Question offshore company for investing in crypto/stock market

CALL US ON +971 50 4467827 - TO SETUP YOUR NON-CRS COMPANY STRUCTURE IN DUBAI.
Bank Accounts, Company Formations, Tax Planning, Residency Solutions, and more

hmg78800

New member
I'm a Lithuania citizen with Estonian residence permit, living in Estonia, running a small marketing business and renting out an airbnb under Estonian OU company. Thinking about starting crypto trading and investing into stocks. Estonian company is absolutely ok in case of taxation, as you only pay when distributing dividends. But declaration process in case of trading is awful, every single operation should be declared and PL calculated into EUR(which is kind of tricky for crypto). So i'm looking into into incorporating some offshore company in jurisdiction with 0% profit/corporate tax and without requirement to declare/report crypto and stock trades and cheap formation+renewal.
The shareholder of the offshore company could be my Estonian company, so i can dive the profit from trades into real estate on behalf of the Estonian company.
The two questions i have are:
1) what jurisdiction would you recommend? I have cayman islands and seychelles on my mind currently, but may be there are better options.
2) after going through forums i understood that more likely i would not be able to open a bank account under that company, and the only option is some EMI, but my research showed that prices for offshore companies are really high, which makes it not to even start it, as i'm currently targeting into <50K yearly turnover


Maybe i'm missing something?
 

TrueTroop

New member
Nevis might be a better option for you;

1) IBC can be registered for ~$1000/year, no taxes, owner of IBC can be different company
2) Cayman is much more expensive, and Seychelles has bad reputation
3) Bank account will be hard for any Caribbean company, but not impossible
 

uplana

Corporate Services
Mentor Group Gold
If you have the money I have great success with my Switzerland company I created for some similar purpose. It has great reputation and you can find plenty of financial services that want to work with you.

Business partners and potential new business partners look at it as a WAOW you have setup your business in Switzerland, you must do something right.
 

pastet89

New member
@uplana

I have the same question as OP. My main issue is the complex and without clear rules way of calculating crypto profits. I want a company somewhere to be like a "black box" for trading and just to pay dividend on what I get out of it .

Unfortunately, banana offshore republics seem not to work. Or at least I am too overwhelmed to keep trying to open one (for around a year so far). Too many issues.

What's the deal (and price) with the Switzerland company? And are there any similar and cheaper options elsewhere?
 

khinkali

Entrepreneur
My main issue is the complex and without clear rules way of calculating crypto profits.

That look in the tax auditor's eyes when you explain that the money will flow BTC -> XRP -> ETH -> OMG -> BNB -> whatever. conf/(%

Some jurisdictions allow for NAV (net asset value) accounting instead of trade by trade in local currency (which is a non starter). I think Cayman allows it, but you need to be big to justify the costs of setting up there.

Anywhere else?
 

Don

Entrepreneur
I'm a Lithuania citizen with Estonian residence permit, living in Estonia, running a small marketing business and renting out an airbnb under Estonian OU company. Thinking about starting crypto trading and investing into stocks. Estonian company is absolutely ok in case of taxation, as you only pay when distributing dividends. But declaration process in case of trading is awful, every single operation should be declared and PL calculated into EUR(which is kind of tricky for crypto). So i'm looking into into incorporating some offshore company in jurisdiction with 0% profit/corporate tax and without requirement to declare/report crypto and stock trades and cheap formation+renewal.
The shareholder of the offshore company could be my Estonian company, so i can dive the profit from trades into real estate on behalf of the Estonian company.
The two questions i have are:
1) what jurisdiction would you recommend? I have cayman islands and seychelles on my mind currently, but may be there are better options.
2) after going through forums i understood that more likely i would not be able to open a bank account under that company, and the only option is some EMI, but my research showed that prices for offshore companies are really high, which makes it not to even start it, as i'm currently targeting into <50K yearly turnover


Maybe i'm missing something?
"But declaration process in case of trading is awful, every single operation should be declared and PL calculated into EUR(which is kind of tricky for crypto)" - yes, PL needs to be calculated, but you only need to declare when you withdraw dividends. It would be like you have described as an individual though.
Note that you would need to declare ownership and interest of offshore entities to Estonian tax office.
 

zzzzzz

Active Member
"But declaration process in case of trading is awful, every single operation should be declared and PL calculated into EUR(which is kind of tricky for crypto)" - yes, PL needs to be calculated, but you only need to declare when you withdraw dividends. It would be like you have described as an individual though.
Note that you would need to declare ownership and interest of offshore entities to Estonian tax office.
Usually if you're the UBO, that company is also considered controlled from Estonia (cfc rules). In the end the most important thing is your personal tax residency.
 

