Move to UAE, wait 6 months and cash out tax free, is it that simple?

[SoNewToAllShit]

When the question actually was: "I have earned income for 10 years, not declared or paid tax on it, moved to UAE recently, and now plan to cash out the income. Does my former home country have legal grounds to prosecute me for tax evasion?" Which, yes, it does. It probably won't happen, though, if OP plays his cards correctly.

yeah true

 

[pieceofmind]

To end your tax residency from your home country, usually requires an exit tax. You'll have to pay capital gains tax on the crypto at market place when moving out from when you bought it. Research exit or departure tax for your home country for more details.

 

[PinkCat]

That's where you will start encountering problems. Cashing crypto won't be a problem, but moving cash out of the country certainly will.

Actually not. Cashing out crypto in UAE WILL be a problem since banks there are not crypto friendly yet. The thing is you don't have to cash it out via local banks, you just need the tax residency to do it tax free.
Yeah there are many OTC offices where you can cash out for actual cash, but good luck depositing that into any bank.

No, not even UK.

The question isn't "Can I move to UAE and pay no income tax on new income?"

The question is "Can I move to UAE, declare undeclared income, pay no tax in UAE, and would my home country have no claim on the money?"

The difference is important. OP has committed tax evasion for the last 10 years. That doesn't go away simply by moving to UAE and becoming tax resident there.

Well not quite tax evasion, just not declaring it. Yeah still a problem but the local authority published a guidance on how to do that not too long ago, so i feel they will still be lenient on it.
Crypto was acquired through investment, not by working for it So no tax event yet.

If you add these points, it's possible:

- De-register from your home country
- No permanent home in your home country, no properties
- No substantial business interests in your home country
- No gym membership, mobile subscription, magazine subscriptions in home country
- No wife and kids in home country
- Spend at most 2-3 months/year in your home country
- Make sure to spend at least 183 days in your new country of residence, and have a rental contract/buy property
- Have documentation ready, flights, CC-statements, utility bills.

However, if you intend to use these funds in EU in the future, it's advisable to opt for an EU country for residency and cashing out the crypto, Cyprus for example.

- is it ok if properties are owned via foreign company?
- do they really check gym memberships and phone subscription? Damn, I knew I shouldn't work out that hard.
- how do they know how much time i've spent here since the EU borders are open and I can be in any other EU country without that being registered anywhere?

the rest is pretty much sorted out

It depends on the particular jurisdiction (EU is not uniform in this) but generally yes.

Again, it depends on the particular jurisdiction. Interpretation of crypto assets is not uniform across the EU.

Unfortunately, it is not, in my deep opinion. See @Sols reply


@PinkCat, general advice: speak with a good tax attorney in the relevant EU country (or eventually, share the country name here). Any particular/detailed opinion you can read here now can be invalid.

ah i've spent more money on tax attorneys than i care to admit, the bitter truth is they are not up to date yet and this forum is actually much much better place to brainstorm those things.

 

[Sols]

Well not quite tax evasion, just not declaring it. Yeah still a problem but the local authority published a guidance on how to do that not too long ago, so i feel they will still be lenient on it.
Crypto was acquired through investment, not by working for it So no tax event yet.

If that's the case, the situation is less serious than I had previously assessed. If the crypto was acquired through legitimate (declared/taxed) funds and you're just now thinking about cashing out the investments, you have probably not committed tax evasion. You might've filed false/incorrect tax returns if you didn't state your assets (if required) but that's much less serious of a crime.

I think that your former home country in the EU may still technically have some claims on you, if you go by the letter of the law. But in reality, the risk is very low. Just don't do something stupid like live in Dubai for 181 days and then the rest of the year in your EU country. Stay outside of the EU properly for at least a couple of years at least. Only visit your EU country as a tourist (a few weeks a year).

 

[Forester]

The taxable event occurs when he sells the Crypto, so it probably is.

It really varies across countries. Keywords: e.g. wealth tax, exit tax.

No, that's usually when he moves out of the country of residence... at least with 1st world countries.

Exit tax. But it's imposed only somewhere.

As I understand - no reporting in the Uk unless sell.

The UK has no exit tax? Interesting. (Possible of course, I am not oriented in the UK tax system.)

So let's say I put 10k usd into crypto (legal taxed income from employment or business) and after some years its worth 100 k usd, do I have to pay tax yearly on the capital gain or only at the moment I cashout?

It depends on your tax jurisdiction. Somewhere it is even tax free

banks there are not crypto friendly yet.

True.

The thing is you don't have to cash it out via local banks, you just need the tax residency to do it tax free.

I do not think that this is the core of the problem

but good luck depositing that into any bank.

