0% tax when cashing out crypto

[kassad1]

I have been thinking about the following tax solution for cashing out bitcoins:

By cashing out I mean, you receive bitcoins to your address at a crypto exchange then transfering USD/EUR/whatever to your bank account in your name.

What determines the tax obligation here has nothing to do with the crypto itself, it is what the source of your income (the crypto payment) is. Under all OECD Double tax treaties there are types of income that are taxed in your country of residence (this is the majority) and types of income that are only taxed at the source country (this is the minority). So if you can find a country that imposes 0% tax on such an income you don't have to pay any taxes if you can prove you received the payment for that type of activity (The country has to have a double tax treaty with your country of residence, and the type of income has to be taxed at the source country according to the double tax treaty).

Now the only country I know of that has a lot of OECD double tax treaties and generally imposes 0% income tax is the United Arab Emirates. See list of 115 treaties here: https://www.mof.gov.ae/en/StrategicPartnerships/DoubleTaxtionAgreements/Pages/DoubleTaxtion.aspx
This covers most OECD countries, the entire EU, the US, Canada, a lot of asian countries etc.

According to all these treaties the only types of income that are only taxed in the UAE (at 0%) no matter that you live in the other country are:

- income from a 'permanent establishment/immovable property' in the UAE (for example you have a house/office/storage room there and you rent it out as a landlord). This is both logical to be so if you think about it and pretty straightforward.

- income that is defined as 'directors fees' from a company in the UAE. This one is a bit (potentially a lot) more complicated. Incorporating a company for this single purpose is very expensive in the UAE (everything is very expensive in the UAE) plus, your home country can always deem the company subject to local tax if the only director is a resident of your home country because of the 'effective place of management and control' rules in all DTAs. Plus if you are also the owner of the company, that is even worse as it can be classified as CFC. So this can get both complicated to implement and expensive if you don't already have a company there.

- income of 'sportsmen and artistes' performing in the UAE (for which you have to be able to show that you travelled to the UAE and show that you received payment from someone for performing as a sportsman or artist there). This one seems tough to pull off unless you are a well known sportsman or actor...

So I did some research on how the first type of income from renting out 'permanent establishment/immovable property' in the UAE would work:
- you would need to find something that is a permanent establishment/immovable property located in the UAE that you can rent for cheap from a UAE company with a contract that allows you to sublease it for profit. Pay for it with a bank transfer to be able to show the tax man as proof.
- if asked by the tax man or your bank when receiving the fiat currency payment to your bank account for source of funds you declare that you rented out/subleased the place in the UAE for profit.
- DONE. That profit is only taxable in the UAE. Where it is taxed at 0% income tax and is free of the 5% UAE VAT if the amount is below 375,000AED/year (which is roughly €90k/$100k). If that is not enough you can repeat the same thing for family members each year.

I have talked to an accountant in my country who has experience with international tax and she says that I am readig the double tax treaties right, renting out property in the UAE is only subject to tax in the UAE.

Any third opinions on this are welcome!

[1715157688]

1715157688

[1715157688]

1715157688

[Theb]

I have to hand it to you, you gave an effort on doing this on giving a solution for not paying income taxes for your crypto earnings but you are forgetting that double taxation avoidance on the word itself just removes the chances of a person on paying the same kind of tax by different countries. So even if you won't be having taxes in UAE you still have to pay taxes on the country you are originating from as a resident citizen and that's including the 115 countries they have with agreement with. Your solution doesn't really solve a thing plus it is not affordable for a lot of people.

[kassad1]

Hi,

What you are describing is the 'credit method' of eliminating double taxation. Which in layman terms allows you to deduct taxes paid in the other country from the taxes you have to pay in your own country. So example if you would pay 15% in your own country but you were taxed at 5% in the other country, makes you pay only 15-5=10% in your own country. If the 'credit method' were to be used in the above UAE example, what you said were true, you had to pay 15% in your home country, because 15-0=15.

However in the situation I described in the opening post the method used by the OECD model conventions is the 'exemption method'. Which means you only have to pay in the other country, whatever the percentage in that country is, and you are exempted entirely in your own country. So you are paying 0% in the UAE because they have no income tax on this, and you pay 0% in your home country, because the OECD convention uses the 'exemption method' in this case.

This is not a simple subject, but you can read more about it here: https://www.oecd.org/tax/treaties/1914467.pdf
Chapter V discusses methods of exemptions (these two).

About how affordable it is: Well the cheapest option I could find is renting a storage room and subletting it. I am told that costs around €1k/year with a provider that allows you to rent it out for profit.

It is a lot cheaper than renting the smallest condo in the cheapest area, those were around €1k/month and I haven't found one that is coming with a contract that allows subletting...

So for €1k you get to not pay any taxes on €90k worth of income. That sounds like a pretty good deal to me. You can also repeat the thing for family members so €90k/person/year for the cost of €1k/person/year. So you have about 1.1% cost. It is obviously worse if you only have for example €30k worth of crypto, but then you could team up with someone who is also willing to do the same thing...

