Pitfalls with crypto taxation: situs of assets, and investor vs trader

[WorldCitizen99]

Crypto-assets are intangible assets, therefore authorities have difficulty determining their location for tax purposes.
It seems like it is mostly just the UK and Ireland that have provided specific rulings (I excluded the US from my search bc it isn't an option for me but if Ameribros want to chime in, please do)
The HMRC (UK) has ruled that the situs of the asset is the residency of the beneficial owner.
Ireland says the onus is on the owner to prove the location of the gain. In order to be exempt from tax under the non-dom regime, the location of the gain must be clearly outside of Ireland, so if it is located 'nowhere' as they claim many crypto-assets are, then it is not tax-exempt bc it doesn't fulfill the 'outside of Ireland' criteria.
This is a HUUUGE issue.
There might be many unsuspecting crypto investors located in territorial tax countries, or lump-sum/non-dom regimes, who will get a surprise tax bill bc the tax authority will rule in the same way as the UK/Ireland.
Some people have said that if you keep your assets on an exchange, then the domicile of the exchange is where the assets are located. There is a debate over whether the criteria for situs should be the location of the person/entity who holds the keys (the exchange) vs the location of the person to whom benefit will flow from disposal of the assets (the account holder)
I would like to hear from people who have some expertise on the subject.

The other pitfall is the issue of being an investor vs a trader.
You can be hodling your BTC for more than a year in your capital-gains-tax-exempt paradise and then bc you didn't fulfil the criteria, you end up with a 35+% tax bill bc it is classified as business income/trader income
e.g. Switzerland - one of the criteria is that your gains need to be less than 50% of your income.

It seems the safe thing to do is to locate yourself in a
*tax haven (for either PIT and CIT) - harder/more expensive to get residency in usually
*a place with low CGT/PIT/CIT - just find a place where you pay 10% regardless of whether it is CGT or PIT/CIT

Any thoughts?

 

[jafo]

W²SD = What Would Satoshi Do?

 

[YoungLansk]

W²SD = What Would Satoshi Do?

Hodl And Say Nothing.

 

[JackAlabama]

W²SD = What Would Satoshi Do?

a beautiful and simple question if one needs to decide

 

[SoNewToAllShit]

Many EU countries have tax regulations now a days for Crypto, they came after it quickly, guess why.

 

[Cloudbanck]

It seems the safe thing to do is to locate yourself in a
*tax haven (for either PIT and CIT) - harder/more expensive to get residency in usually
*a place with low CGT/PIT/CIT - just find a place where you pay 10% regardless of whether it is CGT or PIT/CIT

*most of Sub-Saharan Africa - not officially tax havens, easy to get residency, no personal tax returns and typically no personal capital gains tax, and nobody cares about foreign/crypto earnings of any sort anyway - some countries even have formal territorial tax. The informal sector is a large part of the economy.

 

[JackAlabama]

*most of Sub-Saharan Africa - not officially tax havens, easy to get residency, no personal tax returns and typically no personal capital gains tax, and nobody cares about foreign/crypto earnings of any sort anyway - some countries even have formal territorial tax. The informal sector is a large part of the economy.

which one of these are particularly good for getting residency?

 

[Cloudbanck]

Heard you can get residency in the Gambia the same day. And Namibia has an official digital nomad programme with not so strict requirements. Namibia also has a formal territorial tax, while most African countries just have a de facto territorial tax.

But otherwise, in almost any Sub-Saharan country it is possible to get residency one way or another with a bit of street smarts / contacts.

To take just one example, in one African country there are officially 3 and 6 months tourist visas. Talked to a friend who has a 1 year tourist visa, and says he renews it every year and doesnt even bother to get a residency permit. Never having heard of a 1 year visa, I asked how he got it, and he said: oh, just talk to the honorary consul for the African country in question in Copenhagen, he'll sort out the 1 year visa for you in no time.

Key determining factor will not be how easy it is to get residency, but which country you like spending time in.

 

[void]

Heard you can get residency in the Gambia the same day. And Namibia has an official digital nomad programme with not so strict requirements. Namibia also has a formal territorial tax, while most African countries just have a de facto territorial tax.

the real question is are these residencies not only easy to get but equally easy to maintain? practically speaking having a residency say in Gambia is useful but I have no desire to live there

 

[Cloudbanck]

The original question was where to locate oneself, in the context of selling crypto.

Paper residency is a different issue, but getting a paper residency while living in a high tax country and selling crypto will not help. And if you locate yourself in a tax haven or a place with low CGT/PIT/CIT as suggested, you dont need a paper residency.

But if you just travel around - is a paper residency from an African country an option? Yes, maybe:

Upsides:
-African countries are not treated as tax havens, so no problems with anti tax haven rules, and it's mostly diplomats/NGO workers that go to these countries, so absolutely no red flag from western tax agencies perspective.
-African countries typically dont have visit requirements to maintain residency
-Most African countries are not part of any information sharing agreements, and african governments basically just dont answer emails, so super difficult for a foreign authority to get any information at all.
-If you move your address to Africa for your existing accounts at western banks, exchanges and brokers, you usually get to keep the accounts, and having such accounts is great. They just go, oh this guy lives in this super weird country, eh ok, we cant report at all here.


