Bitcoin trading company in Cyprus. Is it possible?

[OffshoreExpat]

Hello everyone,

I would like to know if it is possible to create a bitcoin trading company in Cyprus.

An example of the activity would be:

1) i buy 1000€ worth of btc in Kraken

2) Then sell those at a price of 1100€ on Localbitcoins.com (to one or many traders). So 100€ profit.

3) I buy again on kraken and repeat the process.

The idea would be to re-invest the daily profits to increase capital, and once i feel confortable start taking profits out to a holding company after paying the 12.5+1% corporate tax.

My questions are:

1) Is this possible with a regular Cyprus LTD or do i need like an exchange license for this?
2) Is this subjected to VAT? (i read that it is not but not 100% sure)

Finally, i know that accounting is expensive in Cyprus, specially if i have many transactions, but i chose Cyprus because it is easy to open SEPA bank account which is how traders will pay to buy Btcs from me. However if you know another location where this could work, i'm happy to hear your suggestions.

Thanks.

 

[Sols]

Cyprus is not a good fit for this. Go get an Estonian license instead.

In Cyprus, financial services are supervises by both the Central Bank of Cyprus and CySEC. AFAIK, crypto trading might be considered a form of activity that CySEC would traditionally supervise but so far CySEC has not issued any licenses for crypto trading nor do they seem interested in doing so.

With regards to VAT, it depends on whether you qualify for a license or not. If you are licensed and the activities thereby qualify as a financial service, it's probably not subject to VAT. If you don't have a license, the activities can be seen as VATable activities.

Normally I'd say go speak wit a tax adviser but in this case, chances are you will get different answers from different advisers since this is a unclear legal area.

 

[Perry8]

Do this in Estonia instead.

The poblem today is that crypto activites are in a vacuum when it comes to regulation. True, in many ways I do prefer that it is unregulated activities, but the situation today is that it is often somewhere inbetween. Getting more and more regulated, but still unregulated in most jurisdictions except that some of it (and it is can be difficult to find out excactly what) are considered financial sevices and therefore regulated.

The type of activity you are referring to will probably not be regulated at all. If you change crypto to fiat in your example you will see that the activity is not regulated in most countries - so there is obviously no point in regulating it for crypto either. But this is only true as long as you deal with yor own money.

So, most likely you can do this from most countries. But, you will probably need to look for banking options that accepts this type of activity.

The reason why I suggest Estonia is that they have crypto licenses, and this type of activity does not require a license. So, in Estonia your legal situation is clear. Estonia has a 20% corporate tax, but it is not applied before you take money out of the company. This makes it easier to build up assets.

 

[wexport]

The reason why I suggest Estonia is that they have crypto licenses, and this type of activity does not require a license. So, in Estonia your legal situation is clear. Estonia has a 20% corporate tax, but it is not applied before you take money out of the company. This makes it easier to build up assets.

This means no need license if trade with company money?

In Estonia , if you make a new company it should have at least one employee ? Or not necessary?

 

[cardbit]

I can confirm that no license is needed in Estonia for this, but your business idea sounds a bit simple. What if you do not sell it at a higher price, or at least won’t be able to sell at a profit, due to bitcoin price flunctuation ? Setting up a company with all the accounting etc is pricy. I know a few traders that work like you described and none of them have any companies, that all gets paid to their local bank account. I would suggest for you to wait and do a few transactions of your own account first before looking for a company incorporation.

 

[OffshoreExpat]

Thanks for the answers .

So, most likely you can do this from most countries. But, you will probably need to look for banking options that accepts this type of activity.

I saw a Localbitcoin user's profile that was incorporated in Malta and had a bank account with Bank Frick (crypto and specially kraken friendly). But Malta tax is too high for my interest.

What if you do not sell it at a higher price, or at least won’t be able to sell at a profit, due to bitcoin price flunctuation ?

I guess it is registered as a lost on the accounting, like buying milk and having to sell it at a discounted price because cause it is expiring, or something like that.

Setting up a company with all the accounting etc is pricy. I know a few traders that work like you described and none of them have any companies, that all gets paid to their local bank account. I would suggest for you to wait and do a few transactions of your own account first before looking for a company incorporation.

I've been already trading like this for a while, and my personal bank gave me a "warning" since they saw i was depositing often in kraken. Ideally with a company i can apply to Bank Frick and then have acces to al mayor crypto exchanges.

 

[Perry8]

This means no need license if trade with company money?

Correct.

In Estonia , if you make a new company it should have at least one employee ? Or not necessary?

There is no requirement to have any employees. If you have an Estonian company and one to get a crypto license, there are some requirements that involves local people. But, a normal Estonian company does not have any such requirements.

I saw a Localbitcoin user's profile that was incorporated in Malta and had a bank account with Bank Frick (crypto and specially kraken friendly). But Malta tax is too high for my interest.

