Best countries for HODLers of crypto (>1yr) to cash out in.....

[WorldCitizen99]

I am planning on leaving my high-tax country in the next few months.
I am setting up meetings with accountants/lawyers in Portugal and Cyprus.
Malaysia and Dubai are also possibilities

My thought process so far is the following:
I should choose a country that my home country has a tax treaty with. The treaties contain residency tiebreaker rules which are very powerful to use as leverage in the event that your home country wants to claim that you never qualified to escape their tax net bc you e.g. parked a bicycle in your parents' garage and therefore that means that you intended to return. With a treaty, they usually use the criteria of having a permanent home available instead of just the local criteria of primary and secondary ties.

The rules around what is considered active income due to 'trading' and what crypto sales would qualify as investments (capital gain) are tricky. Many countries use Badges of Trade to decide on the nature of the income. This usually takes into account the frequency of the transactons, whether the intention is to make a profit, etc...
What is the safest arrangement in the event that the tax authority does not allow you the low capital gains rate you thought you were going to get.
E.g. in Portugal, in theory you should not be taxed if you have held the cryptoasset for >1 year, as long as it is not a security. Well, what happens if they change the rules in 6 months or they say you traded too many coins and must declare it as active income regardless of holding period. You will be hit with Portuguese personal tax rates which go up to 48%. Malaysia also uses Badges of Trade and their highest personal bracket is 30%. Whereas if you set up in Cyprus, you will probably pay some tax if you do it through a company but you won't pay more. So the trade-off is paying 12.5% max vs possibly paying 0% but maybe paying much more if the tax authority goes against you.

There is also the issue of how easy it will be to cash out from a crypto exchange and send the money to a bank. I was already told that Cyprus banks will not accept money transferred from exchanges.

If I get any wisdom from these meetings I will post it here
But in the meantime, anyone have any wisdom to share?

 

[JohnnyDoe]

Why on earth should you sell a valuable asset for garbage? If you really want to do that, first move to a non socialist country.

 

[WorldCitizen99]

Why on earth should you sell a valuable asset for garbage? If you really want to do that, first move to a non socialist country.

If you mean selling crypto for fiat, well most things still require fiat, no? Can you buy an apartment in Portugal with USDT or BTC?

Re: moving to a non-socialist country - I was advised by a lawyer that you have much more leverage if you initially move to a tax treaty country until you are out of the net of your home country. Then it has to be a place that has favourable tax laws for crypto/capital gains so the list gets narrowed considerably.

 

[JohnnyDoe]

If you mean selling crypto for fiat, well most things still require fiat, no?

Not really

Can you buy an apartment in Portugal with USDT or BTC?

Yes

Re: moving to a non-socialist country - I was advised by a lawyer that you have much more leverage if you initially move to a tax treaty country until you are out of the net of your home country.

Why?

 

[WorldCitizen99]

Not really
How do you buy an apartment for stablecoins?
Yes

Why? It has to do with using the tiebreaker rules as leverage in the event that your home country still wants to claim you as a tax resident. Int'l law will trump domestic law. Since you are seasoned member here, I'm sure you know all this so what are you saying?

 

[Rotor]

I remember reading that Montenegro had no tax for crypto holders above 1 year.

 

[WorldCitizen99]

I remember reading that Montenegro had no tax for crypto holders above 1 year.

Ok thank you - that's good to know..unfortunately no tax treaty with Canada

 

[Onassis]

Croatia - 2 years, and there is a very active crypto community there

 

[WorldCitizen99]

Croatia - 2 years, and there is a very active crypto community there

You have to hold for 2 years to get 0% cap gains rate? It's still probably OK if you get in early enough before the cycle peak but it unless it has significant other advantages, 1 yr cutoff is safer

 

[JohnnyDoe]

If you properly change your residence there is nothing your former country can claim or attack.

 

[WorldCitizen99]

If you properly change your residence there is nothing your former country can claim or attack.

When my accountant tells me stories about people getting burned bc they still had a key to their parents' residence in their home country and their non-residency was denied on that basis, then it's normal to be concerned about whether you have properly changed your residence. There is always the possibility that you get burned for something the lawyers didn't think of in advance and then it goes to court.

If through a tax exchange agreement, your home country finds out you cashed out big time on an investment, you're telling me they might not go after that using legalistic nitpickiness?

I would not be cutting all ties to my home country bc I might want to go back there to work part-time. Using a treaty, I would only have to worry that I had a peerm home avail in my new country and didn't have one in my home country, and not the million little secondary ties that they can claim I have. To get a ruling beforehand requires one to fill out a non-residency form and send it to CRA but that has its own risks....

Anyway, I know you are a senior member here, but your answers are too short and/or vague to convince me of anything

 

[JohnnyDoe]

I would not be cutting all ties to my home country bc I might want to go back there to work part-time.