Downsides:
-Unclear process to get and maintain residency, unknown wait times (but workaroundable with connections, local knowledge and well money)
-Nothing can be done online, you have to go there in person and deal with often difficult bureaucracy
-If you need a tax residency certificate, if they even know what you are talking about, it is not going to be a smooth process to get it, (but everything is possible with contacts/bribes)
-Cant open any bank or broker accounts with an african address (except local ones but they suck)
-Stuff like this happened to me once, and happens frequently: got approved for a 5 year residence permit for an African country, but the top dog at the agency responsible for issuing the cards just pocketed the money to print the cards. Took three years before I got the residency card, and during these three years I had to go in person to an office to get temporary 3 months residency papers.

In conclusion, ah if you dont actually enjoy spending some time Subsaharan Africa, better to get a paper residency in like Paraguay.

 

[JackAlabama]

Heard you can get residency in the Gambia the same day. And Namibia has an official digital nomad programme with not so strict requirements. Namibia also has a formal territorial tax, while most African countries just have a de facto territorial tax.

But otherwise, in almost any Sub-Saharan country it is possible to get residency one way or another with a bit of street smarts / contacts.

To take just one example, in one African country there are officially 3 and 6 months tourist visas. Talked to a friend who has a 1 year tourist visa, and says he renews it every year and doesnt even bother to get a residency permit. Never having heard of a 1 year visa, I asked how he got it, and he said: oh, just talk to the honorary consul for the African country in question in Copenhagen, he'll sort out the 1 year visa for you in no time.

Key determining factor will not be how easy it is to get residency, but which country you like spending time in.

good info, thanks

 

[wellington]

In Africa you open a private bank account - Nairobi has a few

 

[WorldCitizen99]

I was not expecting this thread to turn into a Sub-Saharan Africa paper residency thread.
I think that should be its own thread. It's an interesting idea to follow-up on but, realistically, most people on this forum are not going to go to low-HDI countries in Africa to solve their crypto tax problems.

Hodl And Say Nothing.

I like to be able to sleep at night. IMO you are much better off just paying taxes according to the law, or going to an outright tax haven, than trying to outsmart the authorities. It just taks one slip-up for them to find you. Look how they caught the Silk Road guy.

Poland has a flat-tax regime, and like Cyprus, you can get an advanced tax ruling.
Turkey apparently has reversed its decision to tax crypto profits, and will only tax transactions at a low rate.

Anyone know of any other countries (the usual ones people talk about on this forum) where advanced tax rulings or established legislation have ruled that the crypto situs does not follow the residency of the taxpayer?

 

[diro]

*most of Sub-Saharan Africa

what place there is safe for a white man or woman without bodyguards ?

 

[jafo]

Poland has a flat-tax regime, and like Cyprus, you can get an advanced tax ruling.
Turkey apparently has reversed its decision to tax crypto profits, and will only tax transactions at a low rate.

What else do you want? You have 3 options to help you sleep better at night, but you can only choose 1.

Also, your profile says you are from Mexico. Why are you worried about other jurisdictions?

 

[WorldCitizen99]

What else do you want? You have 3 options to help you sleep better at night, but you can only choose 1.

Also, your profile says you are from Mexico. Why are you worried about other jurisdictions?

Does it still say Mexico? I'll have to change it. I moved on from there.
I know gringos don't pay taxes there but I still think it's better to do things by the book - fewer future problems in our increasingly interconnected, digital, AI-surveilled, tax-info-sharing world.
Those 3 options - that's as much as I know about them. I haven't spoken to lawyers on the ground yet.
And the more options the merrier

 

[jafo]

but I still think it's better to do things by the book

Your beliefs are your reality based on your experiences, my friend.
Besides, once someone has a belief, it's almost impossible to make them see "another reality" unless they undergo massive pain & trauma.

Do what makes you happy and gives you peace, my dear.

Peace

 

[void]

what place there is safe for a white man or woman without bodyguards ?

not my personal experience but I have trusted references from people living and doing business in Namibia and Botswana... however nothing lasts forever

 

[WorldCitizen99]

Your beliefs are your reality based on your experiences, my friend.
Besides, once someone has a belief, it's almost impossible to make them see "another reality" unless they undergo massive pain & trauma.

Do what makes you happy and gives you peace, my dear.

Peace

You are absolutely correct, Sir although your response with your "my dear"s is a bit patronizing.
I should have phrased it "better for me"
Some of us are just cautious because we will do well even if we stay on the straight and narrow.
It is not a 'belief'or a refusal to do things in a slicker way. I don't require shock therapy causing a massive change in worldview. It is simply risk/benefit analysis based on my skills and knowledge. Everyone has only their experience to go by.

Are you here to share some actual knowledge, or just let us mere mortals know how pedestrian we are?

 

[JackAlabama]

I was not expecting this thread to turn into a Sub-Saharan Africa paper residency thread.
I think that should be its own thread. It's an interesting idea to follow-up on but, realistically, most people on this forum are not going to go to low-HDI countries in Africa to solve their crypto tax problems.

I like to be able to sleep at night. IMO you are much better off just paying taxes according to the law, or going to an outright tax haven, than trying to outsmart the authorities. It just taks one slip-up for them to find you. Look how they caught the Silk Road guy.

these cases cannot be compared to silk road.