Investing in cryptocurrencies without borders: where to pay capital gains tax?


Tax on Capital Gains When Investing in Cryptocurrencies – Guidelines for Non-Residents

An individual who is not a resident in the United Kingdom since 2019, residing in China and paying Chinese income tax, faces the question of where they will pay tax on capital gains (CGT) related to investing in cryptocurrencies. Let’s consider various scenarios:

1. Tax Liability for CGT

Although China exempts this individual from CGT taxation and they are not a resident of the United Kingdom, there are several factors that may impact their tax obligations. It appears that not being a tax resident in either of these countries may result in no tax liability for capital gains. Nevertheless, it’s advisable to consult with a tax advisor for precise information.

2. Digital Residency and Taxation

When contemplating investments in cryptocurrencies, it’s worth considering the potential impact of digital residency in another country on tax obligations. Shifting digital residency to jurisdictions with more favorable tax rates may help in limiting tax burdens.

3. Relocation to Avoid Taxation

Despite not being a resident in the United Kingdom, this individual is considering relocating to jurisdictions with preferential CGT rates to sell cryptocurrencies at a profit. The planned move to countries in the Middle East, Singapore, or Guernsey could serve as a way to avoid taxation or reduce it.

In conclusion, choosing a jurisdiction for cryptocurrency investments can significantly affect tax obligations on capital gains. Therefore, a thorough analysis of the tax situation and potential consultation with a tax expert are crucial for making the right decision.