If done properly, it is not a problem. See e.g. discussion here Dubai cash deposit of $1.000,000 in two different bank accounts

Well not quite tax evasion, just not declaring it. Yeah still a problem but the local authority published a guidance on how to do that not too long ago, so i feel they will still be lenient on it.

Nobody here can judge about it unless we know what country you are talking about.

Crypto was acquired through investment, not by working for it So no tax event yet.

Possible but unsuitable for discussion without knowing the jurisdiction.

- is it ok if properties are owned via foreign company?

If the company is not formally linked to you (as director, UBO, etc.), then yes; otherwise no.

- do they really check gym memberships and phone subscription?

The former – difficult to say; the latter – very probably yes (it is totally easy).

ah i've spent more money on tax attorneys than i care to admit, the bitter truth is they are not up to date yet and this forum is actually much much better place to brainstorm those things.

Thank you for the compliment to all forum members. And yes, as the crypto is (relatively, wrt the law systems) a new phenomenon for tax attorneys, they are many times not much oriented – but not always.
Nevertheless, I repeat: without knowing what's your jurisdiction, all the opinions make more or less just an (interesting) academic debate that can be to the remarkable extent useless for you (but useful generally )

 

[SoNewToAllShit]

how to setup a new company in UAE and invoice your current company or your self from the company there! I don't know but this way you can transfer everything legally (at least on public view) and setting it up in some sort of free zone if still exists would get you a good 0% tax.

 

[jafo]

Our guy here has (probably) been committing tax evasion for 10 years.

Has he, though?

Is it tax evasion (i.e., Spies evasion) xor passive failure to file?

Source: https://www.irs.gov/pub/irs-utl/tax_crimes_handbook.pdf - Page 22 of 176.

 

[Sols]

Has he, though?

Is it tax evasion (i.e., Spies evasion) xor passive failure to file?

In that post, I was still under the previous understanding that the funds gathered for 10 years had been business/work income that hadn't been declared or taxed.

Making false/incomplete tax return is a far milder crime, especially if no taxes end up having been owed.

 

[Dandyline]

So you're saying there's no income tax as long as you're not paid in fiat? Would the tax authority agree with that? Every time I have employed someone, it's been clear that even payment in kind is taxable. Just a matter of what the threshold is and how for example expenses are handled. But paying someone or a company in crypto isn't a legal way to be excluded from tax.

If you get paid 10,000 EUR/month in bitcoin, you have 10,000 EUR/month worth of income to declare and pay tax on. When you sell the bitcoin, that may or may not be taxable (again).

Our guy here has (probably) been committing tax evasion for 10 years. Moving to UAE isn't going to undo that.

Not saying anything will happen, especially if he keeps a low profile, and doesn't move back EU/Romania anytime soon. But tax evasion is still tax evasion. Look at the details of this question. It's income over a period of time and he ends it by asking if his former home country in the EU will have "legal claim on any tax". The answer to that is a resounding most likely yes.

He didn't mention receiving payments in crypto, he talked about accumulating crypto through regular investments, i.e monthly dollar-cost averaging. In this scenario, tax obligations typically arise only when he decides to sell or convert the crypto into fiat.

However, if he receives crypto as payment for goods or services within a business context, it's of course a different situation. This could lead to potential accounting and tax violations if proper reporting isn't done, if they ever find out.

 

[wellington]

So you're saying there's no income tax as long as you're not paid in fiat? Would the tax authority agree with that? Every time I have employed someone, it's been clear that even payment in kind is taxable. Just a matter of what the threshold is and how for example expenses are handled. But paying someone or a company in crypto isn't a legal way to be excluded from tax.

If you get paid 10,000 EUR/month in bitcoin, you have 10,000 EUR/month worth of income to declare and pay tax on. When you sell the bitcoin, that may or may not be taxable (again).

Our guy here has (probably) been committing tax evasion for 10 years. Moving to UAE isn't going to undo that.

Not saying anything will happen, especially if he keeps a low profile, and doesn't move back EU/Romania anytime soon. But tax evasion is still tax evasion. Look at the details of this question. It's income over a period of time and he ends it by asking if his former home country in the EU will have "legal claim on any tax". The answer to that is a resounding most likely yes.

Most countries I’ve come across - and we do pay in stablecoins - it’s treated as income or it’s treated as capital gains.

If it’s income I.e a payment then its declared as such and taxed as such.

Likewise if its a gift its and its under the threshold its tax free and if converted later only the amount above is taxed as capital gains.

As for undeclared income if it is then he better sort that with the tax afency

If it’s just buying and storing then there shouldn’t be any tax unless he’s sold/exchanged some.

Life’s much simpler living in Asia with a company overseas with staff in it

 

[jafo]

If it’s just buying and storing then there shouldn’t be any tax unless he’s sold/exchanged some.

Kind of like stocks?

