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Dominic Volek is Group Head of Private Clients and a member of the Executive Committee of Henley & Partners.
Large numbers of crypto investors are seeking out welcoming jurisdictions to carry out their activities despite the volatility in the world of cryptocurrencies. Some of the most attractive locations for those involved in cryptocurrencies are in countries that offer residence and citizenship by investment programs, which enable them to obtain the right to reside and/or citizenship in return for making a significant investment.
The pandemic brought with it a new era of innovation, spurring the pace of change across many industries. This effect was particularly visible in the digital asset sector. Cryptocurrencies’ prominence in high-net-worth individuals’ portfolios also increased as investors sought new sources of return and diversification.
Just as alternative residence and citizenship are fast becoming a highly coveted asset class among wealthy individuals, digital assets are also growing in popularity despite their inherent volatility.
As governments scramble to draft new regulations that adapt to shifts in the world of crypto, traders, miners, investors, and cryptopreneurs are exploring investment migration strategies that can safeguard their interests. At Henley & Partners we have seen enquiries from these investors rise significantly. In particular, our clients are looking to build a viable ‘Plan B’ to protect themselves against any potential future bans on the trading or use of cryptocurrencies in their countries and to allay the risks of aggressive fiscal policies that tax digital assets at source.
Let’s take a look at some of the most attractive countries for crypto investors to operate in.
Dubai is on a mission to become the leading center for cryptocurrency and blockchain technology in the Middle East, and it is a hugely attractive option for high-net-worth crypto investors, with no income or capital gains taxes applied, and this extends to any involvement in cryptocurrencies — including selling, trading, or farming them. In fact, these 0% tax rates apply to the whole of the UAE and the Emirates has several double-tax treaties in place.
The UAE’s residence by investment initiative aims to boost the investment environment and foster business growth by attracting talent, professionals, and investors by granting long-term residence. There are numerous categories of beneficiaries for the UAE’’s Golden Residence visa, including real estate investors, who can obtain a 10-year renewable residence visa by purchasing a property, or one or more off-plan properties from approved local real estate companies, worth a minimum of AED 2 million.
Switzerland is home to over 1,000 crypto firms, with more than 750 in Zurich alone, and its central bank recently announced that it is launching a central bank digital currency pilot scheme. Unsurprisingly, it’s a hugely popular destination for investors involved in cryptocurrencies. Gains from private trading in cryptocurrencies are generally treated as tax-free capital gains, although commercial trading may be subject to tax. Private investors may still need to pay income or wealth taxes depending on their individual circumstances, with income from activities such as staking and mining subject to income tax between 0-13.2%.
Based on current Swiss immigration and tax laws and regulations, Henley & Partners designed the Swiss Residence Program for non-EU and non-EFTA nationals. Financially independent individuals who are not gainfully employed in Switzerland but who agree to pay a certain minimum in net annual taxes can acquire a residence permit.
Singapore has emerged as a world-class destination with a harmonious multi-racial and multi-cultural community that is also known to be crypto-friendly. The city state is politically stable and economically prosperous, with reputable and reliable healthcare and education systems. Singapore does not apply a capital gains tax, which makes it an enticing proposition for cryptocurrency investors. Singapore has a friendly tax regime and has continued to introduce tax regulations favoring foreign investors. However, for those involved in trading cryptocurrencies professionally, an income tax rate of 17% applies. The central bank recently announced regulatory guidelines for stablecoin, making it one of the world’s first jurisdictions to do so.
The Singapore Global Investor Program has been designed for wealthy and experienced foreign entrepreneurs, business owners, and managers who are interested in starting a business or investing in Singapore and who wish to make the country their home. Successful applicants receive Singaporean permanent residence status within nine to twelve months, and the minimum investment is SGD 10 million.
Apart from the natural beauty and rich history of this island nation, Malta’s openness to digitization has meant that it offers crypto proponents a welcoming jurisdiction and the option to apply for the Malta Permanent Residence Programme. Alternatively, Malta’s Granting of Citizenship for Exceptional Services by Direct Investment Regulations (S.L. 188.05), under the Maltese Citizenship Act Cap. 188, LN437 of 2020, allow for the granting of citizenship by a certificate of naturalization to foreign individuals and their families who contribute to the country’s economic development by investing EUR 738,000 for a minimum residence period of 36 months or EUR 888,000 for a minimum of 12 months (including a property lease). For either option, real estate investment is a requirement.