[Kemarit]

I have to hand it to you, you gave an effort on doing this on giving a solution for not paying income taxes for your crypto earnings but you are forgetting that double taxation avoidance on the word itself just removes the chances of a person on paying the same kind of tax by different countries. So even if you won't be having taxes in UAE you still have to pay taxes on the country you are originating from as a resident citizen and that's including the 115 countries they have with agreement with. Your solution doesn't really solve a thing plus it is not affordable for a lot of people.

Oh yeah, the length of things people will do to avoid taxes, I know some hated to pay their crypto taxes but this method complicates thing specially for a casual or noob investors or traders so it doesn't makes sense at all. And sooner or later if your government finds out, might be a double whammy to the OP. But @kassad1 put a better explanation but the end result is still the same, too complicated.

[kassad1]

Oh yeah, the length of things people will do to avoid taxes, I know some hated to pay their crypto taxes but this method complicates thing specially for a casual or noob investors or traders so it doesn't makes sense at all. And sooner or later if your government finds out, might be a double whammy to the OP. But @kassad1 put a better explanation but the end result is still the same, too complicated.

Interesting, I actually like this solution because I find it very simple to implement:

1. find the storage room in the UAE you want to rent
2. pay for it
3. cash out crypto as you normally would
4. IF asked for source of funds by your bank/taxman, declare it is income from renting out the storage room
5. Done.

Figuring it out was in fact complicated. Describing how it works in detail based on the international tax agreement is complicated.
Implementing it can't really be any more simple.
People are suggesting moving your residence to a new country, or establishing company structures (or doing both at the same time) to achieve the same thing. Compared to all of that, here we are talking about renting a storage room...
It is as complicated as renting yourself an apartment. I actually think making your first crypto purchase had to be a lot more complicated (it was for me at least) then renting a room.

[gentlemand]

4. IF asked for source of funds by your bank/taxman, declare it is income from renting out the storage room

That's defrauding the tax man.

There's legitimate tax avoidance. That isn't it. You're lying about the source of your funds.

The tax man has seen it all and nailed it all. I expect anything relating to the UAE will be looked at extremely closely.

You may well be fine. I wouldn't bother myself for the sake of a quiet life. 

[kassad1]

The tax man has seen it all and nailed it all. I expect anything relating to the UAE will be looked at extremely closely.

You may well be fine. I wouldn't bother myself for the sake of a quiet life. 

I do understand that some people like to be afraid of the tax authorities, because "they have the bigger stick". But in reality they operate within the rules that have been set for them, and are pretty far from being the allpowerfull know-it-alls some (and sometimes they themselves) would like you to believe them to be.

Let's put us in their prospective, and let's look at something as straightforward as a rent extremely closely. What can you check?
1. Can the examined person prove he really rented a storage room? - Yes, he can show a wire transfer from his/her own bank account to the storage room providers account as proof that you can check.
2. Could the person sublet the storage room for profit? - Yes, if the storage room provider doesn't forbid subletting. If you as the taxman are being  extremely thorough you contact the storage room provider and ask if subletting is allowed, and to further back nr.1 if they can confirm that they have the examined person as a client. The answer is yes for both.
3. Can you as the taxman find anything that would indicate that the income that was declared to be received as rent was in fact received for something else in reality? - No you can't, as you can't trace where bitcoin or crypto transfers originate from. Plus everything else that needs to be in place for the declaration to be true is in place (the storage room is really rented by the examined person and it is possible to sublet for profit).

There isn't anything for you as the tax man to further investigate or documents you can request when we are talking about a private person being examined.

[kassad1]

Just a quick update:

I have finally managed to get ahold of a friend for a lenghty conversation who moved to the UAE two years ago. I asked him to help me find the cheapest option for rentable property that one could sublet. He actually had a great idea!

While first moving there he used a storage service provider that specializes in servicing expats. See when you are moving to the UAE in the begining it's hard to get a local postal address that you can have your stuff, personal packages and deliveries shipped to (when you don't have either a permanent residential address yet). For this purpose a lot of expats use a storage service. They rent a storage room that has it's own postal address, receive their deliveries there and pick them up in the next 15 days. Basically you can think of it as a PO box that is (instead of the size of drawer or closet) is the size of an entire room. The service provider he used quoted me AED4100 ($1150/€1000) for a year for their smallest package and they asured me that they do allow subletting for profit. They also seemed really flexible too (they're used to special needs of the expats) as they have bank accounts in both the US and Europe that you can send their fees to (to minimize your transaction costs).

So this confirms that the preliminary numbers I have posted above are in fact the reality: 'So for €1k you get to not pay any taxes on €90k worth of income. That sounds like a pretty good deal to me. You can also repeat the thing for family members so €90k/person/year for the cost of €1k/person/year. So you have about 1.1% cost.' (that's $1150 cost for every $102k if you are in usd)

[HeRetiK]

Just a quick update:

I have finally managed to get ahold of a friend for a lenghty conversation who moved to the UAE two years ago. I asked him to help me find the cheapest option for rentable property that one could sublet. He actually had a great idea!

