Question Proper crypto-trading structuring for Russian resident

[serzh]

Hi guys, i'm an algo-trader (HFT) in crypto with russian residency. Due to some strange crypto regulation initiatives in Russia i have thoughts on moving to other crypto-friendly country. It would be nice to have a comfortable EU entry in future, but the main goal is to have proper nice taxed business with fiat bank account.
What choices do i have?

 

[LondonOTC]

Cyprus or Estonia. Crypto friendly and reasonable taxes

 

[serzh]

Cyprus or Estonia. Crypto friendly and reasonable taxes

hmm... do you suggest moving to this countries or incorporating (crypto license) or both? as i heard Estonia and Russia have not signed double tax avoidance agreement.

P.S.: I trade with my own funds.

 

[LondonOTC]

Yes, you should move and then don't worry about Russia taxes.

 

[serzh]

Anyone here who could practically help/consult with my needs?

 

[bizniz]

As LondonOTC says - if you move you don't have to worry about Russian taxes any more. Russia only taxes its residents, not based on citizenship. So double tax treaties are not relevant if you are no longer in the Russian tax net.

Number one rule of going offshore - it is always best if you physically move your a** and assets to a zero tax jurisdiction.

Estonia and Cyprus are good. So are Portugal and Andorra. Portugal has a insane lockdown at the moment and Andorra is not EU, but is almost EU. Portugal does not tax crypto gains. If you can afford Monaco it's good too.

 

[serzh]

As LondonOTC says - if you move you don't have to worry about Russian taxes any more. Russia only taxes its residents, not based on citizenship. So double tax treaties are not relevant if you are no longer in the Russian tax net.

Number one rule of going offshore - it is always best if you physically move your a** and assets to a zero tax jurisdiction.

Estonia and Cyprus are good. So are Portugal and Andorra. Portugal has a insane lockdown at the moment and Andorra is not EU, but is almost EU. Portugal does not tax crypto gains. If you can afford Monaco it's good too.

Have you faced with something like i am now and could i ask you something personally?
I am a bit concerned about taxation rules of millions of my trades. I need country with easy rules.
And moving from Russia currently is a problem almost to any place maybe except UAE.

 

[baitmine]

I too engage in algo-trading with millions of transactions every year. I am on this site trying to deduce the same thing as you do. I have yet to find a clear answer, at the moment, my best candidate country (because I prefer to live in Europe) is Cyprus, however, it is unlikely to be tax-free as they do currently have no laws that exempt crypto (unlike securities). I have considered Bulgaria as well (10% CIT, 5% Dividends), but Cyprus appears more appealing due to the climate and larger expat community.

 

[CyprusLaw]

Anyone here who could practically help/consult with my needs?

Cyprus is a very good option. AMLD5 has just been transposed into Cyprus law. Crypto Asset Service Providers will be registered (no license requirement) in a register set up by the regulator - the procedure will be simple and straightforward. No further regulation is expected until the implementation of MiCA around 2024 at the earliest. With to tax and vat I note the following: with respect to vat: The Court of Justice of the European Union (ECJ), in its Hedqvist decision, Case 264/14, explained that bitcoin represents a direct means of payment between the operators that accept it, therefore, the transaction concerning the exchange of bitcoin for fiat currency may fall within the scope of the exemption under Article 135(1)(e)   of the EU VAT Directive 2006/112/EC, covering, inter alia, currency, bank notes and coins used as legal tender. Hence, most EU countries including Cyprus have a joint consensus that the exchange to or from virtual currencies is not subject to VAT. The same applies for using virtual currencies to buy goods or services. Thus, no VAT should be charged on the use of virtual currencies itself.
With respect to the taxation of cryptocurrencies these will fall under the same tax principles as with any other business activities and a tax rate of 12.5% will apply. This in fact the case as no legal definition was attributed to cryptocurrencies in Cyprus Tax legislation. Thus no clarification exists whether cryptocurrencies are securities (“titles”), currency or a digital asset. The accounting practice (IFRS) considers cryptocurrencies as either inventory or intangible assets, and as the the tax practice usually follows the accounting practice, inventories/intangible assets are part of the normal business operations which are taxed at 12.5%. Due to the uncertainty it could be beneficial to seek an official tax ruling/opinion on the matter if you decide to set up in Cyprus.
Finally, with respect to bank accounts, as things stand banks do not open accounts to crypto asset service providers, this could potentially change very soon due to the implementation of AMLD5, however, even if it does not change there are a number of crypto-friendly EMIs in Cyprus for account opening.