Then you will have problems no matter what.

Anyway, I know you are a senior member here, but your answers are too short and/or vague to convince me of anything

I don’t have to convince anyone of anything, life is too short. DYOR, and perhaps hire a better advisor.

 

[WorldCitizen99]

Then you will have problems no matter what.

I don’t have to convince anyone of anything, life is too short. DYOR, and perhaps hire a better advisor.

If you have some specific guidance I will gladly consider it
I have been doing a lot of research and have hired many people as consultants

The tie I would keep would be maintenance of a professional license bc to lose it and then reapply would be a major pain. I've already consulted with 2 tax lawyers and 2 accountants who told me that that by itself would not be a problem. And having the tiebreaker rule from a treaty based on perm home avail would be a powerful insurance policy.

But if you have some specific wisdom to impart, I'm all ears

 

[JohnnyDoe]

The tie I would keep would be maintenance of a professional license

That would be more than enough for any judge to consider you as tax resident.

 

[WorldCitizen99]

That would be more than enough for any judge to consider you as tax resident.

OK, let's say the judge rules me a resident based on that single secondary tie
Why would I not be eligible to invoke Article 4 of the tax treaty where it says if you are resident in both places, you will be tax resident in the place where you have a perm home avail, which I would have in my new counrty, after having gotten rid of my PHA in my old country 2 years ago...

 

[khara]

Cyprus is a bit more than 12.5% (closer to 15% as a non-dom when cashing out through dividends).
Dubai + DTA is pretty solid, without DTA the issues you described are relevant.

Another consideration is that with CIT in force in the UAE, if your trading is considered a "business activity" (which it can be, as anything with a speculative nature is), then you'd have to theoretically register as a freelancer if you sell more than 1M AED of your coins, and pay 9% CIT for anything above 375K AED. Again, badges of trade may be relevant here, but there's zero case law around this as far as I know.

PS: I have no idea what I am talking about. Take everything I say with a grain of salt.

 

[JohnnyDoe]

OK, let's say the judge rules me a resident based on that single secondary tie
Why would I not be eligible to invoke Article 4 of the tax treaty where it says if you are resident in both places, you will be tax resident in the place where you have a perm home avail, which I would have in my new counrty, after having gotten rid of my PHA in my old country 2 years ago...

Because you are resident where your center of vital interests is, and your home country will want your money. If you don’t cut all your ties you will be in trouble. Best case scenario you will pay a huge bill to your lawyers.

 

[Ancova]

Dubai... you can even buy real estate with crypto here.

 

[cryptofriendly]

Germany, tax free after 1 year.

 

[WorldCitizen99]

Dubai... you can even buy real estate with crypto here.

I know about Dubai but if you read the UAE-Canada tax treaty, Article 4 which covers tiebreakers only covers you if you are a 'national', i.e. a citizen of UAE. SO it would not benefit Canadians who aren't UAE citizens.

Resident​

1. For the purposes of this Convention, the term “resident of a Contracting State” means:
(a) in the case of Canada, any person who, under the laws of that State, is liable to tax therein by reason of the person's domicile, residence, place of management, place of incorporation or any other criterion of a similar nature but does not include any person who is liable to tax in that State in respect only of income from sources in that State;

• (b) in the case of the United Arab Emirates,

(i) an individual who is a national of the United Arab Emirates, provided that the individual has a substantial presence, permanent home or habitual abode in the United Arab Emirates and that individual’s personal and economic relations are closer to the United Arab Emirates than to any other State;

For the purposes of the treaty then, you can only be considered a resident of UAE if you are a national. Meaning you would not benefit from a tiebreaker rule bc that only applies when you are a "resident" of both countries. If you can't use the tiebreaker then Canada has free reign over you. It appears that it only benefits UAE citizens who want to have a perm home avail in both countries, and not Canadians.(my interpretation and the interpretation of the team at Offshore Citizen)

Because you are resident where your center of vital interests is, and your home country will want your money. If you don’t cut all your ties you will be in trouble. Best case scenario you will pay a huge bill to your lawyers.

I know you have a lot of experience but what you are suggesting is that domestic courts ignore and throw out the language of the treaty. If that is true then how can any law be trusted? You could sever all ties and they still find a reason to keep you resident. Int'l law in these treaties is supposed to trump domestic law and they are supposed follow things in the proper order. The language is pretty clear in the treaty.
The standard OECD model is that they only look at center of vital interests if you have a perm home avail in BOTH countries.
For example, from the Cyprus treaty:

Whereby a reason of the provision of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

1. he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

I checked with 2 lawyers: if you are staying at a hotel for the duration of your work, that is not considered a perm home avail.

But if you can cite examples where the tax authority and courts completely ignored the treaties, I would definitely be interested to read about that.

Edit: Do they try to make the case that the treaty doesn't apply using anti-avoidance measures to make the case?