While first moving there he used a storage service provider that specializes in servicing expats. See when you are moving to the UAE in the begining it's hard to get a local postal address that you can have your stuff, personal packages and deliveries shipped to (when you don't have either a permanent residential address yet). For this purpose a lot of expats use a storage service. They rent a storage room that has it's own postal address, receive their deliveries there and pick them up in the next 15 days. Basically you can think of it as a PO box that is (instead of the size of drawer or closet) is the size of an entire room. The service provider he used quoted me AED4100 ($1150/€1000) for a year for their smallest package and they asured me that they do allow subletting for profit. They also seemed really flexible too (they're used to special needs of the expats) as they have bank accounts in both the US and Europe that you can send their fees to (to minimize your transaction costs).

So this confirms that the preliminary numbers I have posted above are in fact the reality: 'So for €1k you get to not pay any taxes on €90k worth of income. That sounds like a pretty good deal to me. You can also repeat the thing for family members so €90k/person/year for the cost of €1k/person/year. So you have about 1.1% cost.' (that's $1150 cost for every $102k if you are in usd)

That's smart. It's still tax evasion (+ money laundering) though since while you now have a plausible source of income, it also is not the actual source of income.

Whether you'd be caught is a different question of course, but receiving EUR 90k,- worth of income from the UAE for a property that is worth EUR 1k,- in rent may raise some eyebrows and trigger some deeper investigations.

[kassad1]

Money laundering is covering up illegal profits. Income from trading crypto or crypto capital gains are not illegal.

https://en.wikipedia.org/wiki/Money_laundering

So this is not money laundering.
You probably could use the proposed solution to do money laundering if you were receving profits from something illegal and needed to show legal profits instead. But this is not the case discussed here.

'but receiving EUR 90k,- worth of income from the UAE for a property that is worth EUR 1k,- in rent may raise some eyebrows and trigger some deeper investigations.'

I know a person who sells a product to his clients that he actually receives for free. It's not a sin to sell something with a high markup.

Also from the perspective of your tax authority the rent received is taxable in the other country (UAE). So it is not looked at as being 'taxfree so it has to be suspicious'  but as simply 'not their business'.

[HeRetiK]

Money laundering is covering up illegal profits. Income from trading crypto or crypto capital gains are not illegal.

I'm neither a legal nor a tax expert, but I'm pretty sure that faking income from one source to cover up income from another source as to avoid taxes counts as money laundering in most legislations, including the US and the EU.

Do what you will though, I'm just some random guy on the internet Should you be audited by your local authorities (which hopefully won't happen) it's not me you'd need to convince that neither tax evasion nor money laundering is at play. If you haven't already I'd still advise on getting a tax expert aboard though, if only to avoid any slip ups.

[Kemarit]

Just a quick update:

~ snip ~

Ok, good for you, I guess you can update us if anything go on your way (or not). But still, I will not go on that route just to be "tax-free" (or evade taxes). Yes, you can out-smart the tax-man, however, I have a feeling that sooner or later they already know this process so just be careful.

This is like a person I know back then who doesn't want to pay his due to the government, so he lives like 10 years without paying anything but the government caught up on him and know he has to suffer the consequences. So Goodluck to you.

[kassad1]

I'm neither a legal nor a tax expert, but I'm pretty sure that faking income from one source to cover up income from another source as to avoid taxes counts as money laundering in most legislations, including the US and the EU.

Nope you are mixing things up. Money laundering is when you are 'faking income from one source to cover up income from another source' only if your 'another source' is an illegal activity, and you want to hide that you are doing the illegal activity. So it is not to avoid taxes. It is to avoid being connected with illegal activity. Let's say you sell drugs. That is illegal. You profit from it well. Now you want to buy a house. You need to cover where your money is from so you set up a hotdog shop. From now on you're going to claim enough revenue from selling hotdogs to cover your expenses. While in reality the hotdog shop doesn't sell as many hot dogs. You still have to pay taxes on the revenue from the hotdogs you claimed to sell. That is money laundering. It has nothing to do with avoiding taxes. In fact you will actually be working toward being able to pay taxes when money laundering.

I hope you understand it know and we can let it go . As this thread is not about money laundering.

[kassad1]

This is like a person I know back then who doesn't want to pay his due to the government, so he lives like 10 years without paying anything but the government caught up on him and know he has to suffer the consequences. So Goodluck to you.

Thanks for the good wishes. What I'd like to point out that I intended this thread to be about how to minimize tax on profits involving crypto without having to move your tax residence to any exotic country people always talk about. Not to start a discussion about whether one should work on minimizing their taxes or not in general. So if someone generally disagrees with the concept of not 'always telling only the truth and the entire truth' to the taxman, then he/she disagrees with the entire concept and I get it. So I am sorry if some of you misunderstood this but this discussion is intended to be about HOW to implement it in a smart, prepared, thought out and cheap way.

[erikoy]

It will not be possible for every government in different countries who are adapting bitcoin are already eyeing on how to tax crypto. Other countries that regulated cryptocurrency has used the local exchanges where transaction fee is higher than other exchanges. It is because tax is already on it as an addition to the transaction fee being deducted every trade you made.

