Short tax residency options

[mrb]

So it seems here everybody has a different confirmation letter.

Personally I don't trust you, first because you see your business in danger. And second because If you have had that confirmation letter before you would have said that in the previous messages to shut us up.

My recommendation for everybody is that you get your own confirmation letter and that don't trust anybody.

@Cyprustr

so what is your planned setup, if I may ask
could you wrap it for us here, one could get lost on the current state of things
- crypto trading as a natural person, main source of income
- social contributions required
- expected taxation
- are crypto‘s considered as stocks by the revenue service of CY or have no classification as they don’t fit the stocks/bonds etc definition

 

[CyprusLaw]

@Cyprustr

so what is your planned setup, if I may ask
could you wrap it for us here, one could get lost on the current state of things
- crypto trading as a natural person, main source of income
- social contributions required
- expected taxation
- are crypto‘s considered as stocks by the revenue service of CY or have no classification as they don’t fit the stocks/bonds etc definition

Just on the last point, stock trading is tax exempt on Cyprus, this is provided for explicitly in the income tax law. Cryptos are not included ans as things stand will not be included in this exception. The curewnt treatment is that they are taxed as income, noting however that the tax trigger is the conversion to FIAT

 

[complex]

We actually have an official confirmation from the Social Security Department about this, so it is not ‘my opinion’. If you are trading for business purposes you are running a business and you should be paying social security.

It sounds like you're talking about trading in the sense of goods trading as is typical in most countries outside of US. If you're trading any physical goods or providing certain services then you fall into this category.
Investment gains, whether it's short term as trading or long term investing, don't fall into this category. How is buying and selling securities under my own name a business, it doesn't become a business arbitrarily based on frequency (again, outside of US).

 

[CyprusLaw]

It sounds like you're talking about trading in the sense of goods trading as is typical in most countries outside of US. If you're trading any physical goods or providing certain services then you fall into this category.
Investment gains, whether it's short term as trading or long term investing, don't fall into this category. How is buying and selling securities under my own name a business, it doesn't become a business arbitrarily based on frequency (again, outside of US).

This has been confirmed by the SC department and I would urge you to speak with them. If your sole income derives from trading and you live in Cyprus then I find it reasonable that it would be considered as a business.

In any event stock trading is tax exempt so any sc or ghs obligations are still minimum compared to other jurisdictions.

Please note that the tax dept has issued a circular which clarifies that when you have passive income from stocks, interest, rent you may have an obligation for audited accounts as an indicidual (if this income if over Euro 70,000) in the event that such income is deemed to be a business and not passive.

 

[complex]

Which "Many brokers"???
Can you name few??

Most of the International broker accepting UAE resident.
I thought UAE is best for Trader.

Thanks.

Interactive Brokers for one and that's a big one.

 

[complex]

This has been confirmed by the SC department and I would urge you to speak with them. If your sole income derives from trading and you live in Cyprus then I find it reasonable that it would be considered as a business.

In other jurisdictions at least, you won't be categorized as a business if you're not juridical person and don't identify as a physical person acting as an entrepreneur, this classification is not applied automatically onto anyone. Granted, Cyprus can be different.

In any event stock trading is tax exempt so any sc or ghs obligations are still minimum compared to other jurisdictions.

Please note that the tax dept has issued a circular which clarifies that when you have passive income from stocks, interest, rent you may have an obligation for audited accounts as an indicidual (if this income if over Euro 70,000) in the event that such income is deemed to be a business and not passive.

With Social Insurance at 15.6% + GESY 2.65% we're at 18.25%. Note: GESY website also specifies that "self-employed" pay 4% instead of 2.65%. Adding to that the requirement of filing audited returns on a turnover of €70k (not profit) which is achieved in a day for most, audit costs are easily in the tens of thousands for an active investor. From this aspect, Cyprus loses attractiveness quite fast (total basis upwards of 20%) as there are many better options even in EU. But both SI and GESY are capped at €57k and €184k respectively. So when earning roughly €500k and up annually, it starts to justify itself.

What did I miss?

 

[CyprusLaw]

In other jurisdictions at least, you won't be categorized as a business if you're not juridical person and don't identify as a physical person acting as an entrepreneur, this classification is not applied automatically onto anyone. Granted, Cyprus can be different.



