So you got into crypto and started making some money. You keep investing, and you start to pile up a neat stash, but then a nasty question emerges: Should you report your earnings to local tax authorities? Our expert advice at PlasBit is a clear “yes”. No matter where you live and how much you make with your trade moves, you must pay taxes. If you fail to do so, you should expect to get penalized. The penalties for not paying taxes on crypto per country are quite similar in many countries and generally focus on tax evasion rather than crypto specifically. Penalties typically include fines, additional taxes, and, in some cases, even jail time. In the US, for example, it's a 75% penalty that applies to undeclared income plus the original tax owed. Knowingly failing to report taxes is a criminal offense that can lead to up to five years in prison and fines. Additionally, the court may ask you to disclose the keys to your crypto wallets. In the UK, it's a 20% capital gains tax plus interest, penalties of up to 200% of any due taxes, and possibly criminal charges and jail time.
Capital Tax: What Is It & Why It Matters In Crypto
Capital gains tax (or CGT) is the tax on the profit you make when selling any asset for more than you originally paid for it. And what are these assets? Here you go:
- Real estate: This can come in various shapes and forms. You might purchase property and then wait for the right time to sell it for a higher price, or you can also buy real estate, renovate it, and sell it for profit. You don’t have to pay capital gains tax if you’re selling your primary residence.
- Art & collectibles: These are highly speculative assets, so trading them (like antiques, paintings, rare wines, etc.) is subject to pretty high rates of CGT.
- Precious metals: Physical holdings in gold or silver, for example, are also subject to CGT.
- Stock: If you’re engaging in trading stocks and making any profits, the difference between purchase price and selling price will serve as the basis of your capital gains tax.
So, how about cryptocurrencies? You get taxed when selling, swapping, or spending crypto that appreciates in value. Just like in the case of stocks, your gains will tell you how much tax you need to pay. Assuming you bought ETH at $100,000 and sold it at $250,000, your capital gain is $150,000. In the USA, CGT varies depending on your income level (0% below $48,350, 15% between $48,350 and $533,400). So, in the above example, your CGT would be $22,500.
Missing your capital gains taxes on your crypto earnings will yield massive fines and possibly criminal prosecution
As you might guess, crypto was not always subject to CGT. Countries started to pass legislation following crypto gaining massive popularity between 2014 and 2018. The IRS in the USA first published guidance in 2014, the HMRC in the UK has been constantly updating its guidance since 2018, and most EU nations started to take things seriously since the 2017 bull run. The DAC-8 (Directive on Administrative Cooperation in Direct Taxation) was specifically penned to fight tax fraud and tax evasion in relation to cryptocurrency trade. Although lawmakers are still lagging behind, we at PlasBit think it’s a must to catch up with the crypto world: with billions of dollars made in profits and high adoption rates, it was (and still is to some extent) a hotbed for tax evasion and money laundering schemes. Thanks to recent efforts, apart from massive fines, if authorities catch up with you, you can even face a prison sentence.
Paco Ahlgren Tax Evasion: How It Happened
Now that it’s clear that you can indeed get punished for not reporting your crypto earnings, it’s time for a case study that should serve as a deterrent for evading capital gains tax. This is the story of the Paco Ahlgren tax evasion: known by his full name, Frank Richard Ahlgern III, he has been involved with Bitcoin since 2010 and has been buying since 2011. In 2015, he purchased 1,366 bitcoins through his Coinbase account. His failure to report Bitcoin profits to the IRS ultimately led to his arrest and trial, in which he was the first ever person to be sentenced to prison for crypto-related tax evasion.
John David McAfee was an erratic figure in the digital era since the early 90s
Back in 2015, BTC peaked at $495 per coin. In 2017, its value soared, and Ahlgern sold 640 BTC for $5,807 each. We’ll do the math for you: he made $3.4 million by selling less than half of his coins. So how did he try to evade authorities? When filing his 2017 tax return, he falsely reported his profits by overstating how much he originally paid for BTC back in 2015. He claimed that he bought BTC for prices much higher than the actual market value at the time. Naturally, this massively reduced the capital gains according to his tax return. But Ahlgern didn’t stop there: between 2018 and 2019, he sold even more BTC to the tune of $650,000. Authorities highlighted that Ahlgern used sophisticated methods to hide these gains: he used multiple wallets, did a lot of in-person cash exchanges, and utilized mixers to anonymize transactions. The Department of Justice stated that Ahlgern’s actions over the years resulted in over $1 million in tax losses. It was clear that Ahlgern knew what he was doing: he lied to his accountant about the gravity of his gains, and he also tried to cover up some of the transactions. In a landmark ruling, the court sentenced Ahlgern to two years in prison followed by 1 year of supervised release. On top of that, he was also ordered to pay $1,095,031 in restitution to the US government, plus he had to share his crypto wallet keys with authorities. The case, especially after the verdict, became a huge warning sign for anyone thinking that crypto gains can be hidden from tax authorities.
