Key Insights:
Crypto tax avoidance might get punished more severely than traditional taxation.
Countries that charge little to zero taxation on cryptocurrencies are Hong Kong and UAE.
You can reduce your taxes significantly by calculating your liability more efficiently with top tax resources.
Techniques like using offshore trusts and double tax avoidance agreements have been used worldwide to avoid paying taxes.
Crypto crimes are often more severely sentenced than any other crime. John Alexander Thain, the CEO of Merrill Lynch before it collapsed, triggering the global financial crisis, has never been jailed despite losing $51 billion. Compared to this, Sam Bankman-Fried, who sank the FTX exchange and lost around $8 billion, was sentenced to 25 years in prison.
If you are still skeptic, look at the data. As recently as September 2024, the total number of crypto-related prison sentences was 272 years. Convictions jumped 267% between 2019 and 2023.
Below is a list of top crypto sentencing in the USA.
We assume the same will happen for those who avoid paying taxes on crypto in the future. Tax evasion is a criminal offense in almost all jurisdictions, including the USA, Hong Kong, India, and the European Union.
Though they are still pre-mature, most countries around the world are exceptionally harsh in regulating crypto taxation.
In the US, crypto is taxed along with capital gains. However, several lawmakers have proposed a new law to tax unrealized gains. If passed, it is expected to severely dent crypto ownership in the country.
Italy recently raised its taxes on crypto income from 36% to 42%. If we compare this with the country's regular tax slab, we find that it starts at 23%, and the highest tax slab is at 43%. This means that cryptocurrencies are taxed at the highest rate possible in Italy.
In China, crypto laws are different for mainland and Hong Kong.
Mainalnd China outrightl bans crypto ownership and has maintained this stance since 2017.
However, the Special Administrative Region of Hong Kong has zero capital gains on crypto. There is just one condition: you must mark it as an investment.
Things are similar in India where cryptocurrencies are taxed at flat 30%. What makes matters worse is that tax laws in India do not even allow tax-loss harvesting that is completely normal in other cases. Those profiting from crypto taxes must pay 30% taxes on profit and can claim zero deductions for their losses.
Tax-loss harvesting refers to a process whereby you are only taxed when your net profits are above a certain threshold; in India, it is ₹3,00,000.
In contrast to the above countries, which were at most partially tax-free, crypto gains in the UAE are fully tax-free. This is because the country does not tax personal income.
UAE has also been a top destination for crypto investments with large companies like OKX, Binance, and Kraken already established a presence. Further, the country has also seen the emergence of new startups like Suffescom, Myco.io, RedDot, Andersen Inc and many others.
Koinly: Koinly is a popular crypto tax calculation tool that automatically tracks transactions. The tool supports tracking across multiple exchanges, wallets, and blockchains. Users have also reported that in the event of any issue, the team at Koinly has responded within 24 hours of receiving the complaint.
Spreadsheets: This may sound a bit unusual, but those who do a handful of transactions every month do not need any specialized tools. All they need to do is create an Excel or Google sheet and fill it with data on a regular basis or a couple of days before the tax deadlines. Its easy, free and effective.
Coinledger: If you are looking for a crypto tool that provides encrypted communication between you and different crypto platforms while tracking your crypto taxes, Coinledger is the perfect choice. Users have also claimed it to be easy to set up with zero specialized knowledge. This is the tool to choose for those who value their privacy highly.
Accointing: Accointing by Glassnode is one of the most powerful trackers available in the market. The tool provides comprehensive tracking of crypto transactions, investments and also support portfolio management.
Coinpanda: For those who have yet to choose a crypto tax tracking and calculation tool, Coinpanda is a preferred choice. The tool provides a never-ending free plan that its users highly like. Though we found it a bit less user-friendly than other tools, it does the job well.
Yes, you can avoid paying crypto taxes legally. The catch is to understand how crypto tax laws work in your country.
For example, crypto tax is zero in the US until you cash out on your cryptocurrencies. A simple trick to avoid cashing out is to use a foreign-registered entity, probably in the Cayman Islands or the UAE, and deposit all your gains in it. This is known as round-tripping, and though it may seem morally wrong to a few, it is fully legal.
Another way to save on crypto taxes is to move to countries with lower tax rates, such as the UAE, and use DTAA laws to avoid paying a higher tax in your home country. By doing this, you still remain a citizen in your country but avoid paying higher taxes. However, ensure that your country has a DTAA with the country you want to move to.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.