What are some of the important things that a business focuses to find before setting shop? It is a long list but tax comes amongst the top in the list. Crypto business has not seen exception of taxes but just like any other business, it has fair and sometimes tough regulations and taxes. Some countries have gone to the extent of banning crypto payments and any other transactions, an example being Turkey. Others are crypto tax havens.
There are countries in the world that have used tax to attract investors into their land. Some have imposed heavy taxes on locals and is 0 -5.5% on external investors. Malta requires a corporate tax of 5% for non-domicile companies but impose a higher tax for companies that are registered in the country and remits to the banking system of the country.
Where are major Blockchain companies based?
1. eToro in one of the crypto tax havens
Founded as RetailFX in 2007 by the Assian brothers with David Ring, eToro has found a home in Cyprus. RetailFX was registered in Tel Aviv and 2010 when it released its OpenBook social investment platform which came along with the copy trading feature.
eToro in 2017 took a step to develop Blockchain-based social trading. The development was through a partnership with CoinDash. It has raised funds to expand and it has been a major asset and brokerage firm.
eToro set its offices in Cyprus. A Mediterranean country that charges zero tax on profits from trading in shares or other securities including forex or Bitcoin. Therefore cryptocurrencies are also 0% taxed. This was very conducive for eToro and they thought that would be the perfect place. They have offices in other regions like the UK, US, Australia and EU.
The American cryptocurrency platform that has “made crypto proud” doesn’t have a physical office. Coinbase started in 2012 by Brian Armstrong a former Airbnb engineer. Coinbase Global Inc. was incorporated in Delaware as a holding company for Coinbase and its subsidiaries. The U.S treats cryptocurrencies as personal property therefore taxed as capital assets. Any capital gains from selling cryptocurrency or mining are subject to capital gain tax.
In May 2020, Coinbase went to being remote and announced that it doesn’t recognise any formal headquarters. Coinbase is the first cryptocurrency platform to be listed on NASDAQ its shares selling at over $300 per share. The company has in 2021 announced plans to establish a business presence in India and planning to open a physical office in Hyderabad. Coinbase is citing the existence of engineering talent in India, which will assist the company in the development of the platform.
Coinbase has already posted job openings.
At the same time, India is facing a risk of a crypto ban. The ban is still a speculation and crypto investors are hoping that the government of India will come up with laws and regulations on crypto and not entirely end the trade. India imposes a tax on goods and services, it includes cryptocurrency in this bracket.
3. Binance in one of the crypto tax havens
The largest cryptocurrency exchange platform in the world in terms of trading volume has been on the move until 2018 where it found a home in Malta. Binance started in China, its founder Changpeng Zhao had to move the office to Japan in 2017 following the Chinese government ban on cryptocurrency trading. In March 2018, the company had offices in Taiwan and intentions to open its offices in Malta. This came due to the tough regulations that Japan imposed on it.
Malta which also referred to as the “Blockchain Island” offers the best environment for the crypto business. When other countries were still uncertain about crypto, Malta formed 3 bodies to look at crypto. These are; the Virtual Financial Assets Act (VFAA), Innovative Technology Arrangements and Services (ITAS) and the Malta Innovation Authority Act. These bodies work to ensure crypto operations were smooth and fraud-free.
Malta will not tax you for the possession of coins, utility tokens or other crypto assets. Crypto in Malta is therefore not taxed. Although some companies have failed to register or take licences that haven’t taken away the status of this island with cryptocurrency.
4. Huobi in one of the crypto tax havens
Huobi was founded by Leon Li in 2013 in China. By November 2017 Huobi was at 60% of the global Bitcoin market. China banned Bitcoin exchanges so it was time for Huobi to move to new places that were favourable. Huobi expanded by opening offices in Korea and started trading. It expanded to Japan and the US but it is registered and has its headquarters in an East African Island Seychelles.
Seychelles is the second top country in the world that moved the largest Bitcoin this year. It is attractive to crypto investors because it does not have laid down regulations on crypto. Many crypto co companies have been moving offices to Seychelles this includes BitMex which was banned in the USA with accusations of allowing customers to take excessive risks and having access to the clients’ trading data. Rumours have it that even Binance has offices in Seychelles. Another company with offices on the island is OKEx.
Kraken is a US-based cryptocurrency exchange and bank founded in 2011. It is based in San Francisco, California. It is one of the US-registered cryptocurrency exchange platforms. The US is not as conducive as some other countries in the world in terms of crypto tax and regulations. There have been speculations of a tax hike that is yet to be announced by President Joe Biden which is going to affect crypto users and companies. The tax hike is said to hit 39.6% on those earning more than $1 million.
The rules and regulations that govern cryptocurrency use in the U.S are tough and acquiring a licence is not an easy process because of the scrutiny that will be done before approval. The U.S government is also not sure about embracing cryptocurrency. There have also been rumours of new rules on crypto which has brought uncertainty to the trade.
Cryptocurrency is taxed as property holding in the US which is lower than income tax. Other cryptocurrency trading companies that are US-based include Bittrex which is based in Seattle, Washington.
Decentralised finance protocol Uniswap has also found a home in the US, it was launched here and it has endured the pressure. Although it has been lucky enough not to go through hell like Ripple and other coins, it has been tough to the regulations and tax requirements in the land.
6. Bitfinex in one of the crypto tax havens
Based in Hong Kong and registered in the British Virgin Islands, Bitfinex is enjoying its existence.
Bitfinex started in 2012 but hasn’t found a stable bank to work with. It has been ordered to pay large sums of money for breaches and has been sued for allegedly using Tether reserves to cover up a loss of $850 million.
Bitfinex has chosen the British Virgin Island for its ease to accept crypto businesses. The island which uses the US dollar as its official currency doesn’t have regulations about cryptocurrency. No income tax or corporate taxes have been put on cryptocurrency making this island a lucrative place for the business. It also has tough anti-money laundering legislation which ensures safety in the movement of money.
This is a cryptocurrency and payment platform that has its headquarters in Hong Kong. The founders’ Bobby Bao, Garry Or, Kris Marszalek and Raphael Melo thought it is best to keep the offices in Japan.
Hong Kong is one of the countries with laid down laws and regulations on crypto. Hong Kong allows blockchain businesses to be run pay workers using cryptocurrency but they still tax the income as per the value of the crypto at that time. Any Hong Kong sourced profits from cryptocurrency business activities are taxable as profit tax. People are allowed to carry out business activities but the market value of the cryptocurrency accrued at the date of transaction should reflect the number of sales and purchases.
Buying digital assets for long-term investment purposes is what will not attract income tax.
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