What Is the Penalty For Not Reporting Crypto Gains?
While the punishment for hiding your gains varies from country to country, you can expect massive fines that usually depend on the amount you failed to report. So, what is the penalty for not reporting crypto gains? In the US, for example, the fine is up to $250,000, which is the sum of the unpaid taxes on the gained amount. You might pay up to 25% of the tax you failed to file, another 20% accuracy-related penalty for failing to report, and another 75% if the court finds that you did it all intentionally, worst case scenario, you may face up to five years in prison. Additionally, the court may ask you to disclose the keys to your crypto wallets. If you want to read more information about the penalties in each country, check the table in the article. Here’s a full breakdown of current legislation when it comes to the penalties for not paying taxes on crypto per country:
| Country | Maximum capital gains | Maximum fine | Maximum jail time |
|---|---|---|---|
| The United States | 20% | Up to $250,000 | Up to 5 years |
| Canada | 27% | 50% of unpaid tax | Up to 5 years |
| Australia | 45% | 75% of unpaid tax | Up to 10 years |
| New Zealand | No general CGT | 50,000 (NZ dollars) plus 150% of unpaid tax | Up to 5 years |
| The United Kingdom | 20% | Up to 200% of unpaid tax | Up to 7 years |
| Germany | 26.375% | Up to €25,000 | Up to 10 years |
| France | 30% | Up to €500,000 | Up to 5 years |
| The Netherlands | 36% | Up to 150% of unpaid tax | Up to 6 years |
| Belgium | No CGT | Up to €1 million | Up to 5 years |
| Norway | 37.8% | Up to $6,235 | Up to 5 years |
| Sweden | 30% | Up to 40% | Up to 6 years |
| Finland | 34% | Up to €20,000 | Up to 4 years |
| Denmark | 42% | Up to $1.4 million | Up to 8 years |
| Poland | 19% | Up to $22,000 | Up to 5 years |
| Czech Republic | 15% | Up to 30% | Up to 8 years |
| Austria | 27.5% | Up to €20,000 | Up to 10 years |
| Switzerland | Varies by canton | Up to €11,000 | Up to 3 years |
| Spain | 30% | 1x–6x of the unpaid tax | Up to 5 years |
| Portugal | 28% | Up to 2x of unpaid tax + interests | Up to 8 years |
| Italy | 26% | Fixed 120% | Up to 6 years |
| Ireland | 33% | Up to €126,970 | Up to 5 years |
| Iceland | 22% | Up to 200% of unpaid | Up to 6 years |
| Slovenia | 27.5% | Up to €150,000 | Up to 8 years |
While some countries are tax free, there are plenty that crack down on failing to file crypto gains. The following is a detailed compilation of some of the above countries and their capital gain tax policies:
- The United Kigdom: You may pay up to 200% of the unpaid income tax if you did it deliberately. Things can also escalate and you might find yourself in the middle of a criminal prosecution. Of course, authorities are less strict if you don’t do it on purpose, with fines ranging between 0-30%.
- Germany: Apart from fines up to €50,000 plus interests and late payment penalties with the possibility of criminal prosecution and up to a shocking 10 years in prison. Non-intentional evasion costs you 6% interest per year, and on the flipside, if you hold crypto for less than a year, you’re tax-free!
- Australia: Up to 75% of the missed taxes and administrative penalties on top. This depends on “how intentional” you were: 25% for “failure to take reasonable care”, 50% for “recklessness”, and 75% for “intentional disregard”. As usual, you'll get criminal charges for serious tax evasion.
- Canada: 50% penalty on your unreported income plus the interest on it and criminal prosecution if you did it on purpose. Intentionality also matters: if you evaded on purpose, you can get an extra 50% charge on top of your missed taxes. On the other hand, unintentional evasion will set you back by 20% tops.
- Japan: Your crypto gains are filed under “miscellaneous income”, not capital gains. This entails progressive tax rates up to 55% depending on your income, which is already brutal. If you fail to report your gains, you can get hit by a 20% penalty plus late payment interests, and might be facing criminal charges as well. Unintentional (aka. negligence) will cost you 5-15% additionally to your taxes plus late payment interests of 2,5-3,5%.
- South Korea: They are still catching up with legislation but are pretty serious about enforcement. You might be paying 70% of your income tax, and the law also says that your name can be made public if you are a high-profile tax evader. Non-intentional evaders face a 10-20% penalty and no criminal charges if they cooperate with authorities. Intentional evasion? 40-70% penalty plus criminal charges including asset seizures and jail time of up to 5 years.
While some lawmakers are still passing bills as we speak to regulate tax evaders in the crypto world, the above examples show that authorities are pretty serious when it comes to chasing down offenders.