[freigeist]

I think you can't avoid tax unless you change residence to another country because
your tax authority may request you to present them your sublet contract!
Then what?

You mentioned you have to rent space from legal entity A for 1000€ / year. right?
Then you let this space to legal entity B for 90K € / year .
What if tax authority in your country ask you to show also the contract that you have with legal entity B?

In your case who will be the legal entity B in the contract
that will pay you 90K € on your bank account?

Can you explain more in details please?


For common "small" people is difficult to escape the parasitic systems
that are feeding on the working class and  which  you may know are designed
for the rich to become richer.

Only the rich have totally legal means to "lower" their taxes legally.

[kassad1]

I think you can't avoid tax unless you change residence to another country because
your tax authority may request you to present them your sublet contract!
Then what?

Nothing. There is no need for either a written contract or an invoice between a private person and a non VAT subject partner. It doesn't matter if the other party is a company or a private person, until he/she/it is not subject to VAT.

You mentioned you have to rent space from legal entity A for 1000€ / year. right?
Then you let this space to legal entity B for 90K € / year .
What if tax authority in your country ask you to show also the contract that you have with legal entity B?

The non-written 'verbal' agreement is sufficient and legal in the above described cases. So you can legally only be asked to 'declare' the source of income.

In your case who will be the legal entity B in the contract
that will pay you 90K € on your bank account?

Can you explain more in details please?

The payment arriving to your BTC address at your chosen bitcoin exchange is your income that you declare to have received as rent. The €90k to your bank account arrives from the crypto exchange you have chosen to exchange the crypto to eur.

For common "small" people is difficult to escape the parasitic systems
that are feeding on the working class and  which  you may know are designed
for the rich to become richer.

Only the rich have totally legal means to "lower" their taxes legally.

I agree. That is why I came up with this. To help the little guy (myself included).

[milewilda]

I'm neither a legal nor a tax expert, but I'm pretty sure that faking income from one source to cover up income from another source as to avoid taxes counts as money laundering in most legislations, including the US and the EU.

Nope you are mixing things up. Money laundering is when you are 'faking income from one source to cover up income from another source' only if your 'another source' is an illegal activity, and you want to hide that you are doing the illegal activity. So it is not to avoid taxes. It is to avoid being connected with illegal activity. Let's say you sell drugs. That is illegal. You profit from it well. Now you want to buy a house. You need to cover where your money is from so you set up a hotdog shop. From now on you're going to claim enough revenue from selling hotdogs to cover your expenses. While in reality the hotdog shop doesn't sell as many hot dogs. You still have to pay taxes on the revenue from the hotdogs you claimed to sell. That is money laundering. It has nothing to do with avoiding taxes. In fact you will actually be working toward being able to pay taxes when money laundering.

I hope you understand it know and we can let it go . As this thread is not about money laundering.

If you do try to read up https://www.quora.com/Are-tax-evasion-schemes-considered-money-laundering-Any-examples

A tax evasion scheme, as its name suggests, is any strategy designed to evade taxes. You could even make the argument that not all tax evasion schemes are illegal. It really depends on your understanding and definition of “scheme.” In the United States, “scheme” has a strongly negative connotation. In some other countries, it has a neutral connotation, similar to “strategy.”

HeRetiK point is valid one.

[olubams]

Double taxatiok relief is not a form of tax avoidance rather its a way of not punishing an individual from paying tax twice which means if you pay in country A where the income is generated, you don't have to be in country B where you are located or where you want to bring in the income. It then means that there is nothing like zero percentage of tax because for you to enjoy the double taxation relief, you must show evidence that you had initially paid.

Another thing worthy of note is that double taxation relief is usually on the basis of reciprocity I.e there is hardly a way one country would declare a particular income free and another country would tax that. Its usually a well thought out process by representatives of both countries. A further thought process needs to put in place to decide if this is an avenue worthy of exploit.

[kassad1]

Double taxatiok relief is not a form of tax avoidance rather its a way of not punishing an individual from paying tax twice which means if you pay in country A where the income is generated, you don't have to be in country B where you are located or where you want to bring in the income. It then means that there is nothing like zero percentage of tax because for you to enjoy the double taxation relief, you must show evidence that you had initially paid.

Another thing worthy of note is that double taxation relief is usually on the basis of reciprocity I.e there is hardly a way one country would declare a particular income free and another country would tax that. Its usually a well thought out process by representatives of both countries. A further thought process needs to put in place to decide if this is an avenue worthy of exploit.

1. There is no income tax in the UAE.
2. According to the OECD Model Tax Agrrement which all Double Tax Treaties are based on: income generated in connection with real estate/permanent establishments are always taxed where the real estate/permanent establishment is located - this case in the UAE.

This means renting property that is located in the UAE can only be taxed in the UAE, but the UAE doesn't impose an income tax currently. Thatswhy 0% tax on this type of income.

