Avoiding Tax on Capital Gains from Bitcoin (Legally?)

[BTCEnthusiast2]

In the event that you make a profit from the sale of your bitcoin, in many countries you will need to pay capital gains tax on this profit.

You take all the risk, and if it pays off, the government will be there looking for their taste - 30 to 45% of your gains.

Edit: The tax is generally closer to 10-20% depending on how much you invested, in most countries. But this is still quite a large chunk of change.

Hypothetically speaking of course (I personally would never try to avoid paying taxes), is there a simple way to avoid paying these types of taxes?

Exchanges are collecting your name and handing your transaction info over to the government for tax purposes. But with a little bit of creativity, is there not a way around this? E.g.

1. Using an exchange that does not require KYC / taking your personal information
2. Moving your bitcoin to another address not associated with your exchange account - If asked you can say that you have sold this with 0 profit to the person who holds that new address, "a man by the name of John Smith I think it was". The bitcoin can then be sold on an exchange which does not require KYC.
3. Transferring the funds from the sold btc to an offshore bank account, e.g. in Puerto Rico, which does not share information with foreign governments for tax purposes.

The question is, are there any reliable exchanges/p2p sites which do not require name/passport to sign up to?
Can these exchanges be linked to an offshore bank account in a jurisdiction which does not share banking info with other countries?

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[dothebeats]

In the event that you make a profit from the sale of your bitcoin, in many countries you will need to pay capital gains tax on this profit.

You take all the risk, and if it pays off, the government will be there looking for their taste - 30 to 45% of your gains.

From where I'm at, Capital Gains Tax is capped at 6%, and 30-45%, I think, only applies to rich countries with almost free everything.

1. Using an exchange that does not require KYC / taking your personal information

With the move from every corner regarding crypto regulation, I heavily doubt that you will actually find an exchange that imposes no KYC to their customers. Some don't, but once you reached $1000 on trading volume, you are forced to submit, else you cannot continue your trading ventures.

2. Moving your bitcoin to another address not associated with your exchange account - If asked you can say that you have sold this with 0 profit to the person who holds that new address, "a man by the name of John Smith I think it was". The bitcoin can then be sold on an exchange which does not require KYC.

Either way, they would still tax you even if no profit was made. You can't just go around and say that "hey I sold this to Alice, I made no profit okay?" and expect them to believe your story. Taint analysis on the blockchain is present. The only thing to do is perhaps change to a different altcoin then back to BTC then again, point 1, good luck finding an exchange with no KYC.

3. Transferring the funds from the sold btc to an offshore bank account, e.g. in Puerto Rico, which does not share information with foreign governments for tax purposes.

This is what most politicians do: transfer dirty money into Swiss bank accounts. Perhaps you can do the same, but then again exchanges hold the transaction records so I don't think you can go around with that.

The question is, are there any reliable exchanges/p2p sites which do not require name/passport to sign up to?

None that I know of.

Can these exchanges be linked to an offshore bank account in a jurisdiction which does not share banking info with other countries?

Swiss bank accounts are the only bank accounts that you can ensure to not give your banking info to other countries, though of course it will raise red flags once you do it. And with most countries closing their exchanges from outsiders, I don't think the freedom to link offshore bank account to e.g. an American exchange would still be possible.

[samdan777712]

as soon as you try to convert to fiat more than a few thousand at a bitcoin atm you're screwed. Extremely complex international finance rules. Oversea banks want massive audit trails and details, foreign controlled corps get you audited, they want source of funds etc, puerto rico wants fund audit trail.

On the other hand if it starts on 'bitmex' or the countless other anon exchange, and stays in bitcoin and you know how to use monero and coinjoin, tor, vpns, your own node/server...well you could survive a dignified normal low class existence through pure btc transfers at bitcoin atms and websites that take btc. But the moment you buy stuff like cars and houses you're in trouble.

I personally am going to make a corporate account and bank account do a bunch of law tax planning mumbo jumbo and get my rate down to 30% hopefully. This is all for SHORT term capital gains.

If you have audit trails to prove some bitcoin in a wallet is a long term capital gain, don't sell it, borrow against it with NEXO. Loans aren't taxed.