JackAlabama

Entrepreneur
@uplana

I have the same question as OP. My main issue is the complex and without clear rules way of calculating crypto profits. I want a company somewhere to be like a "black box" for trading and just to pay dividend on what I get out of it .

Unfortunately, banana offshore republics seem not to work. Or at least I am too overwhelmed to keep trying to open one (for around a year so far). Too many issues.

What's the deal (and price) with the Switzerland company? And are there any similar and cheaper options elsewhere?
Cost is very high if you do that in Switzerland.
Important: try to do all trading within a Swiss banks which supports digital assets. There are a few options.
It will massively help with records keeping and creating, otherwise the mess you will create, youd need a full time employee to create records.
Or you try to create or find some analytic tools to do it for you across multi-chains etc.

For these activities however, you will be charged 2 legs and 1 arm usually.
 

khinkali

Entrepreneur
PL needs to be calculated, but you only need to declare when you withdraw dividends

The PL calculations, are these per trade and if so in what currency? Or just measuring PL on deposits and withdrawals?

I had some advice in Georgia (which for tax is currently similar to the Estonian system), that the Revenue Service don't need trade by trade or mark to market accounting (just measure deposits to and withdrawals from the company in local currency). The national bank would need something like trade by trade reporting (if investing for others) but not in local fiat currency (just a trade log). A good compromise, but 20% tax is high depending on investor location and tax treaties.
 

pastet89

New member
The PL calculations, are these per trade and if so in what currency? Or just measuring PL on deposits and withdrawals?

I had some advice in Georgia (which for tax is currently similar to the Estonian system), that the Revenue Service don't need trade by trade or mark to market accounting (just measure deposits to and withdrawals from the company in local currency). The national bank would need something like trade by trade reporting (if investing for others) but not in local fiat currency (just a trade log). A good compromise, but 20% tax is high depending on investor location and tax treaties.
Thanks for that, I will look into Georgia!

I am not aware of the Estonian system but I guess it's the same as in Bulgaria: you need PL in the local currency for each trade. Which is a pure hell.

Imagine the following scenario:

You buy ETH as 1,000$
Two weeks later you buy an NFT worth 1 ETH, but at this time the ETH price is 1200$
Later, you trade this NFT for another NFT + ETH on top of it.

To calculate only the last trade, you need:

1) To assume you realized PL of 200$ when buying the NFT (as the ETH you used to buy it has increased in price). Then, convert $ to local currency in both days to see if you made PL in the local currency.
2) To calculate the local currency worth of the first NFT when you swap it for the second, and for this you need:
a) the realistic price of the first NFT by the time of the swap in ETH: but what is it? (Is it its floor price, or some other price based on NFT traits?)
b) The price in local currency of the NFT: convert the USD value of the NFT worth in the buy day and in the second deal day. Then convert USD to local currency in both days and see what is the PL for that.
c) The price of the extra ETH you add on top (and again, to calculate P/L) of the ETH itself based on if the current ETH price is lower or higher than the price you bought it. Again, add on top of that the USD to local currency conversion.

Now assume you have 100+ such trades in a year, but between the two deals you convert the ETH to BTC or whatever else and then back to ETH or do something complex with it.

Add on top of that the fact the currently no accountant or lawyer was able to tell me with 100% certainty even: what is assumed as an ETH value in $ for a certain deal where you need to take daily rate. What is a "daily rate": close, (high + low)/2, etc...? They say sth like "it doesn't matter that much". Well, that's not Forex. The crypto can do 30% price volatility in a single day so I guess it does matter.

Now assume you make decent profits and the tax office wants to look into your records. I would always be concerned something is not right there. Or at least they can always pretend something is not right.

That's why I am happy to pay even some low (non-zero) tax but not to think about any accounting.

P.S. In Slovenia they had the best crypto legislation proposal ever. You pay 10% on what you convert to fiat. That's it. Nothing else, no complex operations accounting etc... But the parliament rejected it. They are supposed to try again later. If they accept it I think as a no brainier I'd relocate there.

Edit: I just checked Georgia. Sadly, it has a DTA with my country. So the trades should be taxed here and also based on this complex system.
 
Last edited:

Don

Entrepreneur
Thanks for that, I will look into Georgia!

I am not aware of the Estonian system but I guess it's the same as in Bulgaria: you need PL in the local currency for each trade. Which is a pure hell.