[Cupomi]

I have to hand it to you, you gave an effort on doing this on giving a solution for not paying income taxes for your crypto earnings but you are forgetting that double taxation avoidance on the word itself just removes the chances of a person on paying the same kind of tax by different countries. So even if you won't be having taxes in UAE you still have to pay taxes on the country you are originating from as a resident citizen and that's including the 115 countries they have with agreement with. Your solution doesn't really solve a thing plus it is not affordable for a lot of people.

in any country, all types of businesses will definitely be taxed, so we don't need to avoid taxes, because in our country if people avoid taxes, we can be sure that the business being run is a business that violates the law, because only businesses that violate the law fear tax, because they are afraid that if the illegal business they do will be caught by the authorities. bitcoin is not something that violates the law so why do we avoid taxes.

[Kemarit]

This is like a person I know back then who doesn't want to pay his due to the government, so he lives like 10 years without paying anything but the government caught up on him and know he has to suffer the consequences. So Goodluck to you.

Thanks for the good wishes. What I'd like to point out that I intended this thread to be about how to minimize tax on profits involving crypto without having to move your tax residence to any exotic country people always talk about. Not to start a discussion about whether one should work on minimizing their taxes or not in general. So if someone generally disagrees with the concept of not 'always telling only the truth and the entire truth' to the taxman, then he/she disagrees with the entire concept and I get it. So I am sorry if some of you misunderstood this but this discussion is intended to be about HOW to implement it in a smart, prepared, thought out and cheap way.

Don't get me wrong, I totally understand where you coming from, but I guess everyone here doesn't want to go to a lot of hassle just for the sake of reducing or not paying their tax. Maybe I just see people around me back in the days or even up to now, trying to take advantage of the loopholes. Perhaps others will find your 'suggestions' and might go that route, or others doesn't want to make things complicated, vis-a-vis.

[kassad1]

in any country, all types of businesses will definitely be taxed,

Completely false. All of the countries (offshore or onshore, tax heaven or not) have tax exemptions for various types of incomes specific to the country.

so we don't need to avoid taxes, because in our country if people avoid taxes, we can be sure that the business being run is a business that violates the law, because only businesses that violate the law fear tax, because they are afraid that if the illegal business they do will be caught by the authorities.

False again. There are a lot of places with 40% tax burdens. Some people just don't want to pay stupid high rates from their perfectly legal sources of income. If you have a webshop that sells books is that an illegal activity? No. Based on where you live let's say you are taxed at 40% for your income. You don't want to pay it. Does that make selling books illegal? No.

bitcoin is not something that violates the law so why do we avoid taxes.

Because you want to keep most of your profits to yourself.

[kassad1]

Don't get me wrong, I totally understand where you coming from, but I guess everyone here doesn't want to go to a lot of hassle just for the sake of reducing or not paying their tax. Maybe I just see people around me back in the days or even up to now, trying to take advantage of the loopholes. Perhaps others will find your 'suggestions' and might go that route, or others doesn't want to make things complicated, vis-a-vis.

Well making a wire transfer of €1000 to a company per year then declaring the source of income in one sentence IF you're asked to do so doesn't sound overly complicated to me. I'm not sure how somebody even sets up a crypto wallet if he/she finds doing this task complicated.

I do understand your point.
But again I have opened this thread to discuss this solution for the problem of 'wanting to pay 0% on your income received in cypto without miving your residence anywhere'.
Not to discuss people's opinions about how nobody should avoid taxes in general.
Not to discuss how some people believe tax authorities are know-it-all godlike creatures.

Such posts only fragment the information content of this thread for people who want to learn more about this stuff. The same goes for some of the above posts describing in generalities how the 'spirit of double taxation treaties SHOULD work'. ALL the OECD double tax treaties say immovable property income can ONLY be taxed in the country where the immovable property is located. Then you only have to find a country that taxes that income with 0% according to their local tax laws. Which I did. It's that simple. I don't see the point of beating a dead horse any further.

It is as uncomplicated to implement as described in the first paragraph.
It DOES make your income not taxable in your country of residence because that's what the treaties say.

[freigeist]

Don't get me wrong, I totally understand where you coming from, but I guess everyone here doesn't want to go to a lot of hassle just for the sake of reducing or not paying their tax. Maybe I just see people around me back in the days or even up to now, trying to take advantage of the loopholes. Perhaps others will find your 'suggestions' and might go that route, or others doesn't want to make things complicated, vis-a-vis.

Well making a wire transfer of €1000 to a company per year then declaring the source of income in one sentence IF you're asked to do so doesn't sound overly complicated to me. I'm not sure how somebody even sets up a crypto wallet if he/she finds doing this task complicated.

I don't think people find it complicated i think people are afraid!

I do understand your point.
But again I have opened this thread to discuss this solution for the problem of 'wanting to pay 0% on your income received in cypto without miving your residence anywhere'.
Not to discuss people's opinions about how nobody should avoid taxes in general.
Not to discuss how some people believe tax authorities are know-it-all godlike creatures.

Such posts only fragment the information content of this thread for people who want to learn more about this stuff. The same goes for some of the above posts describing in generalities how the 'spirit of double taxation treaties SHOULD work'. ALL the OECD double tax treaties say immovable property income can ONLY be taxed in the country where the immovable property is located. Then you only have to find a country that taxes that income with 0% according to their local tax laws. Which I did. It's that simple. I don't see the point of beating a dead horse any further.

