Denmark’s proposal to tax unrealised crypto gains and Italy’s plan to raise capital gains tax on crypto by 50% have heightened concerns over how digital asset profits are taxed across Europe. For those in high-tax jurisdictions, strategic planning can help maximise how much of your profits you actually keep
Relocating to a tax-friendlier country isn’t a decision to take lightly, but for those willing to consider it, the financial benefits can be significant. This article examines how European nations tax crypto gains, pointing out where investors can preserve more of their profits if they are willing to move.
A Quick Crash Course on Cryptocurrencies
Cryptocurrencies have gained significant ground, now worth over €2.4 trillion globally—about half of Germany’s annual GDP. Operating outside traditional banks, crypto assets aren’t backed by physical assets like gold or managed by central banks, which makes them more volatile than regular currencies.
These digital assets are generated through “mining,” a process that records transactions on a decentralised blockchain network. This setup ensures transparency and security, attracting people seeking independence from government oversight. But as crypto moves further into the mainstream, new regulations are coming into play to offer users more protection.
Crypto’s growth is striking: more than 13,000 digital currencies exist, with nearly 9,000 actively traded. Around 420 million people globally, including 31 million in Europe, own crypto, and about 18,000 businesses accept it as payment. In Switzerland, for example, you can now buy a coffee or even pay your taxes in crypto—a sign that it’s becoming a more accepted and reliable way to transact.
Often seen as “digital gold,” crypto appeals to investors for its built-in security and the potential for rapid and dramatic gains.
Understanding Capital Gains on Cryptocurrency
Understanding capital gains is key when it comes to crypto taxation. Simply put, a capital gain happens when you sell an asset for more than you paid for it—and in most countries, that gain is taxable. The approach varies widely: the U.K., for instance, applies progressive tax rates of 10% or 20%, depending on your income. Meanwhile, countries like Malta and Switzerland either exempt long-term holdings from tax or impose only minor wealth taxes on professional traders (up to 0.8%).
In Denmark, the government has recently proposed a new approach to crypto taxation by considering unrealised gains and losses. This model could mean that taxes apply to the annual changes in the value of crypto holdings, even if assets remain unsold. If implemented, this would mark a substantial shift, sparking debate and some misreporting of the new model’s status.
High Crypto-Tax Regions
Nations with high overall tax rates often apply similarly significant taxes to cryptocurrency gains. Examples include Austria, Belgium, Canada, Denmark, France, Japan, the Netherlands, and Spain. Italy, for instance, is now considering a substantial increase in its capital gains tax on cryptocurrency, proposing a rise from 26% to 42%. This potential hike, part of the country’s 2025 budget, is intended to generate additional revenue but has already faced criticism and is open to review.
In Europe, crypto tax rates vary widely. Here are a few notable rates:
- Austria: 27.5%
- Denmark: Tax is calculated depending on one’s personal income tax bracket. Gains on cryptocurrencies can be taxed at up to 53%. Losses are deductible at a rate equivalent to 26% of your losses.
- France: 30% above €305
- Italy: 26% currently (with the proposed increase to 42%)
- Sweden: Generally 30%
Tax-Free or Lenient Countries for Crypto Investors
Certain countries adopt more favourable tax policies for cryptocurrency investors:
- Germany: Cryptocurrency gains are tax-free if held for at least one year. If assets are sold within a year, gains are taxed progressively, with an exemption for small gains up to €600. Germany’s approach appeals to investors focused on long-term holdings.
- Switzerland: Individual investors are exempt from capital gains tax on cryptocurrency unless classified as professional traders. Professional trading may be subject to a modest wealth tax, typically between 0.5% and 0.8%, depending on the canton.
Low-Tax Options
For those seeking more moderate tax obligations, several European countries offer lower capital gains tax rates:
- Albania: Albania imposes a 15% capital gains tax on cryptocurrency profits, making it a straightforward option for investors with clear tax guidance introduced as of 2023.
- Andorra: Andorra taxes cryptocurrency capital gains at 10%, favouring individuals who declare their holdings. Its competitive tax rate and transparent regulations make it a strategic choice for EU-based investors.
- Bulgaria: Bulgaria’s 10% flat tax on crypto gains applies to both short- and long-term holdings, offering a predictable, low-rate tax environment.
- Hungary: Hungary imposes a flat 15% tax on cryptocurrency gains, attracting investors with its simplicity and comparatively lower rate than many neighbouring countries.
Conclusion
As Europe tightens its grip on cryptocurrency regulation, tax policies remain far from uniform. Countries like Germany, Malta, and Switzerland still provide more forgiving options for long-term holders and investors. For those looking to lighten their tax load, changing residency to a more favourable jurisdiction could make a noticeable difference.
Whether it’s tax-free havens like Switzerland and Malta or lower-tax alternatives in places like Bulgaria and Albania, there are legitimate ways to keep more of your gains. With major countries like Italy and Denmark reassessing their approach to cryptocurrency tax, keeping informed of shifting rules can be vital for effective tax planning in an evolving market.
Sources d'information
- European Parliament, “Crypto-assets Regulation (MiCAR)”
- Danish Ministry of Taxation, “Taxation of Cryptocurrency and Digital Assets”
- Swiss Federal Tax Administration, “Guidelines on Cryptocurrency Taxation in Switzerland”
- Italian Ministry of Economy and Finance, “Capital Gains Tax Review and Proposal” mef.gov.it
- Bulgarian National Revenue Agency, “Taxation of Digital Assets in Bulgaria”
