Cyprus crypto EUR cash out?

[JoeBlow]

What am I missing here with the following potential crypto sale? (assume Cyprus residency)

Step 1 - Sell crypto on Kraken
Step 2 - Send EURs from Kraken to German Fidor Bank (individual account).
Step 3 - Forward at your leisure from Fidor Bank to established Cyprus Bank account - funds aren't coming directly from an exchange thus shouldn't get blocked for the customary "internal bank policy" reasons.

Is this not possible? Tax implications?

Cheers

 

[CyprusLaw]

What am I missing here with the following potential crypto sale? (assume Cyprus residency)

Step 1 - Sell crypto on Kraken
Step 2 - Send EURs from Kraken to German Fidor Bank (individual account).
Step 3 - Forward at your leisure from Fidor Bank to established Cyprus Bank account - funds aren't coming directly from an exchange thus shouldn't get blocked for the customary "internal bank policy" reasons.

Is this not possible? Tax implications?

Cheers

What amount are we talking about?

 

[tsu458]

Step 3 - CY bank might ask for source of funds documents, saying it's savings might not be enough

Tax implications - up to 35% income tax on the cash out

Althought you could think the cash out is realizing capital gains (there is no tax on capital gains in cyprus), lack of crypto regulation is the reason why 8/10 accountants in cyprus will tell you, it won't be tax-free.

 

[CyprusLaw]

Step 3 - CY bank might ask for source of funds documents, saying it's savings might not be enough

Tax implications - up to 35% income tax on the cash out

Althought you could think the cash out is realizing capital gains (there is no tax on capital gains in cyprus), lack of crypto regulation is the reason why 8/10 accountants in cyprus will tell you, it won't be tax-free.

It all depends on the amount that will be cashed out. If the amount is over 10K or is an unusual amount for the line of business of usual transactions of the client then most probably it will be flagged and they will carry out a strict DD.

With respect to tax, again depends on the amount and general income of the OP, but as you correctly mention it will be up to 35%.

We know that the tax department is preparing a circular and potentially an amendment to relevant law in order to regulate cryptos, we are not certain yet what this regulation will say.

 

[JoeBlow]

What amount are we talking about?

Lets says €100-200k per month for several months. No need to cash out in a lump-sum.

 

[CyprusLaw]

This would never be accepted without Due diligence of the source of funds by a Cyprus bank and once they realize the source of funds is crypto they will block the account.

The main options are through an EMI in Cyprus or abroad. Or keeping it in foreign bank.

Another option would be to cash out through purchasing property using crypto.

 

[JoeBlow]

It all depends on the amount that will be cashed out. If the amount is over 10K or is an unusual amount for the line of business of usual transactions of the client then most probably it will be flagged and they will carry out a strict DD.

With respect to tax, again depends on the amount and general income of the OP, but as you correctly mention it will be up to 35%.

We know that the tax department is preparing a circular and potentially an amendment to relevant law in order to regulate cryptos, we are not certain yet what this regulation will say.

Why 35%. Is this the rate for trading activity cap gain?

Also what if you are a resident of Cyprus and sell before any relevant law comes into play? (assuming they don't do a claw back to date past)

 

[CyprusLaw]

Why 35%. Is this the rate for trading activity cap gain?

Also what if you are a resident of Cyprus and sell before any relevant law comes into play? (assuming they don't do a claw back to date past)

The 35% is the max rate on the basis of income tax as an individual. However, having in mind the amount you mentioned I would suggest cashing out under a company with the corp tax rate being at 12.5%

At the moment as there is no framework the safest route is to consider yourself as being taxed under income tax law (or corp tax if a company). It is unlikely that any framework will have a retrospective effect.

 

[JoeBlow]

The 35% is the max rate on the basis of income tax as an individual. However, having in mind the amount you mentioned I would suggest cashing out under a company with the corp tax rate being at 12.5%

At the moment as there is no framework the safest route is to consider yourself as being taxed under income tax law (or corp tax if a company). It is unlikely that any framework will have a retrospective effect.

I see.

I remember hearing somewhere that the new regulation should come in at 5 to 10% only. Have you heard the same?

 

[tsu458]

You mention Fidor, so I assume you are considering moving from Germany to Cyprus - great choice.

Here is the problem, you current gains might be tax-free already in germany, if held for more than a year without staking and so on (if not, it should be 25% flat tax).

Now, if you move to cyprus, you are essentialy trapping yourself. Sell private, pay up to 35% income tax. Sell within a company and pay 12.5%. There is no option to have it tax-free, like in Germany.

Moving your crypto in a company seems to be the usual route, and won't trigger any income tax it seems (or nobody is honest about that, I don't know).

 

[CyprusLaw]

You mention Fidor, so I assume you are considering moving from Germany to Cyprus - great choice.

Here is the problem, you current gains might be tax-free already in germany, if held for more than a year without staking and so on (if not, it should be 25% flat tax).

Now, if you move to cyprus, you are essentialy trapping yourself. Sell private, pay up to 35% income tax. Sell within a company and pay 12.5%. There is no option to have it tax-free, like in Germany.

Moving your crypto in a company seems to be the usual route, and won't trigger any income tax it seems (or nobody is honest about that, I don't know).

At the moment the taxable event is the conversion to FIAT. So moving from individual to company does not act as a trigger, however, this could change once a framework is introduced.