It is as uncomplicated to implement as described in the first paragraph.
It DOES make your income not taxable in your country of residence because that's what the treaties say.

Well the treaties say it but usually is more important what your taxman thinks of it
because there is a great change that to prove this you will have to go to court  against taxman and people are afraid and reluctant to do this
so I think they choose to pay something even if they shouldn't just for the sake to not have to deal with it.

I would suggest anyone that want to try such activity to consult a local tax advisor or lawyer
to avoid any trouble later.

Anyway there could be also other few viable legal options to achieve the same result.
1) in some countries you can cash out your crypto to FIAT for 0% tax if you hold it more than 1 or 2 years (depending on country law).
2) maybe a person could loan himself FIAT for giving crypto assets as collateral.
There are some companies that do that.
This will still require the person to pay back the interest but i think it would be much lower than the tax
as loans are not taxable.

What you think about this?
Anyway out of curiosity are you a lawyer or a tax advisor?

[Patient_Zero]

It will not be possible for every government in different countries who are adapting bitcoin are already eyeing on how to tax crypto. Other countries that regulated cryptocurrency has used the local exchanges where transaction fee is higher than other exchanges. It is because tax is already on it as an addition to the transaction fee being deducted every trade you made.

of course all countries want income from a trade, exchanging bitcoin is not yet in the trade category, but moving into a local bank will be charged one of them taxes, so exchanging bitcoin is not taxed but we will put our money into the bank before we take it in fiat money, of course, some governments have calculated the potential tax that can be used through local banks.

[kassad1]

I don't think people find it complicated i think people are afraid!

I agree. There is no problem with being afraid of something you don't know. But I do find it stupid to be afraid and leave it there instead of researching the subject deeper! The fear factor mosty comes from people spreading half information spiced with sentences like 'the taxman has seen it all, and knows all'. I would like people to be better and more factually informed about this topic.

It DOES make your income not taxable in your country of residence because that's what the treaties say.

Well the treaties say it but usually is more important what your taxman thinks of it
because there is a great change that to prove this you will have to go to court  against taxman and people are afraid and reluctant to do this

Bit of correction here. It is definitely NOT 'Well the treaties say it, but it's more important what your taxman thinks of it'. International tax treaties between your own country and others ALWAYS override your local tax regulations. So if the international tax treaty says your income is only taxable in the UAE then your local tax authority can't challange that. PERIOD

What they CAN do in this case is examine if the truthness of what you are saying could be challanged. The steps they can examine have already been discussed earlier, but I'll quote them here once again, because this is important:

Let's put us in their (the tax authority's) prospective, and let's look at something as straightforward as a rent extremely closely. What can you check?
1. Can the examined person (you) prove he really rented a storage room? - Yes, he can show a wire transfer from his/her own bank account to the storage room providers account as proof that you can check.
2. Could the person sublet the storage room for profit? - Yes, if the storage room provider doesn't forbid subletting. If you as the taxman are being  extremely thorough you contact the storage room provider and ask if subletting is allowed, and to further back nr.1 if they can confirm that they have the examined person as a client. The answer is yes for both.
3. Can you as the taxman find anything that would indicate that the income that was declared to be received as rent was in fact received for something else in reality? - No you can't, as you can't trace where bitcoin or crypto transfers originate from. Plus everything else that needs to be in place for the declaration to be true is in place (the storage room is really rented by the examined person and it is possible to sublet for profit).

There isn't anything for you as the tax man to further investigate or documents you can request when we are talking about a private person being examined.

So by this point the taxman examined if the the truthness of what the examined person is saying about where the income is from could be challanged. In contrary to popular belief about the 'regarding taxes if the taxman says so, then you are guilty until proven otherwise' this doesn't work like: They can randomly charge you with whatever they think up, and you have to start defending yourself in court. They can only 'assume' something based on factual evidence that is allowed them to do so by local laws governing their operations.

I'll give you an example. Every country has laws that describe how they locally define 'tax residence'. In some countries a local address is sufficient, in others various different life circumstances are needed. Let's say you have moved to a new country but you keep your old address because you are paying a mortgage and the bank needs the local address to be on your account. You are working in the new country, your family is living with you in the new country, you are really living there. All of a sudden you receive a one time income sum from your old country, let's say one of your relatives in your own country died and left you an envelope at an inheritance lawyer with some cash in it. You now should be subject to inheritance taxes in the new country because you are living there. But the tax authority of your old country can challange that and 'assume' you actually still have tax residence in your old country because you have an address there, and this is enough for them by local laws to be allowed to 'assume' a local tax residence. Now they have to give you an opportunity to prove your truth that you in fact live in a new country. Local laws describe what they can ask for and have to accept as proof of you are really living in a new country. You now show them your new address, your new job, you tell them you only still have the old address, because you are still paying a mortgage and the bank needed the address to keep your account. If you can provide these things there is no going to court. They HAVE TO accept it by law. Know if you don't have a job or can't provide proof of your new address or you can't fullfill the required proof providing procedure for the tax authority THEN and only then you are going to court having to defend your truth.

