Crypto-Friendly Havens in the Europe: A Guide for High-Net-Worth Individuals
- Jamie Goulding
- Jan 24
- 7 min read
The allure of cryptocurrencies continues to grow, particularly among high-net-worth individuals seeking diversification and potentially significant returns. However, the tax implications of investing in cryptocurrencies can be complex and vary significantly across jurisdictions. This is largely because different countries interpret the nature of cryptocurrencies in different ways, leading to distinct taxation approaches1. This blog post explores the EU countries that offer the most favourable tax laws for crypto investors, with a special emphasis on Portugal.
Top EU Crypto Tax Havens
Several EU countries have emerged as attractive destinations for crypto investors due to their advantageous tax policies and regulatory frameworks:
Portugal: Portugal has long been a favoured location for crypto investors, and for good reason. It offers a 0% tax rate on long-term crypto gains for individuals2. However, it’s important to note that recent changes introduced in 2023 now subject short-term gains (less than one year) to a 28% tax2. Despite this adjustment, Portugal remains an appealing option due to its favourable tax treatment of crypto-to-crypto transactions and its generally welcoming stance towards digital assets4.
Germany: Germany takes a unique approach to crypto taxation. Gains from cryptocurrencies held for more than one year are entirely tax-free6. Short-term gains are added to your income and taxed at your individual income tax rate, which can range from 0% to 45%6. However, there is an exemption limit of €1,000 for gains from cryptocurrencies bought and sold within the same year6. This combination of tax-free long-term gains and a generous exemption for short-term gains makes Germany an attractive option for both long-term investors and those who engage in occasional trading.
Malta: Malta generally exempts individuals from capital gains tax on long-term crypto holdings8. However, it’s important to note that gains from frequent trading or the disposal of assets may be considered business income and subject to income tax, with rates ranging from 15% to 35%10. Malta’s comprehensive regulatory framework for virtual financial assets, its attractive tax regime for long-term investors, and its generous remittance basis tax regime for non-doms make it a strong contender in the EU crypto landscape, especially for high-net-worth individuals11.
Slovenia: Slovenia currently does not tax capital gains from the sale or use of virtual currencies for individuals unless the activity is considered a professional business12. It’s worth noting that a draft proposal for a new tax regime was introduced in 2021, which may change the tax treatment of cryptocurrencies in the future12. Despite this uncertainty, Slovenia remains an attractive option for crypto investors due to its relatively relaxed regulatory environment. It’s also important to remember that Slovenia taxes residents on their worldwide income, including any income derived from cryptocurrencies14.
Switzerland: Switzerland stands out for its lack of capital gains tax on cryptocurrencies for individual investors15. However, cryptocurrencies are considered wealth in Switzerland and are therefore subject to wealth tax17. Wealth tax rates vary by canton, typically ranging from 0.3% to 1%, and are progressive, meaning individuals with higher assets pay a higher percentage16. Switzerland’s long-standing reputation as a financial hub and its favourable tax treatment of crypto for individuals make it a popular destination for crypto investors.
Portugal: A Deep Dive into Crypto Taxation
Portugal has cultivated a reputation as a crypto-friendly jurisdiction, attracting investors and entrepreneurs with its advantageous tax policies and welcoming regulatory environment. Let’s delve into the specifics of crypto taxation in Portugal:
Tax Rates for Individuals
Long-term gains: Crypto assets held for more than one year are exempt from capital gains tax3. This makes Portugal a particularly attractive option for long-term investors seeking to maximize their returns.
Short-term gains: Gains from crypto assets held for less than one year are taxed at a flat rate of 28%3. This change, introduced in 2023, brought Portugal’s tax treatment of short-term gains more in line with other EU countries.
Crypto-to-crypto transactions: These transactions remain tax-free in Portugal, providing flexibility for investors who frequently trade between different cryptocurrencies4.
Taxation of Crypto-Related Income
Income derived from activities such as mining, staking, or providing crypto services is considered professional income and is subject to income tax under Category B18. Taxpayers with professional income of up to EUR 200,000 may opt to apply the simplified taxation regime, which uses coefficients to presume the costs incurred to generate the profits18. For income exceeding EUR 200,000, organized accounting methods must be used to ascertain taxable income18.
Regulatory Overview
No legal tender: Cryptocurrencies are not considered legal tender in Portugal and are not regulated by the country’s central bank19.
Limited specific regulations: There are no specific laws or regulations governing the issuance, taxation, or transfer of cryptocurrencies19.
Digital Transitional Action Plan: In 2020, the Portuguese government passed the “Digital Transitional Action Plan,” which established “Free Zones” for testing crypto technology21. These zones create a flexible regulatory environment for testing purposes, including on-site testing in real-life settings, and assist regulatory entities. This initiative aims to reduce the regulatory and legal burden that crypto businesses face as they develop and experiment with new technologies21.
Benefits of Investing in Crypto in Portugal
Portugal offers a compelling combination of advantages for crypto investors:
Tax-efficient environment: The 0% tax rate on long-term gains and the tax-free status of crypto-to-crypto transactions make Portugal a fiscally attractive jurisdiction for crypto investors5.
No declaration obligations: There are no obligations to declare cryptocurrency holdings5.
Non-habitual resident (NHR) regime: Investors who have not been tax residents in Portugal for the previous five years can benefit from the NHR regime, which offers a 10-year tax break on certain foreign-source income, including pensions, dividends, and interest5.
Golden Visa program: Foreigners can obtain Portuguese residency through investment, including investment in real estate or venture capital funds22. This program provides a pathway to citizenship and allows investors to benefit from Portugal’s tax-friendly environment and high quality of life. Portugal also offers the world’s first Bitcoin-linked Golden Visa investment opportunity, merging the growth potential of Bitcoin with the stability of Portugal’s renowned Golden Visa program23.
Growing crypto community: Portugal has a vibrant and growing crypto community, with various international events and conferences related to cryptocurrencies and blockchain technology24. Portugal’s hands-off approach to crypto regulation is attracting fintech companies and fostering a dynamic ecosystem for innovation in decentralized finance5.
Drawbacks of Investing in Crypto in Portugal
While Portugal offers numerous advantages, there are also some potential drawbacks to consider:
Lack of specific regulations: The absence of specific crypto regulations may create uncertainty for some investors5.
Taxation of professional income: If crypto trading is your primary source of income, you will be subject to income tax on your earnings5.
AML/CFT compliance: Obliged entities must comply with AML/CFT regulations, which may involve identification procedures and customer due diligence for certain transactions5.
Recent tax changes: The introduction of a 28% tax on short-term gains in 2023 has reduced Portugal’s attractiveness for short-term traders25.
Conclusion
Portugal remains a highly attractive destination for high-net-worth individuals seeking a tax-efficient environment for their crypto investments. While recent changes to the tax law have impacted short-term gains, the country’s overall approach to crypto remains favourable, particularly for long-term investors. The combination of tax advantages, a welcoming regulatory environment, a growing crypto community, and a high quality of life makes Portugal a compelling option for those looking to establish themselves in the EU crypto landscape. However, it’s crucial to consider the potential drawbacks carefully and stay informed about future regulatory landscape changes.
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Works cited
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