UAE vs Cyprus for crypto trading company

[ShillGates]

yeah what jim beam said.

no need to compare. Just open uae freezone, easy banking. become resident, enjoy november-may in uae and rest of year in CY or somewhere else. f**k the cy corps, always hassle and slow to get anything done. CY does not check if you got foreign corps, they dont care

 

[Thomas67]

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).

I agree with the financial/tax related part. Still wondering if transferring money back from UAE to Europe is such a big deal when you can prove the source of funds (already the case when you open bank accounts), unless you have points in mind that could possibly be elaborated.

I'm not a fan of the 60 days rule personally, the tax residence is much weaker; esp. in case of conflict of residence between countries.

Regarding beaches and nature I completely agree; if subjective elements had to be considered this is only a small part of the overall view though I believe (depending on the person too).

 

[JimBeam]

So, if you reside in EU (Cyprus) you can bank in any EU country and could use many of the EMIs and banks available so your money doesn't has to be only Cyprus.

Also, none of the UAE banks are currently crypto-friendly the way to cash out crypto it is via OTC where they will provide you with some SoF documents (at a price).

If you're trading with your own money (without a company), you can do it in both places in your name as there are no capital gains tax.

BUT:
Dubai has issued a statement where this kind of activity is considered business activity (so 9% tax applies but no one know how to report it and pay it) while there is no such thing in Cyprus.
Also, with Cyprus you have more options to easily open accounts with crypto-friendly EMIs (both for personal and business use) as most of these are in EU while that's not the case with UAE.

 

[Thomas67]

So, if you reside in EU (Cyprus) you can bank in any EU country and could use many of the EMIs and banks available so your money doesn't has to be only Cyprus.

Also, none of the UAE banks are currently crypto-friendly the way to cash out crypto it is via OTC where they will provide you with some SoF documents (at a price).

If you're trading with your own money (without a company), you can do it in both places in your name as there are no capital gains tax.

BUT:
Dubai has issued a statement where this kind of activity is considered business activity (so 9% tax applies but no one know how to report it and pay it) while there is no such thing in Cyprus.
Also, with Cyprus you have more options to easily open accounts with crypto-friendly EMIs (both for personal and business use) as most of these are in EU while that's not the case with UAE.

I was more referring to the difficulty to transfer money back from UAE to EU than banking in general actually; though good to have your view on it.

I'm not sure Cypriot banks are crypto-friendly either to be honest; I find the way you're stating things quite weird. For crypto-friendly EMIS I think there's no big issue on both sides, I guess it's a minor point in the comparison.

Your end note is right, as UAE is about to apply the corporate income tax. I'd invite you to read more about the capital gains taxation in Cyprus though, as your statement is not correct (I'm sure other threads discuss the topic here on OCT).

 

[JimBeam]

I'd invite you to read more about the capital gains taxation in Cyprus though, as your statement is not correct (I'm sure other threads discuss the topic here on OCT).

You're right about this one!

"Individual traders in Cyprus can enjoy tax-free status for securities such as shares, stocks, bonds, ETFs, derivatives, and futures, but other assets like forex, precious metals, and crypto may be subject to progressive income tax rates up to 35 percent."

 

[Thomas67]

You're right about this one!

"Individual traders in Cyprus can enjoy tax-free status for securities such as shares, stocks, bonds, ETFs, derivatives, and futures, but other assets like forex, precious metals, and crypto may be subject to progressive income tax rates up to 35 percent."

Good if it helps for this thread. Nb: derivatives and futures are not meant to have forex/crypto/precious metals as underlying (for those wondering)

 

[pepemolas]

DMCC crypto company solves all of your problems:

- No income tax
- No corporate tax in DMCC FZ
- Crypto trading license

Only downside is you will pay a 0.75% fee for OTC trades using off-shore banks and an additional fee for swift payments.

 

[khinkali]

DMCC crypto company solves all of your problems:

That's interesting, I didn't know that DMCC was exempt from CIT.

I remember someone in the past (Fred I think) commenting that they were rejecting almost all application. Is this something you tried yet?

Do you know if a DMCC proprietary trading company is easy to onboard with exchanges?

 

[pepemolas]

That's interesting, I didn't know that DMCC was exempt from CIT.

I remember someone in the past (Fred I think) commenting that they were rejecting almost all application. Is this something you tried yet?

