Moved from Germany to Switzerland. Crypto Trader. Not Happy. What next?

[denniz07]

Hello guys,

I was very successful trading Crypto in the last years. So decided to go to Switzerland Zug. Though it would be a good location for crypto.
Right now working on my Tax returns for Germany for 2020 and 2021. It is really a night mare and I have to pay about nearly 50%, if I don't and they found out it's jail time..

To be honest I become kind of disappointed in Zug. It was extremely difficult to find a bank that accepts crypto without a lot of paper work. Most banks refused, without a German Tax decleration.
It is very expensive. Authorities want all the time something from me like money for firefighting, money for cable, some other small things it's kind of something new each time. I'm often abroad and can easily miss such small bills or papers that I have to answer.
To be honest I never had so much paper work or things to fill out. Even in Germany. Also the Tax authorities already contacted me and want some deceleration for 2021. It feels really pushy, I'm already afraid they are after me for whatever reason.

Regarding Taxes it seems that if you are qualified as professional trader ( guess it is 80/20 in my case) it would be something like 30% (20% Tax + 10% social). So you would get about 15% advantage over Germany. But I'm not sure if is worth it. 2022 wasn't so far so high so it may even not matter. Just afraid that they create even more trouble then the German authorities. Also it seems that it is possible to make the declaration in Germany one year later compared to Switzerland. Guess that can bring the advantage down to 10%.

So back to the question . I'm thinking of going back to Germany - if the Tax declaration will go smoothly. Parents and Friends are there. Its hard to leave especially my parents behind.

Is there some legal construction (which makes sense for let's say 1m$ revenues), where I could create a Company (before going back to Germany), so that it would be less headache.
Ideally it would be a location with lower taxes and where a simple PnL (Balance begin of the year - Balance end of the year + withdrawals - expenses) would be enough. It's just a lot of work to declare every trade (what is currently required in Germany), especially since sometimes exchanges don't have clean data. I know CFC Rules would apply if the TAX is is lover then 25%, but maybe I could hire some people or maybe I'm lucky and they will lower the rate later to 15% (not that optimistic about it ).
So looking for some easy and flexible solution.

Spoke with a lawyer and he says a lof of his clients are heading to UAE. Don't want to make this step.

Hope you guys have some ideas. Was even thinking to sell this thing somehow but since it runs on private account not sure anyone would buy it (for a very high price).

 

[KDX]

1. You will be under scrutiny by banks wherever you go.
2. Contact a tax lawyer if you think the authorities may be after you
3. It's not just about CFC but also management and control. if you are trading your crypto, you are the person behind the company and it will be a tax resident in Germany/Switzerland. So, not really.
4. Yes, UAE would be one of the best options. Otherwise, have fun with your taxes.

 

[denniz07]

Thanks a lot for the answer.
2. Contact a tax lawyer if you think the authorities may be after you
Maybe it just regular practice. I think they are collecting some kind of provisional taxes (direct taxes) and asking for my net worth. Not sure how bad it would to not include crypto now and declare it later in the tax declaration (have time till end of 2022, but can't delay that provisional thing). Actually wanted to finish my German declaration first. Maybe they will take 80% so can't estimate my net worth yet.

3. It's not just about CFC but also management and control. if you are trading your crypto, you are the person behind the company and it will be a tax resident in Germany/Switzerland. So, not really.
Not sure about that. I'm algo is trading. There is clearly a lot of room for few people to take care of some parts of the algo. But yeah guess you are right in the end.
Was even thinking to open a company with a jurisdiction of 25% (then CFC do not apply) but it makes only sense if it is less trouble. Right now don't believe it is.

4. Yes, UAE would be one of the best options. Otherwise, have fun with your taxes.
Yeah kind of crazy that this is the only option. Just to far away for me.

 

[KDX]

Yeah kind of crazy that this is the only option. Just to far away for me.

Actually, Cyprus has a funny thing with capital gains being tax exempt for corporations, so that is also an option. And there's also Malta, etc. But most of the time you will have to move physically or you'll trigger the CFC/Permanent Establishment rules

 

[CyprusLaw]

Actually, Cyprus has a funny thing with capital gains being tax exempt for corporations, so that is also an option. And there's also Malta, etc. But most of the time you will have to move physically or you'll trigger the CFC/Permanent Establishment rules

Just to clarify a few things about Cyprus as what you are saying about capital gains taxes is inaccurate:

(a) CGT is only applicable for the sale of real estate or shares linked to ownership of real estate, so any other income falls under standard income and corporate tax rules.

(b) stock trading is exempt from income/corporate tax whether an individual or a company.

