Setup for full crypto income

[wdf123]

Hello!

I've been searching in the forums but couldn't find anyone in a similar position, so I thought of asking some advice. If I had enough crypto to generate some reasonable passive income, let's say $3,000K/month, what would be a good setup to pay as little tax as possible on that? I suppose one way would be revoking my tax residency and move it over to some better place? With such income, I don't need to be physically present in any place, so I suppose there are some options to live off just of crypto paying little/zero taxes?

 

[CyprusLaw]

Hello!

I've been searching in the forums but couldn't find anyone in a similar position, so I thought of asking some advice. If I had enough crypto to generate some reasonable passive income, let's say $3,000K/month, what would be a good setup to pay as little tax as possible on that? I suppose one way would be revoking my tax residency and move it over to some better place? With such income, I don't need to be physically present in any place, so I suppose there are some options to live off just of crypto paying little/zero taxes?

Firstly, I would urge you to consider Cyprus, it is becoming more and more crypto friendly. Foreigners who decide to move their personal tax residency in Cyprus, will automatically be considered as non-domiciled in Cyprus for 17 years.

Cyprus tax residency for individuals is determined by the number of days spent in the island during a calendar year. There is the standard 183 days rule as well as a more recently introduced 60 days rule.

Corporate tax in Cyprus is at 12.5%, one of the lowest in EU but it is not considered a tax haven therefore does not have the risks that such jurisdictions have.

Non-domiciled tax residents will have dividend and interest completely tax exempt in Cyprus. Therefore you will only be paying the corporate tax on profits (with proper tax optimization it could be lower) and a 2.65% on dividend for the national health system, through which you will be able to take advantage of the Cyprus health system.

Legal and accounting services are of very high quality at a lower price compared to other EU jurisdictions. Also, subject to certain conditions you could be able to get a permanent residence card in Cyprus (this applies if you are Non-EU).

 

[wdf123]

Hey CyprusLaw!

Thanks for the reply!

So, let me know if I'm getting this right. If I move my tax residency to Cyprus, I'll get zero-tax on my crypto dividends/interest -- I'm assuming crypto staking is considered as dividends? Or would I need to pay 2.65% on dividend for the health system? Regarding corporate tax on profits, I'm not sure if I understood how it would apply to me. Like I said, all my income will be coming from crypto; so I suppose I'll need to pay 12.5% if I sell some cryptos for profits? But, oh, since I'll need to convert some crypto interest into fiat, then perhaps when I do it -- by selling the crypto --, I'll have to pay the 12.5%?

Really interested into that, and would appreciate if you could give me bit more clarification.

Thanks!

 

[CyprusLaw]

Hey CyprusLaw!

Thanks for the reply!

So, let me know if I'm getting this right. If I move my tax residency to Cyprus, I'll get zero-tax on my crypto dividends/interest -- I'm assuming crypto staking is considered as dividends? Or would I need to pay 2.65% on dividend for the health system?

You would just need to pay the 2.65% on the dividend for the health system, noting that having in mind you would be in Cyprus you would be able to take advantage of the Cyprus health system.

Regarding corporate tax on profits, I'm not sure if I understood how it would apply to me. Like I said, all my income will be coming from crypto; so I suppose I'll need to pay 12.5% if I sell some cryptos for profits? But, oh, since I'll need to convert some crypto interest into fiat, then perhaps when I do it -- by selling the crypto --, I'll have to pay the 12.5%?

There is no tax impact on the revaluation, therefore if you keep in crypto and the value increases (but you are not selling) then there is no tax impact. If you sell you will pay the 12.5% on the profit. I remain at your disposal for further clarifications.

Really interested into that, and would appreciate if you could give me bit more clarification.

Thanks!

 

[Kol019201]

Hello!

I've been searching in the forums but couldn't find anyone in a similar position, so I thought of asking some advice. If I had enough crypto to generate some reasonable passive income, let's say $3,000K/month, what would be a good setup to pay as little tax as possible on that? I suppose one way would be revoking my tax residency and move it over to some better place? With such income, I don't need to be physically present in any place, so I suppose there are some options to live off just of crypto paying little/zero taxes?

I don't think its worth moving your tax residence for 3000$ a month to another country.
You would have the costs of setting up a company and flying there + staying there.

Of course cyprus is a nice option, but you would have to stay there for at least 60 days a year.
In what country are you living currently and paying taxes?
Because many countries have the 180 days rule, so you would not be able to stay more then 180 days in your home country for this.