You can get a citizenship in the Caribbean, a permanent residency in Portugal, perpetually travel to avoid tax residency and renounce american citizenship. This is what tone vays did. It's not a bad life.

[BitGiveOrg]

Hello!

You can donate - in BTC or crypto - to registered charities to offset your gains!

What is better - give it to the government or give it to charity?!

We put this blog out in November, it might be slightly out of date (for example Libra Tax is closing down their legacy system and shifting to enterprise), but it lays out the basics.

https://www.bitgivefoundation.org/wondering-about-crypto-gains-and-taxes/


Thanks!

BitGive

[Lucius]

Swiss bank accounts are the only bank accounts that you can ensure to not give your banking info to other countries, though of course it will raise red flags once you do it.

This is perhaps used to be the case in past, but from last year such a way of doing business is finished, at least for some countries. Swiss banks now share client data with all EU members + "Australia, Canada, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway and South Korea", but since this is data from 2018, some more countries are added to list, one of them is India.

About 7,000 banks, trusts, insurers and other financial institutions registered with the FTA collect data on millions of accounts and send them on the Swiss tax agency. The FTA in turn sent information on around two million accounts to partner states. It put no value on the accounts in question.

The information includes the owner’s name, address, country of residence and tax identification number as well as the reporting institution, account balance and capital income. This lets authorities check whether taxpayers have correctly declared their foreign financial accounts.

Only way to avoid tax would be if buyer / seller is completely bypass banks / crypto exchanges and buy bitcoin for cash directly from other user, and sell in the same way. One more solution is relocation to Germany, when you buy crypto there and hold for 1+ year, seller does not have to pay any taxes.

[BTCEnthusiast2]

From where I'm at, Capital Gains Tax is capped at 6%, and 30-45%, I think, only applies to rich countries with almost free everything.

Wow not bad, where's that?

If it was only 6%, that wouldn't be too bad.

I heavily doubt that you will actually find an exchange that imposes no KYC to their customers.

I've just come across something called Bisq Network, which is P2P, decentralized, and anonymous. Things like this could be a way forward.

change to a different altcoin then back to BTC then again, point 1, good luck finding an exchange with no KYC.

Yes I think this can help to hide part of the paper trail. But as you say you still need a way of converting the BTC into either fiat, or something else.

Getting a foreign bank account is not a problem, but getting the BTC into that bank account requires an anonymous network.

[BTCEnthusiast2]

if it starts on 'bitmex' or the countless other anon exchange,

Thanks for the info. It seems like I could just wash the BTC funds on Bitmex, by sending to my anon Bitmex account, and then withdrawing to a separate BTC offline wallet?

What are some of the other top anon exchanges?

monero and coinjoin

So it sounds like using Coinjoin, you can cover the trail on the blockchain, and basically make the BTC anonymous.

Or if not then at least by switching to a different coin, and then switching back and sending the coin to a different address than the one that was previously being used.

I personally am going to make a corporate account and bank account do a bunch of law tax planning mumbo jumbo and get my rate down to 30% hopefully. This is all for SHORT term capital gains.

30% of a mil is still $300k though. For the average person that's close to 10 years worth of income!

This is why Google, Apple, Amazon, Starbucks, all have ways of paying really low tax - around 5%.

If you have audit trails to prove some bitcoin in a wallet is a long term capital gain, don't sell it, borrow against it with NEXO. Loans aren't taxed.

Great idea. This is what people do with real estate investments, they refinance to pull out tax free cash.

The problem with this though is that BTC is volatile, unlike property which generally goes up in value over-time. BTC has a cycle where it drops massively in value after the steep bull run - such as the one seen after the previous halvening.

You can get a citizenship in the Caribbean, a permanent residency in Portugal, perpetually travel to avoid tax residency and renounce american citizenship. This is what tone vays did. It's not a bad life.

Unfortunately in many countries like Australia, Canada, UK, and I think maybe the USA also, you get taxed on worldwide income, even if you are travelling. Except with countries that have no-double-tax agreements, in which case you only pay tax in the country you made the money in. But BTC is borderless, so your native country will likely want the tax for that.

Thanks a lot for all the info.

