You should also consider the extent and volume of the
crypto trading operations. Selling
crypto a few times a year through an Australian or German
bank account will probably be OK, but if it's a regular activity, German or Australian authorities may consider it an economic activity taking place within their borders.
My friend is actually trading small amounts of crypto and he reinvests his profits by buying crypto. Therefore he not regularly transfers his profits into his personal bank accounts in
Germany or Australia and if he do so it will be around 1k probably.
So, now the question is, how much crypto will your friend be selling and how often? If volume is high, it might make sense to set up something with substance somewhere, and perform the trading activity through that place.
I am curious what you would consider a high amount? Also does it make any difference if someone is trading a 50k account once a month or a 5k account 100 times a months? Would you start to set up something with substance when you trade a 10k account?
I know that for a lot of people it is not that much money, but it is possible to make a living from the profits of a 10k trading account.
1. Every country has its own rules for
tax residency. So you can end up in a situation where you are tax resident in no country. But this can create its own problems because banks etc. expect you to live somewhere and be tax resident somewhere.
That's right, but most people already have a few bank accounts before they leave there tax residence, so they can simply keep there bank accounts. It is also possible to open up bank accounts without the need to show your tax
residency. In Georgia it should be possible to open up a bank account only with a passport.
4. It's important to give the broker the correct information. If his broker still thinks he lives in Germany (because he didn't update his address), he could end up paying only 15% in
US taxes, instead of 30% (because the US thinks he will pay the rest in Germany). That would be tax fraud in the US.
That's difficult, because for most people it is simply out of there imagination to don't be registered somewhere. What do you think will be the response when someone contacts there exchange/broker to tell them that he or she is not living in there country anymore and that they can not provide an alternative address?
I guess that there will be a buerocracy loophole and people simply dont know how to deal with this situation, so they may decide to restrict there account. My experience is that you only have trouble with these special situation because the system is simply not made for such an amazing lifestyle.
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Here a short summary because you both agreed that it is a possible setup:
It is legal to live in
Thailand and to pay 0% tax on trading profits (it doesn't matter how high these profits are), because Thailand is a territorial tax system and the profits are gained outside of Thailand. As soon as these profits are very high, it is necessary to have a bank in a country with 0%
income tax. It only requires a bank in this 0% income tax country, because in this case there is no permanent
tax residency. I think it should be much easier to open up a bank account in a 0% income tax country then to get a permanent residency or
citizenship.
That means it is possible to make unlimited profits and to pay 0% tax while living in a territorial tax system country, is that right? However this only works for very experienced and profitable traders, because they dont need to write invoices and deal with customers and they can work remotely.
In the case of my friend I think the situation is the same, even when he lives and works in Australia for some time. He is not a permanent resident in Australia neither is he able to get support from the state or from the health system.
That is really interesting! I am looking forward to read about your thoughts.