Avoiding taxes on cryptocurrency trading profits (Cyprus)

[bab00n]

Hi everyone,

I'm trading in an array of financial products and a do a lot of cryptocurrency trading lately. Profits from the latter are taxed at insanely high personal income tax rates in my EU country. Therefore I decided to move somewhere nice to concentrate on my trading business and not pay 50% on my profits.

I do quite profitable algo-trading at relatively high frequency (20k+ trades pa) and high volumes, so the tax exemptions on non-professional crypto trading or smaller incomes in countries such as Czech Republic, Malta, and Portugal do not apply. Income from such trading will be at least EUR 100k.

Cyprus appears to be a relatively convenient choice and I have thought about potential setups for my activities. However, some major unresolved questions remain for each setup:

(1) Trading in Cyprus as private person in the Non-Dom or HNWI regime (0% tax + 2.65% healthcare contributions on up to 180k tax base)
This would be the most convenient option and minimizing any admin pains and costs. It works for all conventional financial products but crypto profits do not seem to be classified as either assets or FX, so there seems to be some legal risks involved here. Any precise information available or cases known on this?

(2) Setting up a Cyprus Ltd for trading, paying dividends to myself (12.5% corp. tax+ 2.65% healthcare contributions on dividends)
This seems an OK and relatively safe option. However, I'm concerned doing the bookkeeping there for a huge amount of crypto trades. Tax advisors usually advertise their services charging some fixed rate per single booking, all of which is amounting to insane charges in my case. I was not able to find tax forms in English, internet links from EU sites to the local authorities' information are all broken. Makes me suspect that the Cyprus authorities are working with stone-age technologies in this regard. Any experience on doing Ltd bookkeeping and tax declarations on a large amount of trades and/or crypto trades?

I also considered a Belize Ltd setup, but would rather not do it if one of the two options above works. I don't like the idea of having to rely on an agent and to renew my company license every year.

 

[avalanche]

Hi everyone,

I'm trading in an array of financial products and a do a lot of cryptocurrency trading lately. Profits from the latter are taxed at insanely high personal income tax rates in my EU country. Therefore I decided to move somewhere nice to concentrate on my trading business and not pay 50% on my profits.

I do quite profitable algo-trading at relatively high frequency (20k+ trades pa) and high volumes, so the tax exemptions on non-professional crypto trading or smaller incomes in countries such as Czech Republic, Malta, and Portugal do not apply. Income from such trading will be at least EUR 100k.

Cyprus appears to be a relatively convenient choice and I have thought about potential setups for my activities. However, some major unresolved questions remain for each setup:

(1) Trading in Cyprus as private person in the Non-Dom or HNWI regime (0% tax + 2.65% healthcare contributions on up to 180k tax base)
This would be the most convenient option and minimizing any admin pains and costs. It works for all conventional financial products but crypto profits do not seem to be classified as either assets or FX, so there seems to be some legal risks involved here. Any precise information available or cases known on this?

(2) Setting up a Cyprus Ltd for trading, paying dividends to myself (12.5% corp. tax+ 2.65% healthcare contributions on dividends)
This seems an OK and relatively safe option. However, I'm concerned doing the bookkeeping there for a huge amount of crypto trades. Tax advisors usually advertise their services charging some fixed rate per single booking, all of which is amounting to insane charges in my case. I was not able to find tax forms in English, internet links from EU sites to the local authorities' information are all broken. Makes me suspect that the Cyprus authorities are working with stone-age technologies in this regard. Any experience on doing Ltd bookkeeping and tax declarations on a large amount of trades and/or crypto trades?

I also considered a Belize Ltd setup, but would rather not do it if one of the two options above works. I don't like the idea of having to rely on an agent and to renew my company license every year.

That is obvious that you should consult first Cypriot accountants if thats possible to get totally different pricing for their services. Maybe offer them 5% of your net income instead of service fee?

You can also offer them automation of tax forms to bring down the cost.

 

[reesek]

You can outsource the whole thing to uae co that has am license

 

[anotherone]

Hi everyone,

I'm trading in an array of financial products and a do a lot of cryptocurrency trading lately. Profits from the latter are taxed at insanely high personal income tax rates in my EU country. Therefore I decided to move somewhere nice to concentrate on my trading business and not pay 50% on my profits.