Imagine the following scenario:

You buy ETH as 1,000$
Two weeks later you buy an NFT worth 1 ETH, but at this time the ETH price is 1200$
Later, you trade this NFT for another NFT + ETH on top of it.

To calculate only the last trade, you need:

1) To assume you realized PL of 200$ when buying the NFT (as the ETH you used to buy it has increased in price). Then, convert $ to local currency in both days to see if you made PL in the local currency.
2) To calculate the local currency worth of the first NFT when you swap it for the second, and for this you need:
a) the realistic price of the first NFT by the time of the swap in ETH: but what is it? (Is it its floor price, or some other price based on NFT traits?)
b) The price in local currency of the NFT: convert the USD value of the NFT worth in the buy day and in the second deal day. Then convert USD to local currency in both days and see what is the PL for that.
c) The price of the extra ETH you add on top (and again, to calculate P/L) of the ETH itself based on if the current ETH price is lower or higher than the price you bought it. Again, add on top of that the USD to local currency conversion.

Now assume you have 100+ such trades in a year, but between the two deals you convert the ETH to BTC or whatever else and then back to ETH or do something complex with it.

Add on top of that the fact the currently no accountant or lawyer was able to tell me with 100% certainty even: what is assumed as an ETH value in $ for a certain deal where you need to take daily rate. What is a "daily rate": close, (high + low)/2, etc...? They say sth like "it doesn't matter that much". Well, that's not Forex. The crypto can do 30% price volatility in a single day so I guess it does matter.

Now assume you make decent profits and the tax office wants to look into your records. I would always be concerned something is not right there. Or at least they can always pretend something is not right.

That's why I am happy to pay even some low (non-zero) tax but not to think about any accounting.

P.S. In Slovenia they had the best crypto legislation proposal ever. You pay 10% on what you convert to fiat. That's it. Nothing else, no complex operations accounting etc... But the parliament rejected it. They are supposed to try again later. If they accept it I think as a no brainier I'd relocate there.

Edit: I just checked Georgia. Sadly, it has a DTA with my country. So the trades should be taxed here and also based on this complex system.
Add into the equation the fun penal code in Bulgaria according to which the unpaid tax level that triggers criminal responsibility is only 1534 EUR in unpaid taxes that can result in a jail sentence. 6135 EUR or more is considered “heavy crime".
Estonia and Georgia have more or less the same tax system, where you only pay tax on distributions. With an Estonian company, you have better payment processing options and wider access to crypto exchanges. You can open a company with 1 cent share capital, with no bank account, inject crypto as equity, and do your trading. It's even possible to avoid the need of publishing annual financial reports.
In Georgia, you will probably lose out on currency conversions when you need to deal with GEL, but they have a more interesting tax regime for individuals dealing with crypto, and nice opportunities to exchange crypto for cash, real estate, etc. You hardly have any limitations when converting crypto to GEL.
In Estonia, cryptocurrencies are regulated while in Georgia and Bulgaria, they are not.
 

pastet89

New member
Add into the equation the fun penal code in Bulgaria according to which the unpaid tax level that triggers criminal responsibility is only 1534 EUR in unpaid taxes that can result in a jail sentence. 6135 EUR or more is considered “heavy crime".
Estonia and Georgia have more or less the same tax system, where you only pay tax on distributions. With an Estonian company, you have better payment processing options and wider access to crypto exchanges. You can open a company with 1 cent share capital, with no bank account, inject crypto as equity, and do your trading. It's even possible to avoid the need of publishing annual financial reports.
In Georgia, you will probably lose out on currency conversions when you need to deal with GEL, but they have a more interesting tax regime for individuals dealing with crypto, and nice opportunities to exchange crypto for cash, real estate, etc. You hardly have any limitations when converting crypto to GEL.
In Estonia, cryptocurrencies are regulated while in Georgia and Bulgaria, they are not.
As a Bulgarian, I haven't seen in my lifetime anyone going to jail for non paid taxes.

But I have seen cases of the tax office + the prosecution (both part of the mafia) to blackmail people who try to run a fair business. Just: if you want us to leave you in peace, pay us bribe X.

I remember from other posts you had companies both in Estonia and Bulgaria. I'd highly appreciate it if you PM me to give me a bit more insights about Estonia as I am seriously considering it.

But my doubts are that if I remain tax person of Bulgaria, due to the DTA, they would assume the Estonian company is operating and thus being taxed in Bulgaria under the same ridiculous system.