Less scary? I hope so!

So back to this case, everyone who thinks it can work like:
Taxman: - Please declare source of income.
You: - I declare this income is rent received for immovable property from the UAE.
Taxman: - COOOOOOOOOURT!!!!!

It can't.

They can only ask for what is described in the above qouted part and nothing more.

I would suggest anyone that want to try such activity to consult a local tax advisor or lawyer
to avoid any trouble later.

I agree. I'll say something even better. You should go to a tax advisor and go through this thread together. Let them review if they see something problematic in what I say in respective to your own country's laws. If they do please share here! I would be a lot happier to discuss that than reading posts like 'the taxman is always right' and 'double tax treaties don't work that way' (instead of simply reading the passage of Immovable Property of the double tax treaty between their own country and the UAE).

I'll say something EVEN better. After you have discussed it with your tax advisor. Get your feet wet with a smaller amount. I'm actually doing that. The taxyear ends on the 31th of December. So I have actually sent the yearly payment to the storge company in the UAE and waiting for confirmation of receival. Once that is done I am sending €5000 worth of crypto to an exchange where I have KYC'd account and forward euros to my local bank account. This way the receival of income to the exchange still falls in the 2018 tax year and I can see what happens with this smaller amount. Worst case scenario I'll be taxed for €5000 but I really can't see how. If everything works out I'll do the full amount in 2019.

[Patient_Zero]

I think you can't avoid tax unless you change residence to another country because
your tax authority may request you to present them your sublet contract!
Then what?

You mentioned you have to rent space from legal entity A for 1000€ / year. right?
Then you let this space to legal entity B for 90K € / year .
What if tax authority in your country ask you to show also the contract that you have with legal entity B?

In your case who will be the legal entity B in the contract
that will pay you 90K € on your bank account?

Can you explain more in details please?


For common "small" people is difficult to escape the parasitic systems
that are feeding on the working class and  which  you may know are designed
for the rich to become richer.

Only the rich have totally legal means to "lower" their taxes legally.

we cannot fight the system in our country, so being a good taxpayer may be safer, maybe the tax is charged big but that is also because the money we have is also large, in the business of buying and selling bitcoin, we can still seek profits from our business , even if there is a tax but it is comparable to what you get.

[DavidNiva]

It will not be possible for every government in different countries who are adapting bitcoin are already eyeing on how to tax crypto. Other countries that regulated cryptocurrency has used the local exchanges where transaction fee is higher than other exchanges. It is because tax is already on it as an addition to the transaction fee being deducted every trade you made.

if a business wants to be recognized by the government, one of them is the government is involved in it, one of which is by collecting data and applying taxes to business people, we do not have to worry about taxes imposed by the government, this is proof that the government recognizes or legalizes bitcoin and the government admits that bitcoin is not against the law.

[kassad1]

Received confirmation of payment from the UAE storage company. I have sent the payment of €1000 with a SEPA transfer to their bank account in a German bank. My lease is confirmed to be active from yesterday. I am now going to proceed to cashing out the crypto itself.

[kassad1]

Anyway there could be also other few viable legal options to achieve the same result.
1) in some countries you can cash out your crypto to FIAT for 0% tax if you hold it more than 1 or 2 years (depending on country law).
2) maybe a person could loan himself FIAT for giving crypto assets as collateral.
There are some companies that do that.
This will still require the person to pay back the interest but i think it would be much lower than the tax
as loans are not taxable.

I have missed to answer these:

1) Yes. You would have to move your tax residence there. This costs a lot more than the UAE solution both in money and in time and effort to implement. Also can be easily challanged by your home country if you have family and business ties to your original home country.

2)The propsed UAE solution is again cheaper and less complicated. If you set up a company for giving yourself a loan on paper, the company on it's own would cost you more than the UAE solution's €1000/year/€90k (~1.1% of cost), also in a lot of countries if you receive a loan from a non-financial institution you are subject to tax if the loan has an interest rate below a certain amount (changes from country to country but 5% above central bank interest rate is quite a common requirement in the EU). Plus if this is a loan, you're going to have to pay it back at one time, for that you also have to be able to show another form of income. Compare all that hassle to just paying a €1000 fee for every €90k of inome. Seemed like a nobrainer for me which solution to choose.

[kassad1]

Hi all,

Received the test amount to my bank account yesterday. Got a phone call today from the AML KYC department of the bank as expected (they always call me whenever I receive a wire above their €2000 threshold), and asked me to declare source of funds as they always do. I have declared that it is rent received for immovable property located in the UAE. They thanked me and this is all I had to do regarding this transaction. Once again this was important for me to be done with by 31st of December, to make this an event still in this tax year.

[freigeist]

Hi all,

Received the test amount to my bank account yesterday. Got a phone call today from the AML KYC department of the bank as expected (they always call me whenever I receive a wire above their €2000 threshold), and asked me to declare source of funds as they always do. I have declared that it is rent received for immovable property located in the UAE. They thanked me and this is all I had to do regarding this transaction. Once again this was important for me to be done with by 31st of December, to make this an event still in this tax year.