[BTCEnthusiast2]

Only way to avoid tax would be if buyer / seller is completely bypass banks / crypto exchanges and buy bitcoin for cash directly from other user, and sell in the same way.

I think Bisq Network or a similar P2P network + a foreign bank account for them to send funds to could be used to accomplish this.

One more solution is relocation to Germany, when you buy crypto there and hold for 1+ year, seller does not have to pay any taxes.

That's awesome! Lucky for Germans.

I think you have to live there for several years to qualify as a resident though right?

I assume you have to buy through a German exchange and use a German passport?

One could use a friend living in Germany to buy the BTC for them.. although this could get complicated.

Germany's a wonderful country - I wouldn't mind relocating there to potentially save money.

Also this would be a 100% legal way of avoiding tax.

[diazepam666]

I want to know is taxation filing everywhere in the world? then if yes we need to pay the fees what government is mentioned for it right! We should not loose the country e to stay in low because our taxation.
If you gain the capital mostly countries want it ask you to pay the taxation maximum it will be free only for you.

[josephdd1]

Try this at your risk and I do not recommend this but I have heard of some people using forged docs to get into exchanges. That way no matter what your profit, it can never be traced to you definitively.

I want to know is taxation filing everywhere in the world? then if yes we need to pay the fees what government is mentioned for it right! We should not loose the country e to stay in low because our taxation.
If you gain the capital mostly countries want it ask you to pay the taxation maximum it will be free only for you.

What are talking about?

[RodeoX]

Here is some reality for the grown-ups.

In the USA capitol gains are an arguably unfair tax that favors the wealthy, not an unfair tax that is too high. You will likely pay twice the tax on the money you worked for as you will pay on your bitcoin gains. It could be as high as 20% or as low as 0%.

As far as using an exchange that does not do AML/KYC... You would have be utterly stupid to do that. What do you think the criminals who run an illegal exchange are going to do when you send them bitcoin? I know.

Then what? Are you going to the police to tell them that the people helping you steal tax money were mean to you? No you will have nothing and no recourse to do anything about it. Or maybe the exchange will help you avoid your responsibility. In that case it may just be a matter of time until the IRS catches up. Then you will owe the taxes, penalties, interest, and maybe a little jail time. You will have turned the best investment of your lifetime into a criminal record and a debt to pay.

Don't be a fool and listen the these children who don't know shit about investing. Be a boss, pay your taxes.

[squatter]

if it starts on 'bitmex' or the countless other anon exchange,

Thanks for the info. It seems like I could just wash the BTC funds on Bitmex, by sending to my anon Bitmex account, and then withdrawing to a separate BTC offline wallet?

What are some of the other top anon exchanges?

Binance, Bitfinex, and Deribit are a few other options that allow unverified accounts.

So it sounds like using Coinjoin, you can cover the trail on the blockchain, and basically make the BTC anonymous.

You can certainly make your tracks more difficult to follow. If you properly shield your IP address and cascade enough transactions, you might be anonymous.

In the USA capitol gains are an arguably unfair tax that favors the wealthy, not an unfair tax that is too high. You will likely pay twice the tax on the money you worked for as you will pay on your bitcoin gains. It could be as high as 20% or as low as 0%.

That's only for long term capital gains, where you held for more than a year. Short term capital gains are taxed at your ordinary tax rate, up to 37%.

[samdan777712]

You can evade tax easier by simply not being a us citizen. Uncle Sam get's paid. It isn't worth evading the IRS and the IRS uses chain analysis . You have to renounce US Citizenship. Now you can stay a citizen and live in Europe and get a 110 thousand dollar tax exclusion by traveling and avoiding tax residency. It will get you that much but after that you're on the hook. Amazon uses complex tax evasion techniques only multinationals can afford to do . Normal international business company controlled by american citizen are subject to very complex pass through tax law that were put into place by Trump tax cuts that effectively ended the ability to hold money overseas tax deferred. A normal US citizen can't do it, but Amazon does it presumably by having oversea division unowned by US citizen or some other deeply corrupt loophole.

[marcbitcoins]

I see nothing wrong if the government will required us to pay Bitcoin taxes as long as they are protecting us from scams and making our economy to become more stable and healthy. Avoiding the government policy is very risky as it will just might put you in a lot of trouble like facing tax evasion and exposing you to scam environment which is much costly than paying the taxes.  

