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Crypto Regulations: Is Cyprus a Crypto Tax Haven?

Due to the widespread use of cryptocurrencies Crypto day trading is one of the most lucrative ventures in the world. So it’s a wonder that it’s still a little-known fact that cryptocurrencies are taxed in most countries. This is because most cryptocurrency holdings are considered “property” or assets such as gold and are taxed accordingly.

Simply buying cryptocurrency and holding crypto itself does not incur any taxes. However, when crypto is used as a medium of exchange, it is considered a taxable activity. An exchange can sell the crypto for real money, exchange it for another type of cryptocurrency, or use digital currency to pay for goods and services.

It is recommended that active cryptocurrency traders keep accurate records of their transactions to track how much tax is expected on their earnings in order not to break the law.

Fortunately, not all countries impose a tax on cryptocurrency trading. Cyprus is known for this and is popularly touted as a crypto tax haven for its lenient digital currency trading laws. But before we get into why Cyprus is a tax haven, it’s important to understand how the crypto tax works.

How does the crypto tax work?

In recent years, the cryptocurrency has grown by leaps and bounds and has the potential to grow even further. Because of this growth, it’s very likely that most governments will consider it an asset or equity like stocks and bonds.

So, how is crypto taxed?

As previously mentioned, buying and holding cryptocurrencies is not a taxable event. However, once crypto is exchanged for cash, a product or service – anything that yields a profit or profit – you will have to pay a certain amount of tax on that profit.

Like stocks and bonds, crypto trading earnings are taxed differently depending on how you obtained the digital currency and how long you hold it. You pay short-term tax gains if you owned the crypto for less than a year before trading. In the same way, if you’ve owned the crypto for an extended period of time, you’ll have to pay long-term profit taxes.

How do you know if you owe crypto taxes?

If your crypto had appreciated in value or otherwise traded profitably since it was first bought and sold, you would have performed a taxable action and therefore owed taxes on the gain.

If the value of your crypto increases while you own it and you need to profit from selling your cryptocurrency for fiat currency or use your crypto to purchase a product or service of any kind and exchange your digital currency for another kind You pay tax on it. To know exactly how much you owe in crypto taxes, you need to determine how much you originally bought the currency for and then compare that price to the selling price when you used the crypto.

The difference is your profit and you pay tax on that profit. Although it can be easy to track profits when selling crypto or using it to buy a product, it can be tedious when trading crypto. Crypto Control Software is designed to keep track of your crypto profits and calculate the taxes you are likely to have to pay and they are of great help.

Is Cyprus a crypto tax haven?

Not every country has introduced a tax on crypto transactions. As an example of this, Cyprus is popularly hailed as a tax haven for crypto traders, as until recently there was neither a legal framework for digital currencies nor guidance on how the currencies should be recognized or handled.

However, this does not mean that Cyprus is tax-free for crypto. It’s just that Cypriot tax laws were more lenient on crypto trading until recently. For example, profits from trading cryptocurrencies are not taxed. VAT is also exempt from this. However, the country still enforces a corporate tax of 12.5 percentmaking it one of the lowest rates in the EU.

Although Cyprus is popularly viewed as a crypto tax haven, it is not the only crypto-friendly nation in the world. Many countries have high crypto adoption rates, during the crypto regulation debate is underway and the finely tuned legislation has yet to be imposed. In many cases, the crypto tax is usually lenient when crypto regulation is in place.

For example, Switzerland is one of the few countries that does not levy capital gains taxes on the sale and trading of cryptocurrencies. Both Ethereum and Shapeshift are well integrated in the nation. Malaysia and Portugal do not charge capital gains tax or VAT on the sale or trading of cryptocurrencies, making it an excellent place for crypto investors. It’s almost the same in Singapore, but if a company’s primary business is digital currency trading, then it’s subject to income tax. Also, Greece levies a 15 percent tax on capital gains from crypto transactions, which can mostly be considered a low tax compared to other countries.

The recent massive growth of cryptocurrencies has forced most countries to stock up on their potential and implement policy to keep its spread in check. Taxing crypto transactions is just one of those steps, and it almost certainly won’t be the last. Therefore, it is imperative for active crypto traders to keep up to date with new laws that may affect them in order not to break the law.

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