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Andrew Wood is a tax barrister, advisor, and founder at Mosaic Chambers Group, as well as a CIOT Fellow, STEP member, and author on cryptoasset taxation.
It is always worth remembering, and I say this as a tax advisor, that tax is not the most important thing in the world. However, for crypto holders watching their portfolios appreciate, the difference between zero and 28% tax can mean millions. As digital assets mature from speculation to serious wealth, high-net-worth individuals increasingly engineer tax migrations to preserve gains. The jurisdictional landscape for crypto tax optimization spans from Dubai’s zero-tax haven to Portugal’s 365-day rule and raises critical considerations including the distinction between investor and trader status, what constitutes a disposal, and why moving jurisdictions before cashing out might already be too late.
A primary consideration will be whether the activities of the crypto holder are purely investment in nature, or whether the pattern of activities will lead to the conclusion that the person is operating on a commercial basis. This is because many jurisdictions will treat the activities of an investor differently from someone running a professional or trading activity.
Most crypto participants are aware that the exchange of, for example, their Bitcoin into GBP or USD is considered a disposal for tax purposes. However, it should also be noted that in many jurisdictions the exchange of one crypto for another, such as Ether for Solana, is also considered a disposal. As such, to an extent, if a person believes their move to a favorable jurisdiction before a big cash withdrawal from their Coinbase account is a silver bullet, then the horse has already bolted.
When it comes to building an overseas cryptoassets plan, thought might also need to be given to the ‘legal’ location of these intangible assets (situs) and the place of the source of any income or other return produced by the asset.
From a common law perspective, my view is that the treatment might depend on whether the assets are held via a centralized exchange, such as Coinbase or Binance, or whether held through a private key. The source of any income might firstly be determined by the place where services are provided (where applicable) or, if no services are provided, by the location of the assets.
However, in the context of this article, because particular jurisdictions might have their own statutory or other rules for determining the location of an asset or income source, it is not the place to set this out in further detail.
Generally speaking, it will be the residence of an individual that determines whether a person is subject to tax on capital gains and income in a place. One notable exception to this is the USA, which taxes people, firstly, based on citizenship.
As such, breaking tax residence can have clear tax benefits. However, there are a number of things to note about this. Firstly, it is necessary to make sure that one does not suffer from “out of the frying pan, into the fire” syndrome. It is possible to escape tax in the departure jurisdiction but then discover that tax rates are higher in the new one. However, doing a little homework should prevent this.
The other point to bear in mind is whether the departure jurisdiction imposes any kind of tax tail. For instance, the UK has a temporary non-residence rule that can ‘re-trigger’ gains on some assets if the individual returns to the UK within five years. Other jurisdictions impose exit taxes on leaving in the first place. Again, a little homework is required.
The plan typically follows three paths: moving to a low-tax jurisdiction that taxes nothing or very little, relocating to jurisdictions with special regimes designed to attract wealthy individuals, or choosing jurisdictions offering favorable treatment specifically for cryptoasset profits and gains. Let us look at each in turn.
There remain a number of popular jurisdictions in the world where individuals are unlikely to pay tax on income or capital gains held as investments Again, where the individual is operating a trade or profession, the position might be different. The United Arab Emirates (including Dubai and Abu Dhabi) still levy no personal taxes on personal income or gains.
A flight to the Caribbean also provides some appropriate jurisdictions including the Cayman Islands, Bermuda, and the British Virgin Islands, which also do not levy income tax or capital gains tax on personal income and gains.
In Monaco there is no personal tax for residents on investment income or capital gains (though French nationals are a notable exception under the FR–MC arrangements).
In Switzerland, capital gains made by private investors on movable private assets are free of tax under federal law. This extends to crypto held as private wealth. However, habitual or professional trading is taxed as income. The Crown Dependencies (Jersey, Guernsey, and the Isle of Man) and Gibraltar generally levy no capital gains tax on individuals. However, in each, professional crypto activity might be subject to income taxes.
In Hong Kong (SAR China), there is no capital gains tax. However, the jurisdiction does tax profits that are Hong Kong-sourced from a trade or business. Similarly, in Singapore, there is no capital gains tax but business profits and certain token yields can be taxed (see the IRAS digital tokens guide).
Certain jurisdictions have specific regimes that apply to cryptoasset disposals and, particularly, reward longer term holding. For example, Germany provides that gains on private investment disposals that have been held in excess of one year. Portugal has its own 365-day rule, with individuals paying 28% on gains where the crypto was held for less than 365 days but are exempt if held and sold beyond that period. Mining, staking, and business activity can be taxed as income.
Famously, El Salvador treats Bitcoin as legal tender. Article 5 of the Bitcoin Law states that exchanges in Bitcoin are not subject to capital gains tax. The position is a little more nuanced for other cryptoassets.
Malta applies existing income and capital principles to cryptoassets. In brief, where held on capital account, they are outside capital gains tax, as Malta’s capital gains tax applies only to specific assets. However, trading or mining income is taxable.
Most recently, Thailand’s Deputy Finance Minister announced that he has signed a ministerial regulation exempting capital gains from the trading of digital assets from income tax for a period of five years.
There are also a number of jurisdictions that offer special tax regimes to attract wealthy, internationally mobile high-net-worth individuals. The UK has historically had its remittance basis regime for non-UK domiciled individuals. This has been scrapped and replaced by the Foreign Income and Gains (FIG) regime, where the income and gains from foreign assets are exempt for the first four years of residence (assuming other conditions are satisfied). As such, it will be important to determine the situs of cryptoassets and the source of crypto income for those moving to the UK under the FIG regime.
Italy and other jurisdictions also have special regimes relating to foreign assets, which benefit those who have moved there. In Italy’s case, a ‘flat tax’ is payable, which largely covers the individual’s foreign income and gains. Again, it will be important to be able to assess where these assets are situated and where any income is sourced.
Crypto tax migration requires careful orchestration. Decisions go beyond merely choosing your destination, whether it is Dubai’s zero tax, Portugal’s one-year rule, or the UK’s new FIG regime. A successful plan hinges on several non-trivial elements. For one, you will need to understand your investor or trader status. You will also need to recognize that crypto-to-crypto swaps trigger taxable events and time your move before major disposals. Perhaps most importantly, ensure that your new jurisdiction does not impose exit taxes or temporary non-residence rules that could recapture gains. Like finding Waldo in a crowd, the optimal strategy is not always obvious, but with proper planning, significant tax savings await those who look carefully.
Henley & Partners assists international clients in obtaining residence and citizenship under the respective programs. Contact us to arrange an initial private consultation.