Of course its possible to open an offshore company and cashout that way with low taxes.
And your country where your tax residence is not knowing of this.

 

[wdf123]

Thanks, guys, for the reply!
Yeah, my main concern is that my current tax residence country (Brazil) is a high-tax one, and I worry that they may impose unfriendly restrictions to crypto, so I think that the main advantage of moving the tax residence to somewhere else would be the asset protection.

And, yes, I don't have an issue with having to stay out of the country for 180 days. I suppose I could stay in Cyprus for 60 days, and 120 days elsewhere -- there are some low-cost countries around that I suppose could work, right?

One thing which is still unclear to me is how to cash out the crypto interest. So, since I'll be getting crypto assets as dividend, if I need to cash out these dividends, I'd have to sell them for fiat. So not sure how taxes would apply in Cyprus, for example. My assumption is that, if I earn X coins as passive income, I'd have to sell those X coins for dollar/euro, and the 12.5% tax would apply? Or perhaps since this income is coming from interest, even if I need to sell it, it'd only pay the 2.65% ?

 

[CyprusLaw]

Thanks, guys, for the reply!
Yeah, my main concern is that my current tax residence country (Brazil) is a high-tax one, and I worry that they may impose unfriendly restrictions to crypto, so I think that the main advantage of moving the tax residence to somewhere else would be the asset protection.

And, yes, I don't have an issue with having to stay out of the country for 180 days. I suppose I could stay in Cyprus for 60 days, and 120 days elsewhere -- there are some low-cost countries around that I suppose could work, right?

You could completely relocate to Cyprus, you would automatically get a non dom status for 17 years.

One thing which is still unclear to me is how to cash out the crypto interest. So, since I'll be getting crypto assets as dividend, if I need to cash out these dividends, I'd have to sell them for fiat. So not sure how taxes would apply in Cyprus, for example. My assumption is that, if I earn X coins as passive income, I'd have to sell those X coins for dollar/euro, and the 12.5% tax would apply? Or perhaps since this income is coming from interest, even if I need to sell it, it'd only pay the 2.65% ?

The tax 12.5% would be paid on the profit, so if you have 1mln and you sell for 1.5mln then you are taxed on the 500k profit.

 

[Gogopidou]

You could completely relocate to Cyprus, you would automatically get a non dom status for 17 years.


The tax 12.5% would be paid on the profit, so if you have 1mln and you sell for 1.5mln then you are taxed on the 500k profit.

Hello CyprusLaw and thanks for participating,

I am french and I d like to relocate in Cyprus,.
I ve actually some bitcoins to sell and a stash of ethers to stake( I mean enougth to be worth relocating). I imagine I can open a bank account in a British bank in UK and use it in Cyprus as I know cyprus banks are not cryptos friendly.

I am a bit puzzled with the 60 days. If I resign from my job in november. I ll have no other income but some money so I ll be non resident in France at january the 1st 2022.
If I move to Cyprus in december 2021, create a llc in january 2022, can I sell my bitcoins on march or april as soon as I have my tax residency set up ?
I ll have no more assets or family or house in my original country.

If I create a llc to manage my staking of ethers is there enouth substance in this llc according cyprus law ? It means only staking with exchanges or with rocketpool (decentralised staking tiers) or use the DeFi.

or I ll have to create another llc and manage my stake as an individual ?

I could have another project if necessary : ... create a heath and fitness club with my sons (34/33/33%) One of my sons is a professionnal coach and will come to cyprus with me, the other one will stay abroad for some more years and come to cyprus later.
Can we all (me and 1 son) benefit about the "create a llc" rule for the 60 days status or we have to create each one an llc ?

Thanks !

 

[CyprusLaw]

Hello CyprusLaw and thanks for participating,

I am french and I d like to relocate in Cyprus,.
I ve actually some bitcoins to sell and a stash of ethers to stake( I mean enougth to be worth relocating). I imagine I can open a bank account in a British bank in UK and use it in Cyprus as I know cyprus banks are not cryptos friendly.

I am a bit puzzled with the 60 days. If I resign from my job in november. I ll have no other income but some money so I ll be non resident in France at january the 1st 2022.
If I move to Cyprus in december 2021, create a llc in january 2022, can I sell my bitcoins on march or april as soon as I have my tax residency set up ?
I ll have no more assets or family or house in my original country.

If I create a llc to manage my staking of ethers is there enouth substance in this llc according cyprus law ? It means only staking with exchanges or with rocketpool (decentralised staking tiers) or use the DeFi.

or I ll have to create another llc and manage my stake as an individual ?