With Social Insurance at 15.6% + GESY 2.96% we're at 18.56%. Adding to that the requirement of filing audited returns on a turnover of €70k (not profit) which is achieved in a day for most, audit costs are easily in the tens of thousands for an active investor. From this aspect, Cyprus loses attractiveness quite fast (total basis upwards of 20%) as there are many better options even in EU. But both SI and GESY are capped at €57k and €184k respectively. So when earning roughly €500k and up annually, it starts to justify itself.

What did I miss?

1) Audit does not cost as much as you think - unless of course you are using one of the Big4

2) Hence why non doms are better off setting up a company if they fall into the above category.

3) Please note that whether or not it would be deemed a business is subjective and would depend on the circumstances, so it’s always best to discuss with an advisor on a case by case basis.

Also, as it seems their are differing opinions on this matter it is always better to get a signed opinion by your advisor so that you have evidence that you relied on that in case you do something wrong or something that is challenged in the end.

 

[complex]

It starts to dawn on me why some recommend a BVI company + residency in Cyprus. Receiving dividends a few times a year (or less) is unlikely to be classified as being self-employed. Still liable for GESY and anything upwards of €70k needs an audit but that is a simpler audit as it's only a few dividend payments vs. potentially thousands of trades.

 

[CyprusLaw]

It starts to dawn on me why some recommend a BVI company + residency in Cyprus. Receiving dividends a few times a year (or less) is unlikely to be classified as being self-employed. Still liable for GESY and anything upwards of €70k needs an audit but that is a simpler audit as it's only a few dividend payments vs. potentially thousands of trades.

If you are getting dividend it’s completely passive so the situations where it will be deemed a business it will be very rare, and very unlikely to be honest. Even though the tax circular is clarifying this as mentioned above I have never seen this in practice

 

[mrb]

currency swaps including FIATs are taxable.
Crypto - stablecoins - crypto are impossible to track down
In such case intraday trading is non taxable, if fiats are not involved,

Regular profits required to cover daily expenses travel through revolut account or other EMI where they remain semi invisible
Am I missing something?

 

[backpacker]

In other jurisdictions at least, you won't be categorized as a business if you're not juridical person and don't identify as a physical person acting as an entrepreneur, this classification is not applied automatically onto anyone. Granted, Cyprus can be different.



With Social Insurance at 15.6% + GESY 2.65% we're at 18.25%. Note: GESY website also specifies that "self-employed" pay 4% instead of 2.65%. Adding to that the requirement of filing audited returns on a turnover of €70k (not profit) which is achieved in a day for most, audit costs are easily in the tens of thousands for an active investor. From this aspect, Cyprus loses attractiveness quite fast (total basis upwards of 20%) as there are many better options even in EU. But both SI and GESY are capped at €57k and €184k respectively. So when earning roughly €500k and up annually, it starts to justify itself.

What did I miss?

Do take note that under certain circumstances you will have to pay for GeSY without getting any benefits!
Read https://www.offshorecorptalk.com/th...eing-a-digital-nomad.33701/page-3#post-177273 (post #51) and https://www.offshorecorptalk.com/th...eing-a-digital-nomad.33701/page-4#post-184010 (post #71, #73, #74)

 

[complex]

currency swaps including FIATs are taxable.
Crypto - stablecoins - crypto are impossible to track down
In such case intraday trading is non taxable, if fiats are not involved,

Regular profits required to cover daily expenses travel through revolut account or other EMI where they remain semi invisible
Am I missing something?

It depends if you want to be legit / near-legit or dark. I personally would never go dark, it can come back to you at any point.

 

[chriseu]

I'm doing it. My tax accountant sent a binding consultation to know if I have to pay Social Insurance. Anyway before the binding consultation, I went to Social Insurance in Paphos and the director said that wanted to talk with my tax accountant, so he can explain my activity.

My tax accountant talked with the director and it was correct, I don't have to pay social insurance. But I also asked him to get a formal letter from Social Insurance to be protected in the future.

800 euros I payed for the letter haha But it will worth it.

this sounds fantastic !! i need this letter too hehe

If you want you can give me your email and I can give you the accountant. I don't wanna make spam here xd. I can't send private message here yet.

I would love to consult with this accountant if you would be so kind to send over his/her contact info. My email is [email protected]

 

[tomvan20]

I'm doing it. My tax accountant sent a binding consultation to know if I have to pay Social Insurance. Anyway before the binding consultation, I went to Social Insurance in Paphos and the director said that wanted to talk with my tax accountant, so he can explain my activity.