I do quite profitable algo-trading at relatively high frequency (20k+ trades pa) and high volumes, so the tax exemptions on non-professional crypto trading or smaller incomes in countries such as Czech Republic, Malta, and Portugal do not apply. Income from such trading will be at least EUR 100k.

Cyprus appears to be a relatively convenient choice and I have thought about potential setups for my activities. However, some major unresolved questions remain for each setup:

(1) Trading in Cyprus as private person in the Non-Dom or HNWI regime (0% tax + 2.65% healthcare contributions on up to 180k tax base)
This would be the most convenient option and minimizing any admin pains and costs. It works for all conventional financial products but crypto profits do not seem to be classified as either assets or FX, so there seems to be some legal risks involved here. Any precise information available or cases known on this?

(2) Setting up a Cyprus Ltd for trading, paying dividends to myself (12.5% corp. tax+ 2.65% healthcare contributions on dividends)
This seems an OK and relatively safe option. However, I'm concerned doing the bookkeeping there for a huge amount of crypto trades. Tax advisors usually advertise their services charging some fixed rate per single booking, all of which is amounting to insane charges in my case. I was not able to find tax forms in English, internet links from EU sites to the local authorities' information are all broken. Makes me suspect that the Cyprus authorities are working with stone-age technologies in this regard. Any experience on doing Ltd bookkeeping and tax declarations on a large amount of trades and/or crypto trades?

I also considered a Belize Ltd setup, but would rather not do it if one of the two options above works. I don't like the idea of having to rely on an agent and to renew my company license every year.

1/ when Crypto is not regulated it means that crpyto is not considered as a currency. It is good news. It means that if the tax authority of cyprus investigate your business, they are only interested in your assets and liabilities in euros. The rest does not exist. By the way, you don't need to have a bookkeeping for the crypto transactions.

2/ About the book keeping in Cyprus, it is worth than that. In the end of your fiscal year, you must pay somebody to audiot your book keeping. This is on top of the money you would spend for accounting. Usually, the accountant and the auditor will get paid depending on the number of the transactions that can be found in your book keeping. So for instance, if you have let's say 100,000 transactions in your bookkeeping it is going to cost you a significant amount of money every year. Keeping into account that the minimum is 2500 euros.

The place where you will find the cheapest accountants in europe would be Bulgaria.

 

[cyprus123]

In my opinion the safer option is to set up a LTD in Cyprus as in your option 2) because your option 1) is not tested. Just because crypto is not regulated doesn't necessarily mean that it can't be taxed. If you have an income (let's say clients pay you with assets not fiat), if it's a property, cars or crypto, you are going to pay taxes on this income right. Non Domicile applies only for capital income like dividends, interest etc. which is not the case for crypto imo.

You'll end up paying 2 to 3k EUR a year for accounting and auditing as you have the regulatory framework of the EU and a tax friendly environment. I would prefer this than going offshore.

 

[bab00n]

Thanks for the replies.

I have checked the local tax code and contrary to some interpretations found on the internet, it states that all income is taxable with a list of specific exemptions to this rule such as dividends and share proceeds.

The Cyprus Ltd indeed appears to be the cleanest way in this case.

 

[Back2Matters]

Useful video on the topic:

 

[JohnLocke]

nice video you shared there @Back2Matters - do you believe what they show you there if I may ask?

 

[CaptK]

The issues you have here is crypto regulation is changing day by day. So what is safe today can be a burden tomorrow.

I would suggest UAE, no tax, banks dont care about trading just where the funds are coming from.

A big focus on blockchain and crypto in the UAE but crypto as a currency is illegal. You can transact a purchase for goods or services in the UAE using crypto. You can sell crypto as there is a big market of buyers for cash.

 

[Spinat]

On another note, does someone know if CIM Banque would accept a crypto-trading Cypriot Ltd?

Interesting question did you ever asked them and if so what is the outcome? I believe they are veru restrictive in what business they take on.

 

[avalanche]

You can outsource the whole thing to uae co that has am license

Sounds like a good plan. However bank account would be very difficult to obtain

 

[CaptK]

Thanks! Any specific emirate / bank? I would try it with a RAK ICC.



I didn't ask yet but I well let you know.

RAK ICC is useless you need any of the other states. Try KIZAD or Ajman or for a little more money DMCC.

 

[crsp]

Yeh, the details for capital gains in Cyprus are vague... From what I've read, you could assume that only immovable property in Cyprus is taxed - but I'd really like that confirmed by a local accountant. (Though, if going to trade actively then sure, best to use a company and dividends.) I sent an email to Privacy Management Group to see if they can clarify if non-traders (eg, just a few sells a year) really need to use a company. It would seem from their website they can set up bank accounts as part of their services - but not clear if this includes for crypto related...