I could have another project if necessary : ... create a heath and fitness club with my sons (34/33/33%) One of my sons is a professionnal coach and will come to cyprus with me, the other one will stay abroad for some more years and come to cyprus later.
Can we all (me and 1 son) benefit about the "create a llc" rule for the 60 days status or we have to create each one an llc ?

Thanks !

Hi,

Just to clarify as I understand there is a bit of confusion - the 60 day rule relates to your personal tax residency. A company is a separate entity and therefore as long as substance is created in Cyprus the tax residency will be in Cyprus from the incorporation date of the Company. Substance for the Companycan be created by yourself relocating in Cyprus or by hiring nominee directors.

Your personal tax residency will affect how your personal income eg. from dividend payments is taxed. For example, in your case there will be no tax/SDC on dividend at Cyprus level. So if you are a Cyprus tax resident you have this benefit, if you are a tax resident in, let's say, France, then dividend payments from the Cyprus Company to you would have to be declared in France and probably be taxed as personal income.

I hope this clarifies things a bit. Would be happy to discuss more.

 

[Gogopidou]

Thanks for your quick reply !
I am aware of this sorry if I wrote something confusing. I WANT to relocate myself in Cyprus and create a compagny in Cyprus. So both would have the tax residency in Cyprus.


The conditions for the 60 tax residency status to apply are : have a house bought in cyprus or rented, create a compagny, stay 60 days in cyprus, dont have a tax residency elsewhere (how can I ? or this rule is for US people as they always have a tax residency in the US ?) and finally spend no more 180 days elsewhere...

I am aware too about the tax residency of the compagny in cyprus and the 12.5% taxes. I am aware my dividends are not taxed as are my capital gains on bitcoins and ethers sold.

But my question was on the timing as some people are using the 183 status first then the next year use the the 60 days status. I just wonder If I can directly use the 60 days status as I mentioned.

Thanks

 

[CyprusLaw]

Thanks for your quick reply !
I am aware of this sorry if I wrote something confusing. I WANT to relocate myself in Cyprus and create a compagny in Cyprus. So both would have the tax residency in Cyprus.


The conditions for the 60 tax residency status to apply are : have a house bought in cyprus or rented, create a compagny, stay 60 days in cyprus, dont have a tax residency elsewhere (how can I ? or this rule is for US people as they always have a tax residency in the US ?) and finally spend no more 180 days elsewhere...

I am aware too about the tax residency of the compagny in cyprus and the 12.5% taxes. I am aware my dividends are not taxed as are my capital gains on bitcoins and ethers sold.

But my question was on the timing as some people are using the 183 status first then the next year use the the 60 days status. I just wonder If I can directly use the 60 days status as I mentioned.

Thanks

As of 2017 the 60 day rules applies. So you can use the 60 day rule from the beginning subject to the below.

To become a Cyprus tax resident on the basis of the “60-day rule” the individual must meet all of the following conditions:

• Remain in Cyprus for at least 60 days during the tax year in question; and
• Do not reside in any other single state for a period exceeding 183 days; and
• Is not tax resident in any other state; and
• Carry out business activities in Cyprus and/or work in Cyprus and/or be a director in a company that is tax resident in Cyprus at any time of the tax year in question; and
• Maintain a permanent residence in Cyprus.

 

[Gogopidou]

OK thanks I know all that.
Thanks anyway for your time At least your tried to help Thank you

 

[CyprusLaw]

OK thanks I know all that.
Thanks anyway for your time At least your tried to help Thank you

If you have more questions please specify and I would be happy to assist.

 

[Piano]

As of 2017 the 60 day rules applies. So you can use the 60 day rule from the beginning subject to the below.

To become a Cyprus tax resident on the basis of the “60-day rule” the individual must meet all of the following conditions:

• Remain in Cyprus for at least 60 days during the tax year in question; and
• Do not reside in any other single state for a period exceeding 183 days; and
• Is not tax resident in any other state; and
• Carry out business activities in Cyprus and/or work in Cyprus and/or be a director in a company that is tax resident in Cyprus at any time of the tax year in question; and
• Maintain a permanent residence in Cyprus.

Hello ,

are you covered for health care outside of Cyprus ? I have read it is not the case ..
could you give me your email once more ?

 

[CyprusLaw]

Hello ,

are you covered for health care outside of Cyprus ? I have read it is not the case ..
could you give me your email once more ?

Yes sure I will PM you