[Lucius]

BTCEnthusiast2, as far I know there is no way to get German citizenship in a way that you invest some money in real estate or something like that, which is possible in some other countries. You need to live in Germany at least eight years and then apply for citizenship, but there are some exceptions which make it possible to do this in a short period of time. You can read about this here : How to get German citizenship or a permanent visa

I notice that you quote part of my post under other member name, you can use edit button to fix that

Here is some reality for the grown-ups.
Don't be a fool and listen the these children who don't know shit about investing. Be a boss, pay your taxes.

Grown-ups first read what topic is about, and then reply with useful reply - who is ask anything about paying tax in USA? Your country is twisted in any possible way, paying tax is no exception. If you feel like a boss because you pay tax on your cryptocurrency good for you, your country is happy to have you. I just hope that your taxes will increase even more, so you can feel it more bossy when you pay it

[josephdd1]

You can evade tax easier by simply not being a us citizen. Uncle Sam get's paid. It isn't worth evading the IRS and the IRS uses chain analysis . You have to renounce US Citizenship. Now you can stay a citizen and live in Europe and get a 110 thousand dollar tax exclusion by traveling and avoiding tax residency. It will get you that much but after that you're on the hook. Amazon uses complex tax evasion techniques only multinationals can afford to do . Normal international business company controlled by american citizen are subject to very complex pass through tax law that were put into place by Trump tax cuts that effectively ended the ability to hold money overseas tax deferred. A normal US citizen can't do it, but Amazon does it presumably by having oversea division unowned by US citizen or some other deeply corrupt loophole.

I think you can claim to not file any tax in america if you do not stay there for more than 179 days. Can anyone confirm this? Can this be legally used to avoid taxes in US while trading or doing business there as an individual?

[Harlot]

You can smoke and give all the illusions you want in order to evade taxes and you might be successful on your first attempts but harboring 1 million dollars worth of riches cannot go undetected from any authorities. They really know right away that some person mysteriously is buying houses or other expensive things they have never bought and wonder why where all this money are coming from and it will be the start that you will be under their radar. Exchanges without KYC are not the solution here they aren't even safe and trusted to be use, in fact there are no solutions here but to pay your taxes.

[josephdd1]

Here is some reality for the grown-ups.

In the USA capitol gains are an arguably unfair tax that favors the wealthy, not an unfair tax that is too high. You will likely pay twice the tax on the money you worked for as you will pay on your bitcoin gains. It could be as high as 20% or as low as 0%.

As far as using an exchange that does not do AML/KYC... You would have be utterly stupid to do that. What do you think the criminals who run an illegal exchange are going to do when you send them bitcoin? I know.

Then what? Are you going to the police to tell them that the people helping you steal tax money were mean to you? No you will have nothing and no recourse to do anything about it. Or maybe the exchange will help you avoid your responsibility. In that case it may just be a matter of time until the IRS catches up. Then you will owe the taxes, penalties, interest, and maybe a little jail time. You will have turned the best investment of your lifetime into a criminal record and a debt to pay.

Don't be a fool and listen the these children who don't know shit about investing. Be a boss, pay your taxes.

If grown up means letting crony government to take away MY HARD EARNED MONEY then I am glad I am not grown up.
Why SHOULD I PAY taxes when the government cant even pave the road to my village?

Maybe you would say just because I dont, they dont fix it. Well I do not need them to fix it. I can fix it on my own.

[DaCryptoRaccoon]

In the event that you make a profit from the sale of your bitcoin, in many countries you will need to pay capital gains tax on this profit.

You take all the risk, and if it pays off, the government will be there looking for their taste - 30 to 45% of your gains.

If you were to make $1,000,000 from your bitcoin investment, you would be giving away possibly $300,000 to $450,000 depending on the country...

Hypothetically speaking of course (I personally would never try to avoid paying taxes), is there a simple way to avoid paying these types of taxes?

Exchanges are collecting your name and handing your transaction info over to the government for tax purposes. But with a little bit of creativity, is there not a way around this? E.g.