 

[CyprusLawyer101]

I would say - you should set up a company and open an account with the same institution/exchange you are doing your trades. Then capitalize the company with your existing cryptos and you can then start moving out slowly if you decide. As mentioned, a Cyprus company would be an ideal candidate. I also have a different opinion as to the taxation treatment of your ongoing crypto trades in Cyprus.

 

[Silvio]

If you're able to move, just move to Malta and save yourself a lot of headache. Malta doesn't tax income that is not remitted to Malta. Open as many trading accounts as you want as long as they are not Malta-based, and pay 0% tax. Don't bother with companies and dividends and yearly fees for maintaining the structures. Doesn't get simpler than this.

 

[Andrei636]

If you're able to move, just move to Malta and save yourself a lot of headache. Malta doesn't tax income that is not remitted to Malta. Open as many trading accounts as you want as long as they are not Malta-based, and pay 0% tax. Don't bother with companies and dividends and yearly fees for maintaining the structures. Doesn't get simpler than this.

Hmm if you trade as a natural person from Malta aren't you taxed anyways on all your transactions as what matter is from Here you operate...? (This 35% tax)

If what you say is true why would some bother building a two level with offshore to reach 5% if u coulf be at 0 without anything

 

[Silvio]

If what you say is true why would some bother building a two level with offshore to reach 5% if u coulf be at 0 without anything

Because most people doing business prefer doing it using a company and not using their personal name.
Where you operate = CFC = applies only to companies, not natural people.
Whatever you do on a personal level is taxed at 0% as long as it is not remitted to an account inside the country

 

[baitmine]

I'm not so sure if your statement is accurate.

Some early adopters have actively sought to profit from crypto’s wild swings while others, like Mr X, have casually purchased their crypto with a long-term hold strategy in mind. Should Mr X rather change his strategy and actively trade his crypto, then it must be said that any income derived from such trading activity would be subject to income tax in Malta. In that case, Mr X would be well advised to adopt a corporate strategy to benefit from Malta’s tax refund system. But this could be the topic of another discussion.

Source: IBA - Is Malta the domicile of choice for crypto-millionaires?
Like a lot of countries, it seems that if you're a somewhat passive investor, then you do not need to pay taxes on your gains. This does not appear unique to Malta.

 

[Silvio]

I'm not so sure if your statement is accurate.

Source: IBA - Is Malta the domicile of choice for crypto-millionaires?
Like a lot of countries, it seems that if you're a somewhat passive investor, then you do not need to pay taxes on your gains. This does not appear unique to Malta.

You should thoroughly read the article you are linking:

"Persons who are both domiciled and resident in Malta are taxed on a worldwide basis. However, persons who become ordinarily resident in Malta without acquiring a domicile of choice in Malta are taxed on a source and remittance basis only: that is, on income arising in Malta and on income (excluding capital gains) arising outside of Malta that is remitted to Malta. Capital gains arising outside Malta in the hands of such persons would not be subject to tax in Malta even if remitted to Malta. If this sounds familiar to British lawyers, it’s because the system comes down from the first Income Tax Act back in colonial times."

"Most importantly for Mr X, the transfer of his coin and most of his tokens would not be subject to any capital gains tax in Malta. Any gains made on any security tokens in his portfolio would also not be subject to income tax of such assets if assurance is made that such assets are sited outside Malta."