Crypto Tax Evasion Cases
You might think that most evasions fly under the radar as it’s only recently that penalties for not paying taxes on crypto per country are set in stone, actually there are a few that shook the crypto community. The most notorious of all crypto tax evasion cases involves Frank Richard Ahlgren III, the only instance in the U.S. where someone has been indicted for failing to pay taxes on crypto without any additional criminal charges. Additionally, in 2025, the Nigerian government sued Binance for $79.5 billion in economic losses and $2 billion in back taxes, claiming that Nigerian users had not paid taxes on their transactions through the platform, resulting in significant financial losses for the country. Although Ahlgren is the only person who got indicted and sentenced, there are plenty of ongoing cases worthy of sharing. The next is a compilation of other notorious tax evasion cases.
John David McAfee: From Anti-Virus Software To Crypto Advocate
You’ve probably heard of his family name as he was the creator of the first commercial anti-virus software. He sold his stakes in the 90s and became a vocal critic of the company’s doings, but he didn’t slow down: he founded several companies, assumed leadership positions in others, advocated heavily for privacy, personal freedom, and, of course, cryptocurrencies.
The first page of Ahlgren’s indictment
He believed that crypto was a way to reduce state control over financial institutions, and this is exactly what he brought up in his defense when arrested in Spain back in 2020. Either way, the DoJ claimed that McAfee failed to file income tax returns between 2014 and 2018, exceeding millions of dollars in crypto earnings. In 2021, just hours after the Spanish National Court’s decision to authorize his extradition to the US, McAfee hanged himself in his prison cell. Although many believe his death is due to murder rather than suicide, McAfee’s story is a sobering reminder that evading taxes won’t lead to anything good.
Konstantin Ignatov: An Epic Ponzi Scheme
A bit of an odd-one-out as Ignatov personally is not chased by authorities for tax evasion, but we thought a $4 billion Ponzi scheme deserves a spot on our list. Ruja Ignatova aka. The Cryptoqueen and her brother, Konstantin Ignatov fooled the world with their “Bitcoin-killer” OneCoin. They funneled millions to offshore bank accounts, shell companies, and real estate, all without declaring any of it. After pleading guilty in front of a US court, Ignatov spent 34 months in prison for fraud and money laundering. Even though the IRS didn’t come knocking on the door, his plea deal likely covered undeclared income as part of the broader case. Apart from Ignatov, many OneCoin promoters in Europe and Asia were investigated for tax evasion, with some of them being prosecuted or even fined for undeclared income.
Roger Ver aka. Bitcoin Jesus
An early promoter and investor of Bitcoin and ex-CEO of bitcoin.com, Ver’s story is an instant classic. He kicked off his career by running for the California State Assembly in 2000 as a candidate of the Libertarian Party. In true libertarian fashion, he believed cryptocurrencies are ideal for promoting true economic freedom. After 4 years of promoting and investing in BTC and other cryptocurrencies, he denounced his US citizenship and became a citizen of Saint Kitts and Nevis (also in true libertarian fashion). Also a self-described anarcho-capitalist, Ver kept struggling with gaining visas to various countries, while gaining citizenship in another Caribbean paradise, Antigua and Barbuda. But there’s a dark side to the story. Ver was arrested in Spain upon charges of tax evasion. According to the indictment, Var engaged in an intricate scheme involving two companies to hide his BTC earnings. He filed false tax returns through his companies, hugely undervaluing the worth of 73,000 BTC and claiming that he personally didn’t own anything. Furthermore, despite not owning anything officially, Ver cashed in big time in 2017: he sold tens of thousands of BTC for $240 million. Even though he was not a US citizen anymore, he was still required to report and pay his taxes on his dividends after his US-based companies. Which, he naturally failed to do. While the penalties for not paying taxes on crypto per country varies, Ver is alleged to owe at least $48 million in taxes to the IRS, but he claims that his indictment is part of a political persecution for his views rather than a just case triggered by his tax evasion schemes. While Ver was fighting his extradition in Spain, Elon Musk posted about trying to convince President Trump to pardon Ver. He said that it’s all up to the President now, but he had "asked whether this is possible." Ver’s final appeal against extradition was refused, making his return to the US imminent.
Conclusion: Pay Your Crypto Taxes
Even though most states are still catching up with the massive gains made with crypto, it’s clear that the penalties for not paying taxes on crypto per country gets progressively higher the more you fail to report. While even high-profile cases show that many people still try to evade or mask their capital gain taxes, here at PlasBit we believe that transparency and law-abedience are key to a flourishing crypto world as a whole. Sure, crypto still is a highly unregulated environment by design, but crypto gains are capital gains just like any other asset that entails capital gains tax, so why would you try to evade it?