 

[Dandyline]

Kind of like stocks?

Yeah

 

[JohnLocke]

Most countries I’ve come across - and we do pay in stablecoins - it’s treated as income or it’s treated as capital gains.

If it’s income I.e a payment then its declared as such and taxed as such.

Likewise if its a gift its and its under the threshold its tax free and if converted later only the amount above is taxed as capital gains.

As for undeclared income if it is then he better sort that with the tax afency

If it’s just buying and storing then there shouldn’t be any tax unless he’s sold/exchanged some.

Life’s much simpler living in Asia with a company overseas with staff in it

How does it differ from most other countries?

 

[PinkCat]

my country doesn't have exit tax
so in order to legally cash out without owing taxes how long i have to live in UAE before doing it? In most countries there is some period (statute of limitations) after which they can't touch you, does that apply in this case?

Unfortunately I have one mortgaged property and one business where i participate under my own name directly.
The rest is via foreign owned company but im still registered as UBO in my country since it's required by law
Would those things make it impossible to NOT be considered tax resident in my home country?

 

[Cloudbanck]

Depends on your home country, but most high tax western countries have rules about ties or center of vital interest that mean that you are still a tax resident if you have a property or a business in the country. So in this case it doesn't matter how long time you spend in the UAE, as long as you have a business or a home in your home country.

There was this football player from Montenegro , Vucinic I think, who played football in the UAE and lived there full time, but since he had a house in Italy, and had lived in Italy a while, the Italian tax authorities claimed that he was an Italian tax resident and had to pay italian tax on his worldwide income including the salary in the UAE.

However, if your home country is Ireland or the UK, tax residency is more about days spent in Ireland/UK, and you may ok even if you have business/property there. Eastern European countries are often more lenient on these things too.

 

[Forester]

my country doesn't have exit tax

OK

so in order to legally cash out without owing taxes how long i have to live in UAE before doing it? In most countries there is some period (statute of limitations) after which they can't touch you, does that apply in this case?

Many countries of origin can touch you abroad after 9 years or even more. Until you share the country name, nobody can tell you.

Unfortunately I have one mortgaged property and one business where i participate under my own name directly.

Be assured that in such a case you will be considered tax resident there almost surely, regardless of what EU country it is.

The rest is via foreign owned company but im still registered as UBO in my country since it's required by law
Would those things make it impossible to NOT be considered tax resident in my home country?

See above.

Depends on your home country, but most high tax western countries have rules about ties or center of vital interest that mean that you are still a tax resident if you have a property or a business in the country. So in this case it doesn't matter how long time you spend in the UAE, as long as you have a business or a home in your home country.

Exactly; and it concerns not only high tax western countries.

However, if your home country is Ireland or the UK, tax residency is more about days spent in Ireland/UK, and you may ok even if you have business/property there.

Well, I can't say about Ireland but re:UK, if you have there a house and a running business, you will be forced to talk to HM taxmen, I am afraid

Eastern European countries are often more lenient on these things too.

Sometimes yes and sometimes definitely not (Romania as an example, or Hungary with its worldwide taxation).

 

[jayM]

Depends on your home country, but most high tax western countries have rules about ties or center of vital interest that mean that you are still a tax resident if you have a property or a business in the country. So in this case it doesn't matter how long time you spend in the UAE, as long as you have a business or a home in your home country.

is that really true, what if I rent a apartment it's the same?

 

[Cloudbanck]

Well, I can't say about Ireland but re:UK, if you have there a house and a running business, you will be forced to talk to HM taxmen, I am afraid

I mean you will still have to pay tax to the HMRC on your income from the UK house, and/or corporate tax on your business if it is an LTD (and not non-resident), but the house and business doesnt cause you to be tax resident in the UK (except in the rare case you meet none of the days tests, and the sufficient ties tests are used).

See Am I a tax resident in the UK?.

Basically, just looking at the first overseas days test, if you spend less than 16 days in the UK, you are not a UK tax resident, and that's it, no other factors matter.

 

[Dandyline]

is that really true, what if I rent a apartment it's the same?

Usually same with Rental apartment, depends on the country.

 

[Forester]

I mean you will still have to pay tax to the HMRC on your income from the UK house, and/or corporate tax on your business if it is an LTD (and not non-resident), but the house and business doesnt cause you to be tax resident in the UK (except in the rare case you meet none of the days tests, and the sufficient ties tests are used).

See Am I a tax resident in the UK?.

Basically, just looking at the first overseas days test, if you spend less than 16 days in the UK, you are not a UK tax resident, and that's it, no other factors matter.

Oh well. Now I see. You are right. With a house and a running business one will probably satisfy Accommodation tie and Work tie but with less than 91 days in the UK he/she is safe; and 90 days is quite enough. My bad. Memory does not serve so well