 

[JoeBlow]

You mention Fidor, so I assume you are considering moving from Germany to Cyprus - great choice.

Here is the problem, you current gains might be tax-free already in germany, if held for more than a year without staking and so on (if not, it should be 25% flat tax).

Now, if you move to cyprus, you are essentialy trapping yourself. Sell private, pay up to 35% income tax. Sell within a company and pay 12.5%. There is no option to have it tax-free, like in Germany.

Moving your crypto in a company seems to be the usual route, and won't trigger any income tax it seems (or nobody is honest about that, I don't know).

These are all great responses. Thx everyone.

No I am not from Germany, EU citizen currently but not even living in EU today (no not in US either )

I was also looking into opening a fund in Cyprus as a way to potentially get the most favorable tax rates. I haven't gone deep into this but if anyone has any input on this it would be appreciated.

 

[JohnLocke]

These are all great responses. Thx everyone.

So you must vote for the best, otherwise you have opened a false thread!

 

[manwithtoupe]

At the moment the taxable event is the conversion to FIAT. So moving from individual to company does not act as a trigger, however, this could change once a framework is introduced.

How does that work, if you pay yourself a dividend from your company directly in crypto?

Assuming the dividend is not converted to FIAT:

• Are the capital gains on the crypto taxed at the company level?
• Is the dividend taxed at the individual level?

 

[JoeBlow]

So you must vote for the best, otherwise you have opened a false thread!

I don't understand - did I do sth wrong?

 

[spacenomad]

With Germany, do you just have to hold it in a coin for 1 year and that's it? What if you were trading before that, had a bunch of different wallets, and you purchased crypto years ago. Does only the last year count, or will they start digging into previous transactions?

 

[JoeBlow]

Step 3 - CY bank might ask for source of funds documents, saying it's savings might not be enough

Tax implications - up to 35% income tax on the cash out

Althought you could think the cash out is realizing capital gains (there is no tax on capital gains in cyprus), lack of crypto regulation is the reason why 8/10 accountants in cyprus will tell you, it won't be tax-free.

I still don't understand why there is a potential tax implication. At least today. I think the remaining 2 accountants are too conservative.

The law might change tomorrow but today given the lack of a law governing how Cyprus views BTC , for example, as either currency or property it stands to reason that there can't be a cap gain tax associated with its sale, at least not today. If you where to pay tax this would mean that Cyprus has already deemed BTC as property and this has yet to be established. I am no lawyer but a "reasonable" person (I believe I am a reasonable person) would come to this same conclusion given the current state of affairs in Cyprus.

Also, Cyprus knows that this is going to be (is already) a very completive space and to assess a tax of higher than 12.5% would prompt any larger cash out to go the corporate route thus really harming the little guy more. They also need to be competitive with the Germanys/Portugals etc. so I can't imagine them going any higher than 12.5% cap gain when the relevant law kicks in.

So in conclusion given what I have learned here today is that if there is no concrete law to the contrary (and today there isn't) one should not offer to give tax payment for such cap gain in Cyprus. JMHO. Also, and this is pure speculation, I also believe when the laws are finally released that the tax rates will be 12.5% or less.

Thoughts?

 

[CyprusLaw]

I still don't understand why there is a potential tax implication. At least today. I think the remaining 2 accountants are too conservative.

The law might change tomorrow but today given the lack of a law governing how Cyprus views BTC , for example, as either currency or property it stands to reason that there can't be a cap gain tax associated with its sale, at least not today. If you where to pay tax this would mean that Cyprus has already deemed BTC as property and this has yet to be established. I am no lawyer but a "reasonable" person (I believe I am a reasonable person) would come to this same conclusion given the current state of affairs in Cyprus.

Also, Cyprus knows that this is going to be (is already) a very completive space and to assess a tax of higher than 12.5% would prompt any larger cash out to go the corporate route thus really harming the little guy more. They also need to be competitive with the Germanys/Portugals etc. so I can't imagine them going any higher than 12.5% cap gain when the relevant law kicks in.

So in conclusion given what I have learned here today is that if there is no concrete law to the contrary (and today there isn't) one should not offer to give tax payment for such cap gain in Cyprus. JMHO. Also, and this is pure speculation, I also believe when the laws are finally released that the tax rates will be 12.5% or less.

Thoughts?

Just to clarify the tax rates mentioned are not capital gains tax, and there is no possibility that CGT will be implemented on cryptos. The rates are income tax and corporate tax which is a completely different thing. Any framewrok that will be introduced will not change the tax rates as this is pretty much set. What will be affected is whether there will be a change in the tax trigger

 

[JoeBlow]

Just to clarify the tax rates mentioned are not capital gains tax, and there is no possibility that CGT will be implemented on cryptos. The rates are income tax and corporate tax which is a completely different thing. Any framewrok that will be introduced will not change the tax rates as this is pretty much set. What will be affected is whether there will be a change in the tax trigger

So there will be no Cap Gains on crypto? Now I am confused.

Are you saying that crypto will be taxed at normal income rates and not on cap gains rates?

 

[CyprusLaw]

So there will be no Cap Gains on crypto? Now I am confused.

Are you saying that crypto will be taxed at normal income rates and not on cap gains rates?

Exactly, in Cyprus capital gains only applies to immovable property and on shares which are held in company holding immovable property. So cgt has no application on crypto.