1. Using an exchange that does not require KYC / taking your personal information
2. Moving your bitcoin to another address not associated with your exchange account - If asked you can say that you have sold this with 0 profit to the person who holds that new address, "a man by the name of John Smith I think it was". The bitcoin can then be sold on an exchange which does not require KYC.
3. Transferring the funds from the sold btc to an offshore bank account, e.g. in Puerto Rico, which does not share information with foreign governments for tax purposes.

The question is, are there any reliable exchanges/p2p sites which do not require name/passport to sign up to?
Can these exchanges be linked to an offshore bank account in a jurisdiction which does not share banking info with other countries?

In the UK you only pay capital gains one your convert the BTC to GBP.
Advice.. Don't convert large amounts stick to smaller amounts.

End of the day Capital Gains is STEALING only with Authority.

My advice seek sounds financial advice from accountant if your concerned.

Or Move your assets to somewhere without CG

[josephdd1]

In the UK you only pay capital gains one your convert the BTC to GBP.
Advice.. Don't convert large amounts stick to smaller amounts.

End of the day Capital Gains is STEALING only with Authority.

My advice seek sounds financial advice from accountant if your concerned.

Or Move your assets to somewhere without CG

Capital gains exist in every developed and most developing nations. So there is not much choice in avoiding it completely. The only way to do beat them is by being smarter than them. If you have the money to worry about capital gains, then hire someone to do the worry part for you. Someone competent I mean.


and I was thinking if this is a possibility, Suppose a rich man to created a non-profit, donate to non-profit and indirectly retain the money?

[BTCEnthusiast2]

Just to clarify, I'm not condoning avoiding paying taxes. The questions here are for educational purposes - anyone can choose to report/not report any gains at their own risk.

Anyone who does not condone tax avoidance, that's fine, you are entitled to your feelings and opinions.

But if someone wants to think intelligently about how to manage their tax, like the wealthy do, then that's their prerogative.

Remember that the tax laws are created by the same extremely wealthy people who are able to avoid a large chunk of their taxes.

They create loopholes that they and their wealthy buddies can use to avoid taxes.

They use trusts, off-shore shell companies, off-shore bank accounts, charities, etc etc. The loopholes change every few years to catch out those who are not in-the-know.

Politicians do it; celebrities do it; the wealthy do it; and big corporations like Google, Apple, Facebook, Amazon, and Starbucks, who pay as little as 5% tax, yep they do it too.

And you can do it too. But to do it, you just need to use the gray matter between your ears.

If you're investing in Bitcoin, then who knows, you might be extremely wealthy in the very near future. It's worth thinking about the tax implications now. Not in the future when you're staring down at a tax bill for hundreds of thousands.

Think like the wealthy do, and you'll retain your wealth. Think like a poor person, and you'll quickly lose your wealth and in a few years you'll be back where you started.

There's a reason the rich stay rich, and the poor stay poor. The rich come up with creative ways of guarding their wealth. They definitely don't just say "tax is unavoidable". That's the lie they want you to believe to stop you from even thinking about it.

There may very well be ways to LEGALLY reduce, or minimize your tax burden - EVEN BETTER!

[RodeoX]

In the USA capitol gains are an arguably unfair tax that favors the wealthy, not an unfair tax that is too high. You will likely pay twice the tax on the money you worked for as you will pay on your bitcoin gains. It could be as high as 20% or as low as 0%.

That's only for long term capital gains, where you held for more than a year. Short term capital gains are taxed at your ordinary tax rate, up to 37%.

Good point! I was considering long term gains, not short.

If grown up means letting crony government to take away MY HARD EARNED MONEY then I am glad I am not grown up.
Why SHOULD I PAY taxes when the government cant even pave the road to my village?

Maybe you would say just because I dont, they dont fix it. Well I do not need them to fix it. I can fix it on my own.

How your tax money is spent is a different issue. I assume much of the money I pay in taxes will be wasted. However taxes can be a very fair way to pool the money needed for common projects. It sounds like you don't have a bitcoin problem, you have a government problem. You may want to become politically active to solve that kind of dilemma. But just sticking your neighbors with your tax bill is not going to do anything except bring you financial/legal pain.