UAE vs Cyprus for crypto trading company

[Tom85]

Hi, let's discuss which country is best for living and trading crypto in terms of taxes, ease of running company and banking.

UAE:
- 9% tax on profits above 100k USD
- Possible to open crypto prop trading company
- Banking in local UAE banks is very hard, so one qould need to have offshore bank account, e.g. in Switzerland

Cyprus (my knowledge is limited here):
- 12.5% tax on profits, but possible to make it 2.65% with dividends
- Will need to open company offshore, e.g. in BVI, SVG
- Banking possible to receive dividends from offshore company

In terms of living I think UAE, Dubai in particular, is more developed and interesting than Limassol, but weather is better in Cyprus.

What do you think? Which country would you choose?

 

[CyprusLaw]

Hi, let's discuss which country is best for living and trading crypto in terms of taxes, ease of running company and banking.

UAE:
- 9% tax on profits above 100k USD
- Possible to open crypto prop trading company
- Banking in local UAE banks is very hard, so one qould need to have offshore bank account, e.g. in Switzerland

Cyprus (my knowledge is limited here):
- 12.5% tax on profits, but possible to make it 2.65% with dividends
- Will need to open company offshore, e.g. in BVI, SVG
- Banking possible to receive dividends from offshore company

In terms of living I think UAE, Dubai in particular, is more developed and interesting than Limassol, but weather is better in Cyprus.

What do you think? Which country would you choose?

Hi,

Just to clarify about Cyprus, 12.5% is the corporate tax, it has nothing to do with dividends. As a non dom you pay 2.65% for the GHS on dividends but this is in addition to the corporate tax which is imposed on the net profit of the company. Therefore your total effective tax rate is around 15% (12.5% corporate tax plus 2.65% on dividends).

The corporate tax can be driven down significantly for some type of activities that would fall under the IP box regime.

 

[Sols]

Just to add to what @CyprusLaw wrote, the GHS contribution is capped at 180,000 EUR in dividends, meaning you don't pay more than 4,770 EUR.

UAE:
- 9% tax on profits above 100k USD
- Possible to open crypto prop trading company
- Banking in local UAE banks is very hard, so one qould need to have offshore bank account, e.g. in Switzerland

As of writing, UAE is on the FATF gray list and considered a high risk jurisdiction. For now, it's harder than before to open foreign bank accounts with a UAE company (at least in Europe).

This is probably changing soon, though, and things will go back to how they were before. Just keep an eye on how that develops.

Cyprus (my knowledge is limited here):
- 12.5% tax on profits, but possible to make it 2.65% with dividends
- Will need to open company offshore, e.g. in BVI, SVG
- Banking possible to receive dividends from offshore company

You don't need an offshore company. I think what you're referring to is 12.50% corporate tax if you incorporate in Cyprus and then tax free dividends (except the GHS mentioned), or 0% corporate tax if you incorporate abroad (but still GHS contribution).

It's true that Cyprus isn't going after foreigners who operate offshore companies, as long as they pay the GHS contribution. That might change, but in the meantime, a lot of foreigners in Cyprus do business through offshore companies and avoid paying corporate tax.

In terms of living I think UAE, Dubai in particular, is more developed and interesting than Limassol, but weather is better in Cyprus.

It's very subjective. Best to spend some time in both and pick the one you like the most. Some prefer Dubai over Cyprus, and some prefer Cyprus over UAE.

 

[mytoofood]

It's very subjective. Best to spend some time in both and pick the one you like the most. Some prefer Dubai over Cyprus, and some prefer Cyprus over UAE.

there are tons of discussions like this already around, as sols says, look around you may even visit both countries to see what they can offer you.

 

[Tom85]

Thank you for the info very insightful!

The corporate tax can be driven down significantly for some type of activities that would fall under the IP box regime.

Do you think it is possible to make corporate tax 2.5% or even 0% for crypto trading using software (similar to high-frequency trading)?

