Seychelles or Nevis for crypto trading?

[sujoe]

Hi, First post here, have been reading through a lot of articles, and can't seem to find the answer specific to my question. Any help would be useful. There's a similar article few days ago but seems like the choice of jurisdictions did not cover Seychelles and Nevis.

I'm a Malaysian Resident with a Labuan company that I use mainly for international trading agency. Due to new regulations on Labuan companies, I don't want to risk my side hustle (but getting bigger) of algorithmic crypto trading to trigger the 24% tax instead of the much coveted 3%. I also plan to register some trademarks and do some licensing on it, and IP royalties are certainly taxed at 24%.

My plan is to incorporate another 0% tax IBC in either Seychelles or Nevis to do crypto trading and IP licensing (or maybe other jurisdictions) using my Labuan entity as the shareholder so that the dividends repatriated are non-taxable. Bank account for Seychelles or Nevis company might not be the most important issue as I plan to use Advcash/Transferwise to coordinate the entry and exit of crypto purchase/sale. In the mid-stage I could possibly get a Swiss offshore bank account

My question is:

1) Is this setup viable?
2) Would you pick Seychelles or Nevis? Why or why not?
3) Any other jurisdictions that I could have missed? I need it to be hassle-free (no need for audit) and cheap (initial and annual fees), BVI and Cayman seems like a bit of an overkill for my use case as I'm not trying to setup a fund.
4) Privacy issue is not that important since dividends are repatriated to the Labuan company legally.

Regards
Sujoe

 

[John Andrews]

In which country will the IBC be tax resident in? Does Labuan/Malaysia have permanent establishment and/or CFC rules/laws?

 

[aquarius]

Malaysia has no CFC rules, just looked it up recently.

 

[Sols]

For what you describe, I'm not sure if there is any meaningful difference between Seychelles, Nevis, and other jurisdictions like them. Just be mindful of substance requirements.

As for viability, you should run it by a qualified tax adviser/lawyer to make sure your setup is solid.

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This is the probably the answer to your question.

 

[sujoe]

mange38 said:
In which country will the IBC be tax resident in? Does Labuan/Malaysia have permanent establishment and/or CFC rules/laws?
Click to expand...

There's no CFC rules in Malaysia/Labuan. The substance requirements that are a must (2 employees and place of business) will mean permanent establishment I believe

 

[khinkali]

One problem with an offshore company for algorithmic crypto trading seems to be availability of exchanges.

Seychelles and Nevis aren't supported by as many exchanges as UK, SG, EU, etc. I am looking at the same problem as I'm in Georgia.

 

[sujoe]

khinkali said:
One problem with an offshore company for algorithmic crypto trading seems to be availability of exchanges.

Seychelles and Nevis aren't supported by as many exchanges as UK, SG, EU, etc. I am looking at the same problem as I'm in Georgia.
Click to expand...

Binance supports Seychelles last i checked

 

[JohnLocke]

sujoe said:
Binance supports Seychelles last i checked
Click to expand...

Not bad if they will allow such activity.

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[Praetorian]

Kraken accepts Seychelles corps as well. Just don't bulls**t them with the KYC process and don't be a UBO from a high risk country.

Answer their questions in details during the application process and you should be approved without issues. They don't dig too deep but if you give them one liners to explain your business and don't tell them you plan on investing your own funds only, they might be hesitant to accept you.

Binance is a laundromat exchange, they just pretend to be compliant. Just don't be linked to actual fraudulent accounts/wallets and you'll be fine with a seychelles corp.

The biggest issue with this set up however is having a bank account to accept fiat payments. You're already walking on thin ice with an IBC from those countries, now add to that crypto and doing unlicensed trading activities and that might be the nail in the coffin for just about any bank you run into unless you're connected. I wouldn't solely bank on Transferwise as a gateway for crypto-related activities, sooner or later they'll catch up to you and will be asking a lot of questions.

 

[khinkali]

@sujoe I agree, Binance takes almost anybody, 🙂 Some exchanges are much more restrictive. Jurisdiction can open up (or close off) a lot of trading opportunities.

@Praetorian can't you just invest and withdraw crypto to and from the company, then convert profits to fiat as a natural person? Or is there a rule that IBCs can only receive investment and send dividends via fiat?

Some exchanges require a bank payment as part of KYC, so that could be a problem.

 

[sujoe]

Praetorian said:
Kraken accepts Seychelles corps as well. Just don't bulls**t them with the KYC process and don't be a UBO from a high risk country.

Answer their questions in details during the application process and you should be approved without issues. They don't dig too deep but if you give them one liners to explain your business and don't tell them you plan on investing your own funds only, they might be hesitant to accept you.

Binance is a laundromat exchange, they just pretend to be compliant. Just don't be linked to actual fraudulent accounts/wallets and you'll be fine with a seychelles corp.

The biggest issue with this set up however is having a bank account to accept fiat payments. You're already walking on thin ice with an IBC from those countries, now add to that crypto and doing unlicensed trading activities and that might be the nail in the coffin for just about any bank you run into unless you're connected. I wouldn't solely bank on Transferwise as a gateway for crypto-related activities, sooner or later they'll catch up to you and will be asking a lot of questions.
Click to expand...