 

[baitmine]

You should thoroughly read the article you are linking:

"Persons who are both domiciled and resident in Malta are taxed on a worldwide basis. However, persons who become ordinarily resident in Malta without acquiring a domicile of choice in Malta are taxed on a source and remittance basis only: that is, on income arising in Malta and on income (excluding capital gains) arising outside of Malta that is remitted to Malta. Capital gains arising outside Malta in the hands of such persons would not be subject to tax in Malta even if remitted to Malta. If this sounds familiar to British lawyers, it’s because the system comes down from the first Income Tax Act back in colonial times."

"Most importantly for Mr X, the transfer of his coin and most of his tokens would not be subject to any capital gains tax in Malta. Any gains made on any security tokens in his portfolio would also not be subject to income tax of such assets if assurance is made that such assets are sited outside Malta."

I did read the article, I shared the paragraph which I think invalidates your claim. Anyhow, I could be wrong, I don't have a horse in this.

Would you be willing to stake your reputation on the fact that anyone can move to Malta, as long as you don't incorporate operate any kind of business (e-commerce, trading, crypto), and pay 0% tax, assuming they never remit any of their revenue to a Maltese bank legally, which would stand up a full audit?

It seems we should all move to malta if you're correct.

 

[Andrei636]

"Should Mr X rather change his strategy and actively trade his crypto, then it must be said that any income derived from such trading activity would be subject to income tax in Malta. In that case, Mr X would be well advised to adopt a corporate strategy to benefit from Malta’s tax refund system. But this could be the topic of another discussion."
Souece : still IBA
Same story as everywhere, portugal, etc... if you are a day trader in Malta youll pay the full income tax.
The idea is fool proof only for passiv investor doing a few transaction a year...

 

[Silvio]

I did read the article, I shared the paragraph which I think invalidates your claim. Anyhow, I could be wrong, I don't have a horse in this.

Would you be willing to stake your reputation on the fact that anyone can move to Malta, as long as you don't incorporate operate any kind of business (e-commerce, trading, crypto), and pay 0% tax, assuming they never remit any of their revenue to a Maltese bank legally, which would stand up a full audit?

100% correct, that's why people move to Malta. I know many people that are doing just that, for years, fully legally and without needing to report anything. It's a anonymous forum so I don't have much of a "reputation" here anyway but sure, I'm willing to "stake" it on this. Feel free to call any tax advisor in Malta and he will tell you the same.

"Should Mr X rather change his strategy and actively trade his crypto, then it must be said that any income derived from such trading activity would be subject to income tax in Malta. In that case, Mr X would be well advised to adopt a corporate strategy to benefit from Malta’s tax refund system. But this could be the topic of another discussion."
Souece : still IBA
Same story as everywhere, portugal, etc... if you are a day trader in Malta youll pay the full income tax.
The idea is fool proof only for passiv investor doing a few transaction a year...

This is absolutely, unequivocally, 100% wrong. You are spreading incorrect information. If you are keeping money outside of the country you can trade every 10 seconds or every 10 years, doesn't make a difference. There is no tax, no reporting and no audit. The country doesn't care what you do outside so even if it was true, it's hilarious to think they will somehow get your trading records and see if you are a passive or active trader...

I see it over and over here where there are simple solutions but people ignore them and instead go for some complex structures that just end up costing a lot of money every year, without any added benefit.

 

[Andrei636]

This is absolutely, unequivocally, 100% wrong. You are spreading incorrect information. If you are keeping money outside of the country you can trade every 10 seconds or every 10 years, doesn't make a difference. There is no tax, no reporting and no audit. The country doesn't care what you do outside so it's hilarious to think they will somehow get your trading records and see if you are a passive or active trader...

I am only quoting the article that our friend baitmine is linking, and that you are quoting on your message number 15

 

[Silvio]

I am only quoting the article that our friend baitmine is linking, and that you are quoting on your message number 15

And the article is completely wrong in this regard. Never even heard of IBANET.org, no reason to take this information as word of god.

KPMG and Deloitte both clearly state that capital gains outside Malta are nontaxable regardless of how often the trading occurred. But hey if you want to pay an advisor to tell you the same thing, be my guest...