It's true that Cyprus isn't going after foreigners who operate offshore companies, as long as they pay the GHS contribution. That might change, but in the meantime, a lot of foreigners in Cyprus do business through offshore companies and avoid paying corporate tax.

Is it possible they will apply 12.5% corporate tax for non dom people retroactively for past years?

there are tons of discussions like this already around, as sols says, look around you may even visit both countries to see what they can offer you.

Thanks, will look on forum for more info about living in both places.

 

[CyprusLaw]

Thank you for the info very insightful!

Do you think it is possible to make corporate tax 2.5% or even 0% for crypto trading using software (similar to high-frequency trading)?

If the software was built by you and can be deemed as a qualifying asset then potentially with the correct structure this may be done.

 

[Sols]

Is it possible they will apply 12.5% corporate tax for non dom people retroactively for past years?

Legally, yes.

Knowing Cyprus, I find it unlikely. If they were to change, they would announce it 1-2 years in advance and then when the time came, probably delay is 1-2 more years. That's how things work there most of the time.

 

[khinkali]

Will need to open company offshore, e.g. in BVI, SVG

Are you considering that the offshore company is the trading business, then your Cyprus company receives dividends tax free and then you just pay the 2.65% personally?

If so then you have issues of substance, PE, CFC, etc.

For the location of the actual trading business, UAE and Cyprus will both have significant tax. Also the accounting requirements could be interesting if you do crypto-crypto algo trading, high number or trades, not round-trip to originating currencies, etc.

Otherwise UAE is OK for most of the year and Paphos looks really nice (if you like a more relaxed lifestyle).

 

[Tom85]

Are you considering that the offshore company is the trading business, then your Cyprus company receives dividends tax free and then you just pay the 2.65% personally?

If so then you have issues of substance, PE, CFC, etc.

Yes, this is what I meant. @Sols mentioned that Cyprus government doesn't tax offshore companies for now, that could change in the future though.

For the location of the actual trading business, UAE and Cyprus will both have significant tax.

What do you mean? I think 9% and 12.5% are not so significant compared to EU/US level of taxes.

Also the accounting requirements could be interesting if you do crypto-crypto algo trading, high number or trades, not round-trip to originating currencies, etc.

Indeed, I have no idea how hard accounting in both UAE and Cyprus is going to be. I will consider that in the decision, thanks.

 

[khinkali]

What do you mean? I think 9% and 12.5% are not so significant compared to EU/US level of taxes.

I meant, compared to the 0% offshore approach (which I think is not easy, for the reasons i mentioned).

Regarding accounting if you HODL with monthly portfolio rebalance, or if all your trades are in the same quote currency, or all trades are round-trip, then it's probably not too hard. If you're doing crypto-crypto algo trading, trading back in partial amounts to different quote currencies then it is hard to track, we do it for algo training but you _always_ end up with some mismatch. And if you're logging it all in some fiat currency then the errors will accumulate and compound, which is avoided with NAV or in-specie bookkeeping.

The more I've researched AE and CY and discussed with providers, the less confident I become.

 

[Tom85]

doing crypto-crypto algo trading

What if someone only does crypto-USDT algo trading? I guess that would be easier for accounting.

 

[DSoz]

I meant, compared to the 0% offshore approach (which I think is not easy, for the reasons i mentioned).

Regarding accounting if you HODL with monthly portfolio rebalance, or if all your trades are in the same quote currency, or all trades are round-trip, then it's probably not too hard. If you're doing crypto-crypto algo trading, trading back in partial amounts to different quote currencies then it is hard to track, we do it for algo training but you _always_ end up with some mismatch. And if you're logging it all in some fiat currency then the errors will accumulate and compound, which is avoided with NAV or in-specie bookkeeping.

The more I've researched AE and CY and discussed with providers, the less confident I become.

So what are the other options you're considering?

