In the world of crypto assets, tax regulation has become significantly more complex in recent years, as governments increasingly define clear rules for taxing income from digital assets. The European Union, the United Kingdom, the United States, and Middle Eastern countries are now actively shaping legal frameworks for cryptocurrency taxation, establishing clear criteria for when and how taxes must be paid and how digital asset activities are classified.
Against the backdrop of a global trend toward the formalization of tax approaches, Cyprus has introduced a fixed tax rate of 8% on profits from the disposal of crypto assets, effective from January 1, 2026. This creates legal certainty for individuals and companies working with cryptocurrencies and aligns with the broader European approach to regulating digital financial instruments.
How Cryptocurrencies Are Taxed in Key Jurisdictions
Germany: Crypto assets owned by individuals are classified as private assets. Capital gains are fully exempt from taxation provided the cryptocurrency is held for more than one year. If disposal occurs earlier, the profit is taxed as other income, provided the annual tax-free threshold of EUR 1,000 is exceeded. At the same time, active or systematic trading may lead to the reclassification of the activity as commercial, with full taxation.
France: Applies a flat tax regime (Prélèvement Forfaitaire Unique) of 30% for private investors, which includes both income tax and social contributions. Crypto-to-crypto exchanges are not a taxable event for individuals; taxation arises upon conversion into fiat or use as a means of payment. Separate and more complex rules apply to professional activities.
Ireland: Profits from the sale of crypto assets are taxed as capital gains at a rate of 33%. No preferential regimes for cryptocurrencies are provided, and reporting and documentation requirements are strict.
Spain: Cryptocurrency profits are taxed as savings income with progressive rates of up to 28%. Taxable events include both sales for fiat and crypto-to-crypto exchanges.
Italy: The capital gains tax rate on cryptocurrencies currently stands at 26%, with an increase to 33% planned from 2025. Expanded financial reporting and disclosure obligations apply.
Netherlands: Crypto assets fall under the so-called Box 3 regime, where taxation is based not on actual profit but on deemed (presumed) income.
United Kingdom: Crypto assets are treated as property. Capital gains are taxed at rates of 10% or 20% (for new periods – 18% or 24%), depending on income level. Crypto exchanges are taxable events, and tax authorities have significantly increased oversight and information exchange.
United States: Cryptocurrencies are also classified as property. Short-term gains are taxed as ordinary income at rates of up to 37%, while long-term gains are taxed at preferential rates. The U.S. regime is considered one of the most complex in terms of reporting and enforcement.
United Arab Emirates: Individuals continue to benefit from the absence of personal income and capital gains taxes. At the same time, since 2023, corporate crypto activities may be subject to a 9% federal corporate tax, clearly distinguishing private from business activity.
Cyprus: New 8% Regime from 2026
Cyprus introduces a new Article 20E into the Income Tax Law, establishing a fixed tax rate of 8% on profits from the disposal of crypto assets. The regime will apply to both individuals and companies.
Crypto assets are defined by direct reference to EU Regulation 2023/1114 (MiCA), ensuring consistency with the European regulatory framework. Taxable events include, in particular, the sale of cryptocurrency for fiat, exchange of one crypto asset for another, use of cryptocurrency as a means of payment, and gifting.
Losses may be offset exclusively against crypto profits within the same tax year and may not be carried forward. Cryptocurrency obtained through mining is excluded from this special regime and is taxed under general rules as ordinary income or trading activity.
Practical Comparison: What the Tax Burden Looks Like in Practice
To assess the real attractiveness of the Cypriot regime, it is appropriate to compare not only nominal rates but also the actual amount of tax payable by an investor or company with identical economic results.
Example 1: Individual, capital gain of EUR 500,000
Condition: An individual realizes crypto assets with a net profit of EUR 500,000 during the tax year.
Cyprus (from 2026): 8% — EUR 40,000
Germany (holding < 1 year): up to ~45%* — up to EUR 225,000
France (PFU): 30% — EUR 150,000
Ireland: 33% — EUR 165,000
Spain: up to 28% — EUR 140,000
Italy: 26%–33% — EUR 130,000 – EUR 165,000
United Kingdom: 20% — EUR 100,000
USA (long-term): up to 20% (+ state taxes) — from EUR 100,000
UAE (individual): 0% — EUR 0
* depends on the marginal personal income tax rate.
Cyprus is not the lowest-tax jurisdiction in the world, but among European countries it demonstrates one of the lowest and most predictable outcomes without aggressive tax positioning.
Example 2: Active Trader or Crypto Investor
In jurisdictions with progressive or deemed taxation (Netherlands, Spain, USA), market volatility may lead to situations where tax arises even in the absence of actual cash income; crypto-to-crypto exchanges are treated as taxable events; and losses are limited in offsetting or cannot be carried forward.
Despite restrictions on loss carryforward, the Cypriot regime has one important advantage — a clear rule of taxing only actual profit from disposal, without deemed or presumptive bases.
Example 3: Company Managing a Crypto Portfolio
Condition: A company earns EUR 1,000,000 in profit from crypto asset operations.
Cyprus: 8% — EUR 80,000 tax
Ireland: 33% — EUR 330,000
United Kingdom: 25% corporate tax — EUR 250,000
UAE: 9% corporate tax (subject to threshold) — EUR 90,000
In this context, Cyprus remains one of the few EU jurisdictions where corporate crypto activity benefits from a separate special regime rather than automatically falling under standard corporate income tax.
Key Considerations for Planning
A low tax rate alone does not guarantee an optimal outcome. In practice, key factors include tax residency of the individual or company, correct classification of activity (investment vs trading), source of income (trading, holding, mining), availability of tax treaties and regimes (e.g., Non-Dom), and the quality of accounting and supporting documentation.
It is at the intersection of these factors that real tax risk or advantage is formed.
Practical Aspects and Expected Clarifications
Although the legislative framework has already been defined, key practical issues — valuation methods, accounting requirements, reporting procedures, and audit approaches — are awaiting further clarification from the Cyprus Tax Department. This phased approach is typical of Cypriot tax practice and generally ensures a gradual increase in legal certainty.
The introduction of an 8% tax on cryptocurrency profits from 2026 positions Cyprus not as a zero-tax jurisdiction but as a balanced and predictable center for crypto asset management. The combination of a moderate rate, direct integration with the European MiCA regulation, and relative administrative simplicity makes the Cypriot regime competitive in an international context.
For investors, founders, and crypto businesses, Cyprus offers a compromise between tax efficiency, regulatory stability, and a high level of legal certainty — particularly when combined with tax residency and the Non-Dom regime.
Our team supports clients at all stages — from structuring and company registration to tax planning, accounting, and preparation of financial statements, taking into account the new crypto taxation rules in Cyprus.
Please note that this article is for informational purposes only and does not constitute individual tax advice.