I'm just starting to research the subject so not knowledgable on how best to set up an on/off shore company with a bank account for converting crypto sales into dividends. Not sure on corp tax for Swiss off shore companies - and do they need local directors? Obviously a safe/simple offshore with no corp tax that can be setup and operated remotely would be best.

Thanks for replies.

 

[tsu458]

Yeh, the details for capital gains in Cyprus are vague... From what I've read, you could assume that only immovable property in Cyprus is taxed - but I'd really like that confirmed by a local accountant. (Though, if going to trade actively then sure, best to use a company and dividends.) I sent an email to Privacy Management Group to see if they can clarify if non-traders (eg, just a few sells a year) really need to use a company. It would seem from their website they can set up bank accounts as part of their services - but not clear if this includes for crypto related...

I'm just starting to research the subject so not knowledgable on how best to set up an on/off shore company with a bank account for converting crypto sales into dividends. Not sure on corp tax for Swiss off shore companies - and do they need local directors? Obviously a safe/simple offshore with no corp tax that can be setup and operated remotely would be best.

Thanks for replies.

Did you get some insights regarding the capital gains tax?

These guys got the option that cryptos in general would rather fall under securites:
https://pahalaw.com/areas-of-practice/cyprus-regulatory-licensing/blockchain-cryptocurrency/"According to data from the existing tax legislation, we come to a conclusion that profit from trade in cryptocurrency is not taxed (rate – 0%), because “The Cyprus Tax on profits from trading in shares or other securities, including forex or bitcoins is 0%”. "

But I've also saw the opinion that everything which is not declared in §8 (22) N118 (I) / 2002, the often qoted law, would be taxed. As income if you are a trading, but would it be 20% flat if you buy and hold, do 3-4 transactions a year?

I've registered a offshore company to keep my cryptos but was burned when it came to bank accounts. Literally impossible for under 500k net worth. So I won't "gift" my cryptos to that company because how could I get the money back if not in fiat dividends?

 

[crsp]

@Gediminas ^

 

[Gediminas]

Thanks for tagging, @crsp

We have a conservative approach as regards taxation of crypto gains in Cyprus. I mean, we consider that income from active crypto trading might be taxable or at least it is considerable risk that it might happen. From a theoretical point of view, crypto might fall under security regulations (recently announced EU Regulation for crypto assets makes this position even stronger), however, at least in my view, there is too much legal uncertainty. Opinions of local tax advisors are also different.

So the only way I see is to set up a company in zero tax country (a subsidiary of a Cypriot company or owned by Cypriot tax resident) and to trade crypto on behalf of this company. Then it would pay dividends to Cypriot holding. It is important that an offshore company would not have a PE in Cyprus for tax purposes. Banking if properly structured it is not an issue. The main criteria for EMI are that a person might prove an initial source of wealth, also the source of funds for specific crypto transactions. Of course, not all EMIs are used to working with this.

 

[Back2Matters]

nice video you shared there @Back2Matters - do you believe what they show you there if I may ask?

The author is well known as reliable in cryptocurrency's profit advising, but he is not a tax expert at all. Anyway I can't see any relevant criticism in video's comments.

 

[Tango]

Hi everyone,

I'm trading in an array of financial products and a do a lot of cryptocurrency trading lately. Profits from the latter are taxed at insanely high personal income tax rates in my EU country. Therefore I decided to move somewhere nice to concentrate on my trading business and not pay 50% on my profits.

I do quite profitable algo-trading at relatively high frequency (20k+ trades pa) and high volumes, so the tax exemptions on non-professional crypto trading or smaller incomes in countries such as Czech Republic, Malta, and Portugal do not apply. Income from such trading will be at least EUR 100k.

Cyprus appears to be a relatively convenient choice and I have thought about potential setups for my activities. However, some major unresolved questions remain for each setup:

(1) Trading in Cyprus as private person in the Non-Dom or HNWI regime (0% tax + 2.65% healthcare contributions on up to 180k tax base)
This would be the most convenient option and minimizing any admin pains and costs. It works for all conventional financial products but crypto profits do not seem to be classified as either assets or FX, so there seems to be some legal risks involved here. Any precise information available or cases known on this?