Malta has an effective tax rate of 5% if you have a Maltese company and a foreign shareholder (35% tax and 6/7 refund) - not too bad in my opinion.

 

[OffshoreExpat]

Malta has an effective tax rate of 5% if you have a Maltese company and a foreign shareholder (35% tax and 6/7 refund) - not too bad in my opinion.

Wow , i did not know that . Tha's probably what they LCB user is doing.

So for example a trading company in Malta owned by a holding in Cyprus will pay an effective 5% corp rate in Malta and 0% dividends rate in Cyprus?

 

[CaptK]

Wirex and SEBA Bank have no issue with crypto payments. Wirex has a 50K a day deposit and withdrawal.

Do it in a personal name. In the UK so long as you have a full time job trading is deemed as secondary income (hobby) and therefore tax free.

 

[crsp]

LEAK: EU to create ‘superbody’ of watchdogs to oversee digital currencies – EURACTIV.com

https://twitter.com/x/status/1304739073484087296

Cryptocurrency to get pan-European legal framework | Cyprus Mail

Maybe wait a few weeks to see what changes are coming before deciding things.

 

[Perry8]

Wow , i did not know that . Tha's probably what they LCB user is doing.

So for example a trading company in Malta owned by a holding in Cyprus will pay an effective 5% corp rate in Malta and 0% dividends rate in Cyprus?

Correct.

But this is the effective tax rate. First the Malta company will have to pay 35% tax and then the shareholder - wich is the Cyprus company in your example - will get a up 6/7 of this refunded.

Dividends from a Malta company to a Cyprus company are normally not taxed.

 

[Deanalyst]

Hey poster I have also been searching this forum for days and your post has given me some insight

I'm African and a non EEA/ UK/ US resident

Mine is a similar setup just that I want to be able to buy and arbitrage bitcoin from exchanges in the uk (kraken, luno , etc)/EU via Sepa/swift transfers or other faster bank transfer method and sell on localbitcoin and in other jurisdictions where its profitable at that time for example Africa

My challenge is

1) Finding the best corporation setup and bank account that would let me buy volumes daily ( up to 10 btc or more daily )

2) How to remit liquidity from the African market im selling to back to my EU/UK bank account as fast as possible after selling there

3) tax planning

Looking forward to your replies

 

[CaptK]

You will need to set yourself up in the UK with a residential address and get verifiable proof of it.
Feel free to PM or email to discuss.

 

[simplesimon]

Just jumping into this... I'm looking to do something similar to OP: Purchase BTC and arbitrage on various exchanges (and various currencies).

If I understand correctly, the consensus seems to be that an Estonian company + bank account is the preferred setup due to a favorable regulatory environment?

If so, is it possible to have an Estonian bank account that accepts incoming transfers in multiple currencies beyond just USD, EUR, GPB, etc.?

 

[simplesimon]

To add to my above message: I'm in the US and have no intention of avoiding taxes, I just wish to trade bitcoin and receive incoming transfers wherever it makes the most sense for me to do so.

 

[CaptK]

To add to my above message: I'm in the US and have no intention of avoiding taxes, I just wish to trade bitcoin and receive incoming transfers wherever it makes the most sense for me to do so.

If you are a US citizen you can use a nominee company set up and be the "trader" as an employee on a result based basis.
That way you can access all the exchanges with full access. Pay yourself the profits and pay tax on it.

 

[simplesimon]

@CaptK Great, thanks for the tip!

How about banking? Is an Estonian bank going to be OK with inbound transfers from Nigeria (or wherever) and outbound to crypto exchange?

 

[jackfrost]

The problem with this buisness "idea" is that most of the people you sell the btc too will want to do so anonymously / launder cash etc. It is just a matter of time till you will land your butt in some kind of jail / massive problems especially when doing this as a business.

Most laws concerning that is the pure participation in such an transaction makes you a full accomplice / fully liable to the charges. Given the nature of the business you will not be able to proof your innocence.

 

[simplesimon]

The problem with this buisness "idea" is that most of the people you sell the btc too will want to do so anonymously / launder cash etc. It is just a matter of time till you will land your butt in some kind of jail / massive problems especially when doing this as a business.

Most laws concerning that is the pure participation in such an transaction makes you a full accomplice / fully liable to the charges. Given the nature of the business you will not be able to proof your innocence.

Thanks @jackfrost, that is a solid objection and a real concern. However, assuming the KYC stuff isn't a problem, how would I accomplish this?

I see two issues:

1. Having a bank account that will accept incoming transfers from multiple currencies.

2. Having a bank account that will allow transfers to/from bitcoin exchange.

I don't think 1 & 2 need to be the same bank account, or even in the same jurisdiction.