My tax accountant talked with the director and it was correct, I don't have to pay social insurance. But I also asked him to get a formal letter from Social Insurance to be protected in the future.

800 euros I payed for the letter haha But it will worth it.

Anyway I talked also with another accountant that they had already official confirmation saying that is not required to pay social Insurance.

Is there an update to this by now?

If somebody has any tips: tomvan20 at yahoo dot com

 

[fortunespeculator]

In other jurisdictions at least, you won't be categorized as a business if you're not juridical person and don't identify as a physical person acting as an entrepreneur, this classification is not applied automatically onto anyone. Granted, Cyprus can be different.



With Social Insurance at 15.6% + GESY 2.65% we're at 18.25%. Note: GESY website also specifies that "self-employed" pay 4% instead of 2.65%. Adding to that the requirement of filing audited returns on a turnover of €70k (not profit) which is achieved in a day for most, audit costs are easily in the tens of thousands for an active investor. From this aspect, Cyprus loses attractiveness quite fast (total basis upwards of 20%) as there are many better options even in EU. But both SI and GESY are capped at €57k and €184k respectively. So when earning roughly €500k and up annually, it starts to justify itself.

What did I miss?

Which are the alternative options that are good in EU- if you can let know it will be very helpful.

1) Audit does not cost as much as you think - unless of course you are using one of the Big4

2) Hence why non doms are better off setting up a company if they fall into the above category.

3) Please note that whether or not it would be deemed a business is subjective and would depend on the circumstances, so it’s always best to discuss with an advisor on a case by case basis.

Also, as it seems their are differing opinions on this matter it is always better to get a signed opinion by your advisor so that you have evidence that you relied on that in case you do something wrong or something that is challenged in the end.

How much does audit cost annually??

 

[mmlimb]

If you are getting dividend it’s completely passive so the situations where it will be deemed a business it will be very rare, and very unlikely to be honest. Even though the tax circular is clarifying this as mentioned above I have never seen this in practice

This has been confirmed by the SC department and I would urge you to speak with them. If your sole income derives from trading and you live in Cyprus then I find it reasonable that it would be considered as a business.

In any event stock trading is tax exempt so any sc or ghs obligations are still minimum compared to other jurisdictions.

Please note that the tax dept has issued a circular which clarifies that when you have passive income from stocks, interest, rent you may have an obligation for audited accounts as an indicidual (if this income if over Euro 70,000) in the event that such income is deemed to be a business and not passive.

It would be interesting to get the criteria the tax office / courts apply to evaluate if sb is private or business. In Bulgaria, for example, everything above 2 trades anually seems being considered business. Rather simple, but although many accountants don't know.

 

[CyprusLaw]

It would be interesting to get the criteria the tax office / courts apply to evaluate if sb is private or business. In Bulgaria, for example, everything above 2 trades anually seems being considered business. Rather simple, but although many accountants don't know.

The criteria is based on common law and specifically the batches of trade.

 

[mmlimb]

The criteria is based on common law and specifically the batches of trade.

I consider myself an investor, a private person, but not a professional trader. With let's say 2 sales transactions per year and no other income - is there the risk that Cyprus' tax office may deem me being professional + liable to pay social fees?

 

[fortunespeculator]

The criteria is based on common law and specifically the batches of trade.

So if i am trading 10-20 times a year then i am considered a full time trader and i cant get the benefits of zero taxes on capital gains if i am trading through a company??

 

[CyprusLaw]

So if i am trading 10-20 times a year then i am considered a full time trader and i cant get the benefits of zero taxes on capital gains if i am trading through a company??

Just to clarify, at least for Cyprus:

(a) Capital Gains are only imposed on the sale of real estate or shares connected to real estate.

(b) Cryptocurrency trading falls under the normal income tax rules, so at the moment your income is taxed.

(c) The discussion for the badges of trade above related to whether or not as an individual you would be deemed to be a professional and therefore having to pay social insurance contributions.

(d) If you are doing the trading under a company then you only have 12.5% corp tax and no social insurance.

Generally for the badges of trade, it is based on common law and there are a number of considerations to be taken into account, namely:

• profit seeking motive
• the number of transactions
• the nature of the asset
• existence of similar trading transactions or interests
• changes to the asset
• the way the sale was carried out
• the source of finance
• interval of time between purchase and sale
• method of acquisition.

Therefore each case has to be considered in its own merits.