(c) Crypto trading at the moment does not fall under (b) above, therefore realised gains from crypto-trading is taxed under income/corporate tax.

 

[KDX]

Just to clarify a few things about Cyprus as what you are saying about capital gains taxes is inaccurate:

(a) CGT is only applicable for the sale of real estate or shares linked to ownership of real estate, so any other income falls under standard income and corporate tax rules.

(b) stock trading is exempt from income/corporate tax whether an individual or a company.

(c) Crypto trading at the moment does not fall under (b) above, therefore realised gains from crypto-trading is taxed under income/corporate tax.

Great info, good to know!

 

[hlepic211]

Just to clarify a few things about Cyprus as what you are saying about capital gains taxes is inaccurate:

(a) CGT is only applicable for the sale of real estate or shares linked to ownership of real estate, so any other income falls under standard income and corporate tax rules.

(b) stock trading is exempt from income/corporate tax whether an individual or a company.

(c) Crypto trading at the moment does not fall under (b) above, therefore realised gains from crypto-trading is taxed under income/corporate tax.

Can you bypass this (make "c" look like "b") by having a stock and let's say crypto ETFs/ETPs portfolio combined? Platforms like Swissquote/IBKR have those instruments available.

 

[JackAlabama]

Thanks a lot for the answer.
2. Contact a tax lawyer if you think the authorities may be after you
Maybe it just regular practice. I think they are collecting some kind of provisional taxes (direct taxes) and asking for my net worth. Not sure how bad it would to not include crypto now and declare it later in the tax declaration (have time till end of 2022, but can't delay that provisional thing). Actually wanted to finish my German declaration first. Maybe they will take 80% so can't estimate my net worth yet.

3. It's not just about CFC but also management and control. if you are trading your crypto, you are the person behind the company and it will be a tax resident in Germany/Switzerland. So, not really.
Not sure about that. I'm algo is trading. There is clearly a lot of room for few people to take care of some parts of the algo. But yeah guess you are right in the end.
Was even thinking to open a company with a jurisdiction of 25% (then CFC do not apply) but it makes only sense if it is less trouble. Right now don't believe it is.

4. Yes, UAE would be one of the best options. Otherwise, have fun with your taxes.
Yeah kind of crazy that this is the only option. Just to far away for me.

UAE is not the only option. It is just the closest one and in similar time zone than Germany.

 

[denniz07]

UAE is not the only option. It is just the closest one and in similar time zone than Germany.

Which other options did you had in mind? For me the best option would be stay somehow close to Germany. Friend of mine went to Thailand. But that is really far away.
Actually I was thinking at the beginning to open a company in Gibraltar (then realized that it is hard because of German CFC rules). Not sure if Gibraltar is good for a private person. For companies I think it might be better then Zug.

By the way. Just realized Swiss has something like this: 'Einschätzung nach Ermessen'. Anyone experienced with that? So as I understand if you don't fill out anything, they will somehow estimate the income by themselves and send it to you. Is this a very bad idea?

 

[daxbr]

Just to clarify a few things about Cyprus as what you are saying about capital gains taxes is inaccurate:

(a) CGT is only applicable for the sale of real estate or shares linked to ownership of real estate, so any other income falls under standard income and corporate tax rules.

(b) stock trading is exempt from income/corporate tax whether an individual or a company.

(c) Crypto trading at the moment does not fall under (b) above, therefore realised gains from crypto-trading is taxed under income/corporate tax.

Do commodities and futures contracts traded at CME exchange fall under (b)?

 

[bubbledouble]

2. Contact a tax lawyer if you think the authorities may be after you

that's the best advise in our case. It sounds like you didn't care about your finances at all, that's the biggest mistake some can do. It's not the problem with Switzerland nor German, the problem starts with you and you are unorganized. Missing documents on the crypto is a huge problem these days.

You need to get some documents to proof the origin of your crypto.

 

[polonieth]

Leave Europe while you still can, and if you have enough cash, take your parents with you. It's going to be a long winter this year in Europe. Food shortages, heating shortages, rolling blackouts.

 

[denniz07]

Leave Europe while you still can, and if you have enough cash, take your parents with you. It's going to be a long winter this year in Europe. Food shortages, heating shortages, rolling blackouts.

Off topic guess. But yeah, I already told them, lets leave. But they kind of got attached to Germany. Although the alternatives are not always good. Europe has some benefits like good public transportation, and something like Asia is off the table because of cultural differences. Guess Europe will suffer you are right. I think even if the union splits up Germany will still be ok, because they still have some factories (even Tesla is there). Anyway, just curious, where would you go?