P.S. In Bulgaria, add to the equation the legal uncertainty if NFT trades need to pay VAT due to being considered copyright deals. I hope this nonsense does not exist in Estonia or other countries.
 

algotrader

New member
But my doubts are that if I remain tax person of Bulgaria, due to the DTA, they would assume the Estonian company is operating and thus being taxed in Bulgaria under the same ridiculous system.
Check out these comments by Bulgarian lawyers:
On the basis of the texts adopted in the second reading by the National Assembly , two main problems can be outlined before the functioning of the CFC rules in Bulgaria.
The first problem is related to the fact that the CFC rules do not apply to natural persons .

The legislative changes are aimed only at taxable persons within the meaning of Art. 2 of ZKPO, which for the most part are local legal entities. Although sole traders (ET) and natural persons - traders within the meaning of Art. 1, para. 3 of the Commercial Law also fall within the scope of Art. 2 of ZKPO, this is not enough at all.

In practice, this means that if a local Bulgarian individual owns an offshore company, he will not be affected by the new rules in any way , even if the offshore company realizes huge profits.

Дискусионно: Кратък преглед на новите правила за контролирани чуждестранни дружества и защо те няма да проработят в България
Some experts identify two main problems with the functioning of the CFC rules in Bulgaria.

The first is that CFC rules do not apply to taxes of individuals. If the company is controlled by a physical person who is a Bulgarian tax resident, the Bulgarian Controlled Foreign Company rules do not matter.

The second problem is that if a potential CFC is not subject to corporate tax in its jurisdiction, it will not be considered a Controlled Foreign Company, and the new rules will not affect it.
 

pastet89

New member
@algotrader

Thanks! I am very well aware of these.

But as you said, it applies to CFC rules and thus works for offshore company (from a country without DTA), because due to the lack of DTA, regarding the PE rule, all you need is a local Nominee Director there and to claim he manages the company there.

But apart from CFC, you need to worry about PE.

So when there is DTA in place, it clearly states that if you act on the company in the country, even by using a POA, it is assumed to have a PE there. So you still don't need to worry about CFC in this case but PE ruins everything.

If this was not the case, I would have opened long ago an offshore in some nice place: Luxembourg, Malta, Dubai, etc... (if I am not wrong even the UK offers 0% for offshore companies) and I wouldn't have wasted time trying to arrange things with jurisdictions such as SVG, BVI, Seychelles, etc...

My hope for Estonia (and other DTA-based jurisdictions) was nomadic style, claiming:

1) As a natural person, I am a tax resident of Bulgaria as I have my parents' home there. So I pay 5% and not 20% on the Estonian dividends (thanks to DTA).
2) But I don't live in Bulgaria as I am a nomad, thus, my company has no PE in Bulgaria and is taxable in Estonia for the corporate tax, e.g. 0%.

But this is just my idea which I still haven't discussed with a lawyer and to be honest I have doubts it may work. It seems hard to get 1) and 2) to be convincingly true in the same time.
 

algotrader

New member
PE and PoEM are in fact CFC rules to determine wether a company is foreign controlled by another company from abroad but they do not apply to a BG natural person owning a company registered abroad. The Bulgarian NRA won't care about the company except for the dividends or salary. Ask your lawyer. And since your office address will probably be in Estonia and your place of effective management around the world you won't have a problem with these rules anyway. But the real problem with this setup is that you will have difficulties to open accounts with banks/brokerage firms without a permanent address in Estonia. Therefore, it might indeed be necessary to have a nominee director with address in Estonia.
 
  • Like
Reactions: Don

pastet89

New member
PE and PoEM are in fact CFC rules to determine wether a company is foreign controlled by another company from abroad but they do not apply to a BG natural person owning a company registered abroad. The Bulgarian NRA won't care about the company except for the dividends or salary. Ask your lawyer. And since your office address will probably be in Estonia and your place of effective management around the world you won't have a problem with these rules anyway. But the real problem with this setup is that you will have difficulties to open accounts with banks/brokerage firms without a permanent address in Estonia. Therefore, it might indeed be necessary to have a nominee director with address in Estonia.
I have asked my lawyer and one accountant with legal degree, they both confirmed DTA claims PE in Bulgaria. But I will ask again. It's just written clearly in the DTA, you can check point 5) in the PE section.

The fact PE is a CFC rule does not mean it can exist outside of the CFC scope as a legal concept.

I really, really hope you are right. But it sounds too good to be true and I was already explicitly told the opposite by my tax consultations.

I don't think any bank will accept me anyway, and I was ready for it as I was preparing to use jurisdictions like SVG.
 

Latest Threads

Top