital gains to encourage investment.
As an incentive for Bitcoin investors, all companies in the nation must accept Bitcoin as payment for goods and services. Nonetheless, India, Spain, South Africa, the Netherlands, and Denmark have some of the worst crypto tax regimes.
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