@khinkali raised a good question, this is what I'm wondering as well, do we really need a bank account?

khinkali said:
@Praetorian can't you just invest and withdraw crypto to and from the company, then convert profits to fiat as a natural person? Or is there a rule that IBCs can only receive investment and send dividends via fiat?
Click to expand...

After researching more after posting this thread, I think an UK LLP is really interesting for my case, and if I get an EEA resident to be the other member, I'm told I can virtually open most of the banks, including HSBC (in-person visit required though).

Are they any crypto friendly EMI for European/UK companies? I don't mind settling for just an EMI for now.

 

[Praetorian]

khinkali said:
@sujoe I agree, Binance takes almost anybody, 🙂 Some exchanges are much more restrictive. Jurisdiction can open up (or close off) a lot of trading opportunities.

@Praetorian can't you just invest and withdraw crypto to and from the company, then convert profits to fiat as a natural person? Or is there a rule that IBCs can only receive investment and send dividends via fiat?

Some exchanges require a bank payment as part of KYC, so that could be a problem.
Click to expand...

For Kraken at least, you need a bank account in the name of the company to withdraw from your kraken corporate account. You cannot transfer funds between personal and business accounts as the exchange wants them kept separate to prevent smurfing/other money laundering risks. I tried transfering funds from my corporate account to my personal account and it was blocked immediately, they literally asked me to provide a bank account for the company in order to withdraw in fiat. That's why using an IBC is risky, mainly because very few banks will onboard you to receive crypto exchange withdrawals lol, and i doubt they'd be keen even if you had some form of crypto/forex license to legitimize your case.

 

[khinkali]

@Praetorian as far as I know on Kraken you don't need a bank account for KYC or to unlock limits, you only need it for fiat deposits and withdrawals.

Most exchanges don't need to verify a bank account if you deposit only crypto and withdraw only crypto. I've seen exchanges that do require a bank deposit for KYC, but it seems rare.

 

[Praetorian]

khinkali said:
@Praetorian as far as I know on Kraken you don't need a bank account for KYC or to unlock limits, you only need it for fiat deposits and withdrawals.

Most exchanges don't need to verify a bank account if you deposit only crypto and withdraw only crypto. I've seen exchanges that do require a bank deposit for KYC, but it seems rare.
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Yes, but if you have a corporate account and you want fiat withdrawals for that account, you need a bank account in the name of the entity. For anything else its not necessary. You dont need a bank deposit to verify the account however. KYC does not ask for banking info, since fiat is entirely optional.

 

[sujoe]

After thorough research, I am now settling on an UK LLP with the Labuan entity being the member of that LLP.

 

[nomad999]

sujoe said:
My plan is to incorporate another 0% tax IBC in either Seychelles or Nevis to do crypto trading and IP licensing (or maybe other jurisdictions) using my Labuan entity as the shareholder so that the dividends repatriated are non-taxable.
Click to expand...

anyone know if it's legal to pay dividend in that example above in crypto (BTC or any stablecoin) ?

 

[travelES]

sujoe said:
After thorough research, I am now settling on an UK LLP with the Labuan entity being the member of that LLP.
Click to expand...

May I ask why you went with a UK LLP?

 

[dirtyharry]

travelES said:
May I ask why you went with a UK LLP?
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I would like to know that to? But I have researched and found Seychelles to be very complicated to setup for this purpose if a license is a requirement.

 

[rentolfree]

nomad999 said:
anyone know if it's legal to pay dividend in that example above in crypto (BTC or any stablecoin) ?
Click to expand...

Hey all, I would also like to know this, if anyone can comment on.

Essentially to sum up, the idea is to set up an offshore in Seychelles, open a business account on Kraken in order to day trade crypto. The profits (and question) is if we can pay the dividends in the personal account with Crypto?

The way that I understand it, it does not matter what way the money was transferred (fiat or crypto) - not sure though on this.

For example, what if I have another institutional account on OKX or a web3 wallet to collect the profits, and through there pay myself dividends at the end of the year? - wondering by the way, can I also pay myself salary?

 

[wellington]

rentolfree said:
Hey all, I would also like to know this, if anyone can comment on.

Essentially to sum up, the idea is to set up an offshore in Seychelles, open a business account on Kraken in order to day trade crypto. The profits (and question) is if we can pay the dividends in the personal account with Crypto?

The way that I understand it, it does not matter what way the money was transferred (fiat or crypto) - not sure though on this.

For example, what if I have another institutional account on OKX or a web3 wallet to collect the profits, and through there pay myself dividends at the end of the year? - wondering by the way, can I also pay myself salary?
Click to expand...

Of-course it's legal (in many jurisdictions)

Just don't co-mingle funds (wallet wise).

Note based on a $ value [no unjust enrichment]

rentolfree said:
Hey all, I would also like to know this, if anyone can comment on.

Essentially to sum up, the idea is to set up an offshore in Seychelles, open a business account on Kraken in order to day trade crypto. The profits (and question) is if we can pay the dividends in the personal account with Crypto?

The way that I understand it, it does not matter what way the money was transferred (fiat or crypto) - not sure though on this.

For example, what if I have another institutional account on OKX or a web3 wallet to collect the profits, and through there pay myself dividends at the end of the year? - wondering by the way, can I also pay myself salary?
Click to expand...

FYI using a offshore company to trade will likely still result in basically paperwork, but no tax savings etc.

Last edited: Oct 5, 2023