 

[ilke]

It's true that Cyprus isn't going after foreigners who operate offshore companies, as long as they pay the GHS contribution. That might change, but in the meantime, a lot of foreigners in Cyprus do business through offshore companies and avoid paying corporate tax.

Does it mean CFC regulations won't apply to a foreigner tax resident in Cyprus and the offshore company would not be considered a Cypriot taxpayer and that person would only pay GHS contributions? I haven't seen any information on that, I feel it would be a good combination with HK companies which are easily bankable, but I'm not too well-versed about Cypriot tax law, and haven't seen any EU jurisdictions except maybe LV that don't have CFC applicable for practically everything.

Sorry for the potentially stupid question.

 

[khinkali]

What if someone only does crypto-USDT algo trading? I guess that would be easier for accounting.

Much easier, if you are allowed to consider USDT=USD. The last few days have shown how that is not reality, but maybe the regulator will go for it.

Obviously that would make your trading quite boring.

I still think that your books will become "interesting" over time if you run a FIFO general ledger approach, because you'll end up with dust trades. It's not a problem in the short term, but small errors build over time.

So what are the other options you're considering?

Honestly right now I'm considering moving to Western Atlantic somewhere. Open the office, hire the programmers, keep it all in one place. We should start a new thread for this perhaps?

Alternatively Georgia could be OK if you don't mind 20% tax. I've had some advice that between the Revenue Service and the National Bank of Georgia, it might be a simpler and more straight forward jurisdiction. Compliance costs would be reasonable if you have scale, but still 20% is a lot more than 0%

 

[zaybxc]

Regarding accounting if you HODL with monthly portfolio rebalance, or if all your trades are in the same quote currency, or all trades are round-trip, then it's probably not too hard. If you're doing crypto-crypto algo trading, trading back in partial amounts to different quote currencies then it is hard to track, we do it for algo training but you _always_ end up with some mismatch. And if you're logging it all in some fiat currency then the errors will accumulate and compound, which is avoided with NAV or in-specie bookkeeping.

When accounting a crypto-to-crypto swap, is it necessary to keep track of the euro values of the 2 cryptos involved in the swap even if it is not a tax event in Cyprus?

 

[khinkali]

When accounting a crypto-to-crypto swap, is it necessary to keep track of the euro values of the 2 cryptos involved in the swap even if it is not a tax event in Cyprus?

Great question. Are we actually sure that crypto-crypto trades are not tax events in Cyprus, and if so does that apply to natural persons, companies, or both? Cyprus lawyers are welcome to shed some light on this!

In most contexts, per-trade bookkeeping will be necessary. Especially if you have third party funds. Personally I'm fine with that (after all, if you're not tracking trades then you shouldn't be trading). The complaint I have is that logging crypto to crypto trades in some fiat currency will have errors and if you have a fast turnover (e.g. 100% turnover per day with positions lasting hours, not days) then those errors will compound and there will be drift. In-specie (e.g. maintain a ledger per currency) or NAV bookkeeping has the same small valuation errors, but that's OK because they don't compound over time.

IFRS accounting standards seem to be the problem here. But perhaps a regulator and auditor in some jurisdiction will accept that trading mispricings of exotic pairs doesn't fit with local fiat currency per-trade bookkeeping and a broader approach to "fair value" might be accepted.

I read with interest today the wording in Hong Kong regulation "An entity may present its financial statements in any currency (or currencies)" - the word "currencies" perhaps bodes well for bookkeeping requirements? But members here seem unimpressed at the difficulty of having their company be considered to have non-HK profits and therefore be tax neutral.

Advice from anyone who has found a solution to this, is welcome. There seem to be an increasing number of people with this need and that need looks set to increase this year.

 

[Thomas67]

Hi, let's discuss which country is best for living and trading crypto in terms of taxes, ease of running company and banking.