Very nice.

You think they will buy it?
Was this money sent(wired) from a crypo exchange bank account to your bank account?

What now?
Do you need to fill some other tax forms and send to your tax office or wait for their call
or there is nothing for you to do now regarding this?

Thanks.

[kassad1]

Very nice.

You think they will buy it?

I definitely do! Please see below...

Was this money sent(wired) from a crypo exchange bank account to your bank account?

Yes it was.

What now?
Do you need to fill some other tax forms and send to your tax office or wait for their call
or there is nothing for you to do now regarding this?

I have actually went ahead and contacted the tax authority themselves with this exact question. The answer was that there are two possible scenarios:

1. If I have had no other income in 2018 that would result in me having to file a tax return for the year 2018. In this case I don't have to file anything, because this income is not subject to tax in the country of my residence, so this income is of no concern for the tax authority (Yes, these are their own words! Btw. no surprise here because the double tax treaty states this would be so, as I described this multiple times alredy. Just confirming for everyone who posted comments here that 'treaties don't work like this' or 'of course all countries would tax it' etc. This is confirmation from the actual tax authority...)

2. If I have other income for the tax year of 2018 that is taxable in my country. This means I already have to file a tax return for the year 2018 to begin with. In this case I DO have to declare this as income that is subject to no tax in my country (tax free income bracket). The reason for this is that eventhough I won't have to pay any tax after this income as it is only subject to tax in the UAE (there you go they've confirmed it once again), they DO still want to know about it as it is used in calculating a persons total income for the year. Which if is above a certain threshold then the individual tax allowance amount changes for the other income (this is a local speciality so might not really be relevant info for residents of other countries but I still wanted to provide their reasoning).

[HeRetiK]

1. If I have had no other income in 2018 that would result in me having to file a tax return for the year 2018. In this case I don't have to file anything, because this income is not subject to tax in the country of my residence, so this income is of no concern for the tax authority (Yes, these are their own words! Btw. no surprise here because the double tax treaty states this would be so, as I described this multiple times alredy. Just confirming for everyone who posted comments here that 'treaties don't work like this' or 'of course all countries would tax it' etc. This is confirmation from the actual tax authority...)

2. If I have other income for the tax year of 2018 that is taxable in my country. This means I already have to file a tax return for the year 2018 to begin with. In this case I DO have to declare this as income that is subject to no tax in my country (tax free income bracket). The reason for this is that eventhough I won't have to pay any tax after this income as it is only subject to tax in the UAE (there you go they've confirmed it once again), they DO still want to know about it as it is used in calculating a persons total income for the year. Which if is above a certain threshold then the individual tax allowance amount changes for the other income (this is a local speciality so might not really be relevant info for residents of other countries but I still wanted to provide their reasoning).

I'm impressed. I'm also skeptical whether you'll be able to stay under the radar once your "rent income" increases but keep us posted. Good luck OP.

[kassad1]

I'm impressed. I'm also skeptical whether you'll be able to stay under the radar once your "rent income" increases but keep us posted. Good luck OP.

Thanks!

Well this is actually not supposed to be something that only works until you're 'under the radar'. So let's fastforward to next year when I'm claiming €90k worth of income and let's say I become being 'on the radar'. The authority becomes interested in investigating the circumstances:

I have already posted this above, and I do understand it's not the most elegant thing to quote myself , but I'd like to put this out there one more time for the sake of the emphasys it deserves:

'Let's put us in their (the tax authority's) prospective, and let's look at something as straightforward as a rent extremely closely. What can you check?
1. Can the examined person (you) prove he really rented a storage room? - Yes, he can show a wire transfer from his/her own bank account to the storage room providers account as proof that you can check.
2. Could the person sublet the storage room for profit? - Yes, if the storage room provider doesn't forbid subletting. If you as the taxman are being  extremely thorough you contact the storage room provider and ask if subletting is allowed, and to further back nr.1 if they can confirm that they have the examined person as a client. The answer is yes for both.
3. Can you as the taxman find anything that would indicate that the income that was declared to be received as rent was in fact received for something else in reality? - No you can't, as you can't trace where bitcoin or crypto transfers originate from. Plus everything else that needs to be in place for the declaration to be true is in place (the storage room is really rented by the examined person and it is possible to sublet for profit).

There isn't anything for you as the tax man to further investigate or documents you can request when we are talking about a private person being examined.'


So you became being 'on the radar',
then they investigated,
then they arrived at the conclusion that they still have nothing to do with this income (because it is ONLY subject to tax in the UAE), and have no facts based on witch they could claim in court this transaction hasn't happened in reality.
Done.

[Kemarit]

I'm also would be interested on how things will end up @kassad1. You may have setting a precedence here and I'm sure members have found your method viable specially if this sort of "experiment" will be a success on your part.

@freigeist yeah probably people are afraid to test the waters because they just wanted not to complicated things in life.