 

[Mr Gus]

Maybe have a look at eastern europe?

I believe Hungary just implemented a 15% income tax of crypto earnings, and you will only have to pay it when you if you convert crypto to fiat. Crypto to crypto is tax free.

 

[denniz07]

Guess don't want to relocate again. Guess money is not everything. Just hoping I can cash out without trouble. Still taxes are pending in Germany and for 2021 in Swiss.
Hoped for some solution without relocating. But of course 15% sounds better then 45% in Germany, although people are talking that there might be a regulation change.
I think the danger in Hungary may be that I would be classified not as an private actor anymore. Guess that this what could happen in Swiss (since I think a bit of trading is OK and completely tax free. But not sure about the regulation.

 

[JimBeam]

Let's talk numbers a bit:
How much did you make and you need to pay the taxes on that amount?
What's your best year and what's your worst one?
How much have you paid already in taxes and what will you have to pay in the future?

UAE is the best option.
You'll find a lot of german folks in Dubai and I know some Swiss guys that moved here just to trade crypto...

 

[neweraoffshore]

Your crypto tax became payable in Germany. Period. Leaving doesn't mean you can just pay your tax in another country. The guys telling you that you can just go to another country and cash out there are wrong... . I am ex-German btw.
If you want to sleep well pay the tax.
If you want to hide the profits there is a way, but it comes at a risk, however very very small and in my opinion worth it. Find an unrelated 3rd person who already is a tax resident in a country which is favorable for crypto profits. You relocate to a country which is favorable for foreign profits and managing foreign entities. Open a company in a favorable jurisdiction (USA and UAE are good). Send him the crypto, he pays out and funds the company by personal capital raise and you then pay out distributions to yourself step by step.
However, you also have to look at which exchanges you have your accounts and which traces you have in your ledger. If you just traded off-exchange or never verified or traded via non european exchanges then you should be good to go. If not you would also have to look into what your exchanges are reporting and make a decision based on this.

 

[GPT]

You are guessing a lot and saying that there is a lot you don’t want. Suck it up buttercup.

You will never find a solution with your negative attitude.

Switzerland -and you speak the freakin’ language- isn’t so bad in your case. What it comes across is that you just don’t want to grow up and be independent. Start dictating your life and owning up.

If you always travel, look at the amount of days. You might not even be a tax resident in Switzerland -regardless of living there officially- in the eyes of Germany.

 

[denniz07]

Let's talk numbers a bit:

How much did you make and you need to pay the taxes on that amount?
What's your best year and what's your worst one?
How much have you paid already in taxes and what will you have to pay in the future?

It is in the 6 figures for 2020 and it is in 7 figures in 2021
I relocated in the middle of 2021. According to my lawyer I'm taxable till the mid of 2021 in Germany. After that in Switzerland. Best year would be 2021 so far.

How much have you paid already in taxes and what will you have to pay in the future?

I did payed nothing yet. So that is the reason I'm getting a nervous a bit. Have to make the declaration for Germany till 31.07.22 (for all the past). Actually I wanted to make do it very clean with Germany. The reason is I'm planning coming back and that every bank/broker asks for the source of wealth. Then at least it would be possible to prove it. It doesn't make sense to have so much money in crypto. Just a bit pissed of Switzerland since they want already some numbers, which I can't provide until the declaration in Germany is finished.

Your crypto tax became payable in Germany. Period. Leaving doesn't mean you can just pay your tax in another country.

Exactly. I'm aware of it. Actually moved to Switzerland to protect future profits. But that might have been an error on my side.

If you want to hide the profits there is a way, but it comes at a risk, however very very small and in my opinion worth it.

I traded on a lot of exchanges. Most are outside of Europe. I think the risk of sharing data comes from the big ones like binance. So even If I do this kind of trick. Who knows if later the law would require to report large balances to European countries. Of course nobody knows. But if the chance is only 5%, I don't want to take it (jail time in Germany).

Switzerland -and you speak the freakin’ language- isn’t so bad in your case.
If you always travel, look at the amount of days. You might not even be a tax resident in Switzerland -regardless of living there officially- in the eyes of Germany.

According to the rules I would be resident in Switzerland. The alternative would be Germany (which isn't better). You just need 90 days to become taxable in Switzerland.
I'm not saying Switzerland is very bad. Just it also is kind of expensive. Like I think even 34% tax if you are classified as a trader. Still better then Germany, but not so much better and isn't worth the effort at the end.

 

[bastard]

Switzerland -and you speak the freakin’ language- isn’t so bad in your case. What it comes across is that you just don’t want to grow up and be independent. Start dictating your life and owning up.

sounds like a reasonable answer