Bitcoin Forum

Hi everyone

I have the possibility to do arbitrage but I’m not sure about some aspect that may affect it

Basically to do the arbitrage I will be buying altcoins in coinbase or kraken, transferring them to another exchange,  selling for fiat, withdrawing to a bank account, send the money to another bank account, depositing into coinbase or kraken and do the same again and again ( all this obviously in two different countries)

My questions are:

When I start withdrawing and depositing big amount of money into the bank accounts, will I be in trouble with the tax offices?

Does anyone know if have to pay taxes in both countries?

Any advice will be appreciated

Thank you

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You won't get in trouble with the tax offices as long as you properly report your income and pay your taxes. So for tax purposes you will need to keep track of your arbitrage trades and the profits you made. You will also need to be able to proof these trades. In case beneficial holding periods apply, you will have to decide whether you calculate your profits using the FIFO (first in first out) or LIFO (last in first out) principle -- and stick to it.

Your bank may cause you some problems in that you may trigger their fraud department and could be asked in detail to explain on where the transactions are coming from. Anecdotally banks have supposedly shut down or frozen customer's accounts due to cryptocurrency related bank transactions. Keep in mind that your bank is likely to forward any information on larger money movements to your local tax authorities either way, especially if these transactions show a change in your usual account usage.

Depending on the amount of money and where you live you might need to notify your bank and authorities in advance of such transactions (for example in Germany any border-crossing transaction of EUR 12,500,- or beyond needs to be reported).




You will have to pay taxes in whatever country you are tax resident, regardless of where you bought or sold the coins. If you ever had ties to the US, but are now tax resident of another country, you might get twice the paper work but will likely only have to pay taxes in the country where you reside.


Disclaimer: Not an expert, everything I mentioned is only a general rule of thumb from my own layman experience and will highly depend on your individiual situation. If you are serious about running arbitrage at scale (monthly trading volume at 3-4 EUR/USD digits or beyond) I'd recommend getting a tax advisor.

This is definitely a valid concern and likely to happen at most banks.
However, it is even more likely that they will simply disable your account, because you will
have too much activity (in terms of money transacted) on your account. Most
personal bank accounts are meant to allow you to pay your bills and
to receive a paycheck. Running an arbitrage business that involves a ton of high-value
transfers exceeds the thresholds for these personal accounts by a magnitude
and therefore most banks will shut you down and refer you to a business bank
account.

Unfortunately, these business bank accounts are hard to get (especially
if you are making crypto-related transactions, which you would be doing).

Thank you so much to both of you!! I definitely have to do a lot of researchs before starting

The tax depends on where you live in the country. according to the tax value of the country you are living in

i concurre that you will be shut down by your bank without any doubt

I suffered the same fate and won't encourage you to pursue this type of operation

So you should know the law on cryptocurrency in your country. The best is to have a real life business even if it small and jsut deposit small amount everytime. Dont do it it one transaction if your Real life business cant cover the money you deposited. Most of my money are from cryptocurrency but i made loan in the bank for money to build up my business and slowly paying it with cryptocurrency transactions.

In most of the countries, there is no specific revenue law is formed to impose Taxes on crypto-currency. So I think you need to pay tax as per your country revenue law on the profit earned hen converted into fiat.

Depends on the current taxation law of your country and the country that you do decide to make transactions with. If they are strict when it comes to compliance of tax then expect there would really be questions specially when they do saw unusual transactions or activity came to your account. If that only transacts smaller amounts and then suddenly becomes big and active then it would really caught their attention.

I think you are in trouble of you do arbitrage trading in big level because I heard that many accounts who receiving big rewards from crypto related investment the banks are just freezing them,I heard this is happening with US traders.But I don't know where are you from so it may changes according to your locality.
But you will be taxed while receiving fiat currency into your fiat account but the taxation will vary from different countries.In my country if I receive more than $20K per month then I have to pay taxes.

In clear speaking taxation percentage would really vary on each country since we do know every country do have its own legislation when it comes to this field. Rates would be different because standards of living and economic state is really different from each other. Some places might not required tax on certain levels but for sure when it comes on big amount transactions then expected tax would really be there.