0% tax when cashing out crypto

[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.

[1715164688]

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[1715164688]

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[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.