Malta was one of Europe’s pioneers in establishing a regulatory environment that welcomed blockchain and techpreneurs as it spotted the opportunity to establish a new industry to complement its services sector. As a result, it implemented a framework for crypto exchanges to be licensed and registered on the island. Malta views cryptocurrencies as a ‘unit of account, medium of exchange or a store of value’, which means there is no capital gains tax to pay on long-term gains from crypto holdings. On the downside, trading crypto is viewed as similar to trading stocks or shares, which means trades are subject to the Business Income Tax rate of 35%. That said, depending on your earnings and your residency, this can be reduced to 0-5%.
Portugal offers one of Europe’s most attractive residence by investment programs, the Portugal Golden Residence Permit Program, which ranks first on the Henley Residence Program Index. The minimum capital requirement starts at just EUR 200,000 (EUR 280,000 for the real estate option) and Portugal offers a pathway to applying for citizenship after five years of residence.
Portugal has long drawn interest from mobile crypto investors as it offered those who relocated there a favorable tax regime. However, the situation has changed somewhat in 2023, with new rules for tax residents in Portugal that include income from professional or business activities related to crypto assets being taxed at a rate of 15% and mining activities at 95%, no tax on capital gains from the sale of crypto assets held for a year or more, regardless of when they were acquired, but gains on assets held for less than a year will be taxed at 28%, no tax applied when receiving crypto assets in exchange for selling other crypto assets. Leaving Portugal and becoming a non-tax resident will be considered a disposal event for capital gains tax purposes.
It is anticipated that all European Union member states will soon be adopting the Markets in Crypto-assets (MiCA) Regulation, a regulatory framework defining how crypto assets are treated, which could impact the status quo in each member state.
Elsewhere in Europe, Montenegro has been modernizing as part of its efforts to attract location-independent investors and techpreneurs. Ethereum’s co-founder Vitalik Buterin hit the headlines last year when he obtained Montenegrin citizenship, highlighting the country’s crypto-friendly attitude. The government is also getting in on the act, exploring the possibility of setting up a central bank digital currency.
Montenegro has not yet set out any specific rules for crypto taxation, but crypto is still subject to the country’s tax rules, which are among the most favorable in Europe. Any profits from buying and selling cryptocurrencies are subject to the country’s flat income tax rate of 9%, although if you hold the assets for more than a year you will not have to pay any taxes on gains when you sell them. Corporate Income Tax ranges between 9-15% depending on the level of profit.
Montenegro’s Residence by Investment Program requires applicants to buy an existing property (no minimum value is required) or create and register a company in the country, including renting or buying office space for the business and renting or buying residential property for personal use, and opening a bank account. Montenegro is also a candidate country for the European Union.
A Caribbean investment migration program that is proving highly popular with digital asset investors is the Antigua and Barbuda Citizenship by Investment Program. Eligible applicants can contribute a non-refundable sum of USD 100,000 to the National Development Fund or USD 150,000 to the University of the West Indies, invest from USD 200,000 in approved real estate, or buy an eligible business for a minimum of USD 1.5 million.
In 2020, Antigua and Barbuda passed progressive legislation to position itself as one of the Caribbean’s tech hubs. The Digital Assets Business Bill enables digital asset businesses, exchanges, wallets, service providers, financiers, and lenders to receive a license and establish themselves in this tropical island location. The country recognizes Bitcoin and other cryptocurrencies as legal tender and applies no wealth, income, or capital gains taxes.
The St. Kitts and Nevis Citizenship by Investment Program has also drawn numerous high-profile investors to the country’s shores thanks to its hospitable approach to tech and cryptopreneurs and its pristine beauty. In a bid to adapt to innovation in the financial services sector, the Virtual Asset Bill was passed in 2020, creating a framework for entrepreneurs to license their blockchain or crypto businesses. There is no income or capital gains tax to pay on cryptocurrency-related activities for structures such as an LLC, while individual investors do not have to pay income tax on investment income on personal investments held overseas.
Those who wish to become citizens of St. Kitts and Nevis can make a non-refundable Sustainable Island State Contribution of USD 250,000 or make a minimum non-refundable contribution of the same amount to a public benefit unit in an Approved Public Benefit Project. Alternatively, they can invest a minimum of USD 400,000 in an approved real estate development.
Henley & Partners welcomes enquiries from digital asset investors who want to craft a tailored portfolio of alternative residence permits and citizenships that protects both their lifestyle and wealth in these disruptive and volatile times.
Henley & Partners assists international clients in obtaining residence and citizenship under the respective programs. Contact us to arrange an initial private consultation.
