Crypto dividends to personal bank account

[manwithtoupe]

Consider the following setup:

- A company pays a USDC dividend to a shareholder's personal wallet address.

- The shareholder deposits the USDC dividend to a personal account on a crypto exchange (Coinbase, Kraken, Bitstamp).

- The shareholder converts the USDC to EUR, and withdraws the EUR to his personal EMI account.

- The shareholder transfers the EUR from the personal EMI account to his personal bank account.

- At the end of the tax year, the shareholder declares the dividend on his personal tax statement, and pays full tax on it.

What are the weaknesses of this setup?

Are the funds likely to be frozen at any point in the chain?

What sort of documentation will each institution (crypto exchange, EMI, bank account) ask for?

Considering that all tax is paid legally, is this a viable setup in the long-term?

 

[Martin Everson]

Sounds fair enough‌

Any party in the chain can freeze funds dependent on their internal⁠ AML policy.

Depends on bank, EMI and exchange used.

Depends on your country or residence and treatment of crypto. Rules are︀ still evolving around crypto in some countries so long-term cannot be determined what will happen.︁

P.S There are many important variables you left out. Such as country incorporation, shareholder country︂ of residence, business activity of company, which banks or EMI you are using etc etc.︃ But local advice would be needed from where you are resident.

 

[Shlomo]

I am no expert, but having used a lot of different exchanges, EMI and banks,‌ I can also say that I believe the suggested setup could either be fine or‍ be totally impossible. It depends on so many different factors, and anywhere along the chain⁠ something might go amiss.

As mentioned, many things need to be considered, such as country⁤ incorporation, shareholder country of residence, business activity of company, which banks or EMI are used.⁣ I think in most scenarios, it will simply not work, and it would be better⁢ to have a much simpler setup.

 

[fanban]

we need more information to get accurate answers!

 

[seabreeze]

a) You need to︃ get squeaky clean with your whole setup. Are you SURE you're not committing some basic︄ mistake like creating a Permanent Establishment of your OffCo in your country of residence by︅ virtue of effectively managing the OffCo from your country of residence? Are you sure your︆ OffCo is not a CFC? Are you prepared to carry the burden of proof that︇ your setup has a legitimate purpose which is not tax minimization? Do you have a︈ real office, employees, accounting, balance sheets? Do you have board resolutions to open crypto exchange︉ accounts? Do you have contracts fully supporting all payments? Are you sure you are not︊ making some VAT evasion "mistakes" or failing to register as a regular business provider in︋ some countries etc etc?
You will just be begging for a tax audit if you︌ do what you intend. And this is what you'll need to provide off the bat,︍ more or less.

which brings us to the following in view of what you'll need︎

b) The whole document spiel where:
- Board declares dividends
- You query board to️ pay dividends "in kind"(what kind?) to wallet, timeframe, amount, fees etc.
- Board reviews your‌ query and agrees to it, suggests parameters of transaction
- Your formally agree
- Board‍ executes, informs you with chain info
- You provide a board with a receipt, relieving⁠ of duty
- accountant certified calculations on the day of the transaction with the transaction⁤ number in chain, FIAT value, assignment of fees, screenshot of transaction
- a recent apostilled⁣ certificate of incumbency + notarized ID copy

then

c) You will need two non-binding legal⁢ letters of opinion,
one from a practicing attorney at the OffCo jurisdiction stating that -︀ a) Distributions of dividends in kind is acceptable b) This is acceptable c) The OffCo,︁ business model and structure is legal and compliant in the OffCo jurisdiction d) How the︂ OffCo is not a shell but has operations where and how e) Something nice about︃ you.
one from a practicing attorney or tax advisor back home stating that a) This︄ receipt of dividends in kind exists in national legistlation / would be equivalent oris just︅ plain permissible in general b) The whole tax, structure is Tax compliant

d) You should︆ try to find a reliable EMI that accepts crypto and can credit to SEPA asap︇ and have their compliance accept this pile of ludicrous garbage. Try to keep the least︈ hoops possible. Of course there is no such thing as a reliable EMI that accepts︉ crypto so you'd want to keep your money there the least time possible and take︊ it to real banks from there. God forbid this is your primary source of income︋ because no bank in their right mind will even consider this unless it's generating 20k+︌ USD commissions p.a. . The second this hits compliance your money will become locked up︍ for weeks as your account is being closed at best and you'll also be getting︎ reported to the authorities at worst.

e) Calculate cost of being compliant (incl. potentially Permanent️ Establishment locally taxed in your country of residence...) + attorneys + "special case" EMI account‌ opening fees + OffCo fees and the kind of payment providers you'll need to deal‍ with to get this done. Balance this vs. just being locally tax compliant and accounting-smart.⁠