Do you know if a DMCC proprietary trading company is easy to onboard with exchanges?

I set-up a company in DMCC 6 months ago.

You can open a company account with all exchanges and you work under a regulated environment which is good (VARA)

Only current issue is exchanges do not have proper on/off ramps so you need to do OTC trades for that through an off-shore bank.

Off-shore crypto banking options have also improved recently.

 

[JackAlabama]

That's interesting, I didn't know that DMCC was exempt from CIT.

would be very new. Nothing is really cit exempt except a very small of qualifying activities.

I remember someone in the past (Fred I think) commenting that they were rejecting almost all application. Is this something you tried yet?

Do you know if a DMCC proprietary trading company is easy to onboard with exchanges?

 

[khinkali]

would be very new. Nothing is really cit exempt except a very small of qualifying activities.

A number of finance and investment activities are exempted (with some conditions).

I was told by another FZ that proprietary trading in cryptocurrency is a non-regulated activity and not exempted. I wonder if voluntary VARA regulation can change that.

 

[zaybxc]

- No corporate tax in DMCC FZ

Could you provide a source for this please?
I haven't found any official info about it and on the DMCC website they just say a generic "Business friendly tax environment".

I was told by another FZ that proprietary trading in cryptocurrency is a non-regulated activity and not exempted. I wonder if voluntary VARA regulation can change that.

It's an approved activity in DMCC; you can check "List or approved activities" at Document templates for new business setup | DMCC

 

[khinkali]

It's an approved activity in DMCC

Yes, there are many approved business activities.

Also some financial services are regulated activities. Those tend to be exempt from CIT.

 

[GrumpyMess]

If you're trading with your own money (without a company), you can do it in both places in your name as there are no capital gains tax.

How can you cash out crypto and don't trigger capital gain tax in Cyprus?

 

[JimBeam]

How can you cash out crypto and don't trigger capital gain tax in Cyprus?

I thought there are no capital gains but I was wrong.
Posted here: UAE vs Cyprus for crypto trading company

 

[Gediminas]

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?

If Cypriot resident is trading crypto as an individual capital gains might be taxed significantly with progressive tax rates.

So having Cypriot residency means that you can set up a company outside Cyprus, preferably in a zero-tax country, and start a business on behalf of that company.

Dividends received from such a company would be taxable with 2,65 GESY contributions only (with threshold).

Trading crypto in Dubai (even at the individual level) might lead to a 9% tax. But having Dubai residency you can also set up a foreign zero-tax country and receive dividends (non-taxable in UAE). In both cases, there is a theoretical risk of PE, but this risk is usually manageable.

 

[khinkali]

In both cases, there is a theoretical risk of PE, but this risk is usually manageable.

Do you think that a Cyprus IP Box company could service the offshore trading company or fund?

The manager of the IT company would live in Cyprus with office and staff performing software development.

The trading company or fund would deal with KYC, risk management etc.

The IT company would charge royalties giving it a decent profit margin.

 

[liroyb]

So, if you reside in EU (Cyprus) you can bank in any EU country and could use many of the EMIs and banks available so your money doesn't has to be only Cyprus.

Also, none of the UAE banks are currently crypto-friendly the way to cash out crypto it is via OTC where they will provide you with some SoF documents (at a price).

If you're trading with your own money (without a company), you can do it in both places in your name as there are no capital gains tax.

BUT:
Dubai has issued a statement where this kind of activity is considered business activity (so 9% tax applies but no one know how to report it and pay it) while there is no such thing in Cyprus.
Also, with Cyprus you have more options to easily open accounts with crypto-friendly EMIs (both for personal and business use) as most of these are in EU while that's not the case with UAE.

This video clarifies that day trading is subject to UAE CIT while swing trading isn't:

 

[Houdini]

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).

But it would be easier to withdraw the money tax-free in the UAE rather than in Cyprus, as there is still some uncertainty regarding his software and business model as I understand it.

In any case, the savings in those two countries compared to many (other) European countries are significant.

 

[khinkali]

This video clarifies that day trading is subject to UAE CIT while swing trading isn't:

Which implies the need for audited accounts I guess? I've spoken with a couple of auditors (not in UAE though) and complex crypto to crypto trading (many small transactions, not round trip to the original quote currency) across different venues could lead to high professional fees.

That worries me a lot more than paying 9% on profits.