(2) Setting up a Cyprus Ltd for trading, paying dividends to myself (12.5% corp. tax+ 2.65% healthcare contributions on dividends)
This seems an OK and relatively safe option. However, I'm concerned doing the bookkeeping there for a huge amount of crypto trades. Tax advisors usually advertise their services charging some fixed rate per single booking, all of which is amounting to insane charges in my case. I was not able to find tax forms in English, internet links from EU sites to the local authorities' information are all broken. Makes me suspect that the Cyprus authorities are working with stone-age technologies in this regard. Any experience on doing Ltd bookkeeping and tax declarations on a large amount of trades and/or crypto trades?

I also considered a Belize Ltd setup, but would rather not do it if one of the two options above works. I don't like the idea of having to rely on an agent and to renew my company license every year.

How do you calculate capital gains on crypto - only when you go back to fiat or also on crypto to crypto as well (ie each and every transaction like in the U.K. )

 

[lory]

My tax accountant told me only when you exchange crypto to fiat it is possible and required.

 

[CryptoEfficiency]

Hi everyone,

I'm trading in an array of financial products and a do a lot of cryptocurrency trading lately. Profits from the latter are taxed at insanely high personal income tax rates in my EU country. Therefore I decided to move somewhere nice to concentrate on my trading business and not pay 50% on my profits.

I do quite profitable algo-trading at relatively high frequency (20k+ trades pa) and high volumes, so the tax exemptions on non-professional crypto trading or smaller incomes in countries such as Czech Republic, Malta, and Portugal do not apply. Income from such trading will be at least EUR 100k.

Cyprus appears to be a relatively convenient choice and I have thought about potential setups for my activities. However, some major unresolved questions remain for each setup:

(1) Trading in Cyprus as private person in the Non-Dom or HNWI regime (0% tax + 2.65% healthcare contributions on up to 180k tax base)
This would be the most convenient option and minimizing any admin pains and costs. It works for all conventional financial products but crypto profits do not seem to be classified as either assets or FX, so there seems to be some legal risks involved here. Any precise information available or cases known on this?

(2) Setting up a Cyprus Ltd for trading, paying dividends to myself (12.5% corp. tax+ 2.65% healthcare contributions on dividends)
This seems an OK and relatively safe option. However, I'm concerned doing the bookkeeping there for a huge amount of crypto trades. Tax advisors usually advertise their services charging some fixed rate per single booking, all of which is amounting to insane charges in my case. I was not able to find tax forms in English, internet links from EU sites to the local authorities' information are all broken. Makes me suspect that the Cyprus authorities are working with stone-age technologies in this regard. Any experience on doing Ltd bookkeeping and tax declarations on a large amount of trades and/or crypto trades?

I also considered a Belize Ltd setup, but would rather not do it if one of the two options above works. I don't like the idea of having to rely on an agent and to renew my company license every year.

Good afternoon,

first of all thank you for all of your valuable replies.

I actually have the fairly similar issue going on already being in Cyprus from EU country several weeks and researching this option. Have you taken any action at all @bab00n ?

I could agree with @Gediminas to employ offshore LTD as a Non-Dom tax resident who I plan to become next year asap. The question I have: is there any problem receiving dividends “in crypto” currency - not in fiat? From the offshore entity to my personal wallet? Am sure this was disscused there somewhere here, there is options such as crypto[dot]com and others who are able to send you fiat to your bank account (of a private individual) Via sepa same day often if you need it. Tested, works well. Where do you mentors see problem in my thinking in any at all?
I heard the same opinion as @lory - is your accountant Cypriot actually, please?
@tsu458 where did you get burnt? My case is that I am being paid in crypto as I can choose this option from the company I work with and I prefer crypto rather than uncertainty of unknown offshore bank (by my limited awareness) and especially if there is so many stablecoins already, even backed by EURo, USD, Gold already. Thus, elaborating this further, via options such as MCO Card or SwipeCard and many many others to follow soon, I kind of feel this could work.

Could the solution to your and mine issue be?: 0% taxed income by offshr Ltd > dividend paid to Cyprus tax resident (non-dom eu status after 183 days) > social/healthcare contributions = legal income in crypro or fiat.
I feel like I could leave out cyprus ltd, accounting, auditing, more expensive alternative as owner of the offshore Ltd. Where am I wrong guys, please?
I appreciate any comments. I will be happy to share my process as I go through to help others having similar issues. Later next year of course.