UAE:
- 9% tax on profits above 100k USD
- Possible to open crypto prop trading company
- Banking in local UAE banks is very hard, so one qould need to have offshore bank account, e.g. in Switzerland

Cyprus (my knowledge is limited here):
- 12.5% tax on profits, but possible to make it 2.65% with dividends
- Will need to open company offshore, e.g. in BVI, SVG
- Banking possible to receive dividends from offshore company

In terms of living I think UAE, Dubai in particular, is more developed and interesting than Limassol, but weather is better in Cyprus.

What do you think? Which country would you choose?

I'd just create an excel table with all your own (weighted) criteria and score them for both options; which might require gathering a lot of information and possibly visit both countries (what I did for both - and is subjective). Taxation/accounting requirements only constitute a single criterion imo.

 

[DSoz]

I'd just create an excel table with all your own (weighted) criteria and score them for both options; which might require gathering a lot of information and possibly visit both countries (what I did for both - and is subjective). Taxation/accounting requirements only constitute a single criterion imo.

What country did you choose? And what were the main points supporting your move?

 

[Thomas67]

What country did you choose? And what were the main points supporting your move?

Did both. Moved from Cyprus to UAE/Dubai. Main drivers were the dynamism, modernity, bigger city, more inspiring, and more women of my type. I stayed in Cyprus in 2020 too, so being blocked during a year on the island without seeing anybody (incl. friends/family) while working hard had been quite difficult and reinforced my impressions. All these arguments are entirely subjective and can depend on personal circumstances (incl. the phase of life), and Cyprus has many advantages/qualities to offer too, esp. regarding the relaxing way of living, nature, excellent climate, cost of life. I could see myself going back to Cyprus later on, e.g. with a family.

 

[JimBeam]

Hi, let's discuss which country is best for living and trading crypto in terms of taxes, ease of running company and banking.

UAE:
- 9% tax on profits above 100k USD
- Possible to open crypto prop trading company
- Banking in local UAE banks is very hard, so one qould need to have offshore bank account, e.g. in Switzerland

Cyprus (my knowledge is limited here):
- 12.5% tax on profits, but possible to make it 2.65% with dividends
- Will need to open company offshore, e.g. in BVI, SVG
- Banking possible to receive dividends from offshore company

In terms of living I think UAE, Dubai in particular, is more developed and interesting than Limassol, but weather is better in Cyprus.

What do you think? Which country would you choose?

I own(ed) companies in both countries so have the experience.
Let's say you have a company that has 1.5M turnover and 500k profit before taxes.

UAE:
+ 500k profit
- 36k tax (9% of 400k with first 100k discount)
= 464k income after CIT
No dividend tax so you can take 464k to your personal account

Cyprus:
+ 500k profit
- 62.5k tax (12.5% on 500k)
= 437k income after CIT
- 5k dividends - 2.65% that you pay on 437k but it's capped to around 5k / 180k in dividends (not 100% sure about this cap)
= 432k

So the difference is 464k vs 437k in profit after taxes - 27k difference.
Or 32k difference if you want money out of the company into your pockets (464k vs 432k)

So, the difference is both significant and insignificant.
There are some differences in costs: company maintenance in UAE will be more expensive but banking and accounting/audits are cheaper in UAE.
Also, as being employed in Cyprus you need to pay social contributions (pension and healthcare) on top of your salary - but these are reasonable (probably lowest in EU).
In Dubai you don't - buy you need to have private health insurance (and pension) and if you need more coverage the price might not be so reasonable.

But the biggest thing is that if you plan on going back to EU your money is in EU already, you have paid taxes in EU (low but you have paid them and you've got docs to prove it) so that makes things easier than coming back from UAE with money.
Also, in Cyprus you need to spend 60 days to be a tax resident while in UAE you have to spend 6months+1day (but they don't enforce it - yet.
It's almost as equally hot but Cyprus has more nature and better beaches. CoL is lower in Cyprus but so is QoL (this is arguable though).