Cyprus crypto EUR cash out?

[JoeBlow]

What am I missing here with the following potential crypto sale? (assume Cyprus residency)

Step 1 - Sell crypto on Kraken
Step 2 - Send EURs from Kraken to German‌ Fidor Bank (individual account).
Step 3 - Forward at your leisure from Fidor Bank to‍ established Cyprus Bank account - funds aren't coming directly from an exchange thus shouldn't get⁠ blocked for the customary "internal bank policy" reasons.

Is this not possible? Tax implications?

Cheers

 

[CyprusLaw]

What amount are we talking about?

 

[tsu458]

Step 3 - CY bank might ask for source of funds documents, saying it's savings‌ might not be enough

Tax implications - up to 35% income tax on the cash‍ out

Althought you could think the cash out is realizing capital gains (there is no⁠ tax on capital gains in cyprus), lack of crypto regulation is the reason why 8/10⁤ accountants in cyprus will tell you, it won't be tax-free.

 

[CyprusLaw]

It all depends on the amount that will be cashed out. If the amount is⁢ over 10K or is an unusual amount for the line of business of usual transactions︀ of the client then most probably it will be flagged and they will carry out︁ a strict DD.

With respect to tax, again depends on the amount and general income︂ of the OP, but as you correctly mention it will be up to 35%.

We know that the tax department is preparing a circular and potentially an amendment to relevant︃ law in order to regulate cryptos, we are not certain yet what this regulation will︄ say.

 

[JoeBlow]

Lets says €100-200k per‌ month for several months. No need to cash out in a lump-sum.

 

[CyprusLaw]

This would never be accepted without Due diligence of the source of funds by a‌ Cyprus bank and once they realize the source of funds is crypto they will block‍ the account.

The main options are through an EMI in Cyprus or abroad. Or keeping⁠ it in foreign bank.

Another option would be to cash out through purchasing property using⁤ crypto.

 

[JoeBlow]

Why 35%. Is this the rate for trading activity︁ cap gain?

Also what if you are a resident of Cyprus and sell before any︂ relevant law comes into play? (assuming they don't do a claw back to date past)︃

 

[CyprusLaw]

The 35% is the max rate on the basis of income tax as an individual. However,⁠ having in mind the amount you mentioned I would suggest cashing out under a company⁤ with the corp tax rate being at 12.5%

At the moment as there is no⁣ framework the safest route is to consider yourself as being taxed under income tax law⁢ (or corp tax if a company). It is unlikely that any framework will have a︀ retrospective effect.

 

[JoeBlow]

I see.

I remember hearing somewhere that⁢ the new regulation should come in at 5 to 10% only. Have you heard the︀ same?

 

[tsu458]

You mention Fidor, so I assume you are considering moving from Germany to Cyprus -‌ great choice.

Here is the problem, you current gains might be tax-free already in germany,‍ if held for more than a year without staking and so on (if not, it⁠ should be 25% flat tax).

Now, if you move to cyprus, you are essentialy trapping⁤ yourself. Sell private, pay up to 35% income tax. Sell within a company and pay⁣ 12.5%. There is no option to have it tax-free, like in Germany.

Moving your crypto⁢ in a company seems to be the usual route, and won't trigger any income tax︀ it seems (or nobody is honest about that, I don't know).

 

[CyprusLaw]

At the moment the taxable event is the conversion to FIAT. So moving from︁ individual to company does not act as a trigger, however, this could change once a︂ framework is introduced.

 

[JoeBlow]

These are all great responses. Thx everyone.

No I am not from Germany, EU︁ citizen currently but not even living in EU today (no not in US either 😉)

I was also looking into opening a fund in Cyprus as a way to potentially︂ get the most favorable tax rates. I haven't gone deep into this but if anyone︃ has any input on this it would be appreciated.

 

[JohnLocke]

So you must‌ vote for the best, otherwise you have opened a false thread!

 

[manwithtoupe]

How does that work, if you pay yourself⁠ a dividend from your company directly in crypto?

Assuming the dividend is not converted to⁤ FIAT:

• Are the capital gains on the crypto taxed at the company level?
  
• Is the⁣ dividend taxed at the individual level?
  

 

[JoeBlow]

I don't understand - did I do sth wrong?

 

[spacenomad]

With Germany, do you just have to hold it in a coin for 1 year‌ and that's it? What if you were trading before that, had a bunch of different‍ wallets, and you purchased crypto years ago. Does only the last year count, or will⁠ they start digging into previous transactions?

 

[JoeBlow]

I still don't understand why there is a potential tax implication. At least today. I⁢ think the remaining 2 accountants are too conservative.

The law might change tomorrow but today︀ given the lack of a law governing how Cyprus views BTC , for example, as︁ either currency or property it stands to reason that there can't be a cap gain︂ tax associated with its sale, at least not today. If you where to pay tax︃ this would mean that Cyprus has already deemed BTC as property and this has yet︄ to be established. I am no lawyer but a "reasonable" person (I believe I am︅ a reasonable person) would come to this same conclusion given the current state of affairs︆ in Cyprus.

Also, Cyprus knows that this is going to be (is already) a very︇ completive space and to assess a tax of higher than 12.5% would prompt any larger︈ cash out to go the corporate route thus really harming the little guy more. They︉ also need to be competitive with the Germanys/Portugals etc. so I can't imagine them going︊ any higher than 12.5% cap gain when the relevant law kicks in.

So in conclusion︋ given what I have learned here today is that if there is no concrete law︌ to the contrary (and today there isn't) one should not offer to give tax payment︍ for such cap gain in Cyprus. JMHO. Also, and this is pure speculation, I also︎ believe when the laws are finally released that the tax rates will be 12.5% or️ less.

Thoughts?

 

[CyprusLaw]

Just to clarify the tax rates mentioned are︊ not capital gains tax, and there is no possibility that CGT will be implemented on︋ cryptos. The rates are income tax and corporate tax which is a completely different thing.︌ Any framewrok that will be introduced will not change the tax rates as this is︍ pretty much set. What will be affected is whether there will be a change in︎ the tax trigger

 

[JoeBlow]

So there will be no Cap Gains on crypto? Now I am confused.

Are you saying that crypto will be taxed at normal income rates and not on cap⁢ gains rates?

 

[CyprusLaw]

Exactly, in Cyprus capital gains only applies to immovable⁠ property and on shares which are held in company holding immovable property. So cgt has⁤ no application on crypto.