Cyprus tax optimization for stock, crypto traders?
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When we say that capital gains from stocks are tax free, is there a distinction between
- investing and short term trading
- occasional trading and business like trading (organized, ongoing, frequent)?
For cryptos, trading through a company is an option (I assume income tax as natural person would otherwise apply for both investing and trading), but is it legal/does it require a license and is it now better accepted by banks? Are there strong compliance (aml, mifid, any other laws) constraints even for small companies?
- investing and short term trading
- occasional trading and business like trading (organized, ongoing, frequent)?
For cryptos, trading through a company is an option (I assume income tax as natural person would otherwise apply for both investing and trading), but is it legal/does it require a license and is it now better accepted by banks? Are there strong compliance (aml, mifid, any other laws) constraints even for small companies?
To begin with, in Cyprus capital gain taxes apply only on the gain from︀ the sale of immovable property or from the sale of shares connected to the ownership︁ of immovable property.
With respect to stock trading/investing, holding and selling, or occasional trading falls︂ under the ambit of capital gains and therefore exempt. Active trading would potentially be considered︃ as income and therefore be deemed as personal income (for the purposes of social insurance)︄ if trading on a physical person capacity, or corporate tax if trading through a company.︅
Whether or not the frequency of trading would lead to the income being deemed as︆ taxable the badges of trade would be sued to determine this.
With respect to crypto,︇ my position from the beginning was that income from crypto when actively trading is taxable,︈ a lot of other lawyers or accountants had differing opinions, however, during the presentation of︉ the tax reform, even though the precise manner was not presented, crypto taxation was briefly︊ addressed mentioning that if it is active trading then it would be taxed as income,︋ otherwise it would be deemed as a capital gain and therefore non taxable. As Cyprus︌ will not re-invent the wheel, most probably they will implement similar concepts as in other︍ jurisdictions, for example, holding over 1 year would make it non-taxable, while selling before that︎ it would make it taxable.
Additionally, it was implied that due to the difficulties in️ monitoring conversion to FIAT will be the trigger.
With respect to stock trading/investing, holding and selling, or occasional trading falls︂ under the ambit of capital gains and therefore exempt. Active trading would potentially be considered︃ as income and therefore be deemed as personal income (for the purposes of social insurance)︄ if trading on a physical person capacity, or corporate tax if trading through a company.︅
Whether or not the frequency of trading would lead to the income being deemed as︆ taxable the badges of trade would be sued to determine this.
With respect to crypto,︇ my position from the beginning was that income from crypto when actively trading is taxable,︈ a lot of other lawyers or accountants had differing opinions, however, during the presentation of︉ the tax reform, even though the precise manner was not presented, crypto taxation was briefly︊ addressed mentioning that if it is active trading then it would be taxed as income,︋ otherwise it would be deemed as a capital gain and therefore non taxable. As Cyprus︌ will not re-invent the wheel, most probably they will implement similar concepts as in other︍ jurisdictions, for example, holding over 1 year would make it non-taxable, while selling before that︎ it would make it taxable.
Additionally, it was implied that due to the difficulties in️ monitoring conversion to FIAT will be the trigger.
Thank you for this insight, really helpful. In your︊ opinion - if an individual trades stocks/ETFs frequently throughout the year, say makes 2-3 trades︋ each week, however he only sells stocks/ETFs after holding for at least a year, would︌ this be considered exempt from individual income tax? it is active trading on one hand,︍ but a one year holding period on the other hand.
Thank you for this very good overview.
As a︊ complement to this for the interested reader, please find here below a good article on︋ the topic just found right now, incl. a description of the badges of trades (assessment︌ to be performed by the tax department or a judge)
https://www.chambersandco.com/crypt...s Income Tax Office,Frequency of︍ transactions
As a︊ complement to this for the interested reader, please find here below a good article on︋ the topic just found right now, incl. a description of the badges of trades (assessment︌ to be performed by the tax department or a judge)
https://www.chambersandco.com/crypt...s Income Tax Office,Frequency of︍ transactions
Just to clarify something which I believe maybe I was not clear above, in terms of taxation, trading any type of securities that falls under the exemption afforded by the income tax law would be non-taxable.︀ However, actively trading could potentially make you liable to social security (if traded on a︁ personal level).
On the other hand, with respect to trading cryptos it appears that it︂ will be treated as explained above, i.e. either tax exempt if capital gain, or as︃ taxable income if actively trading.
On the other hand, with respect to trading cryptos it appears that it︂ will be treated as explained above, i.e. either tax exempt if capital gain, or as︃ taxable income if actively trading.
Great clarifications, thank you @CyprusLaw.
Is it still common in CY to have a BVI Trading company in combo with CY NonDom?
Back then knew several people who traded like that through their offshore BVI company.
If I remember well, one guy even had CY HoldCo with BVI TradeCo below and paid out dividends from BVI to CY tax free. Thats at least what he told me back then.
Now I think with the PE Rules this wont work anymore in combo with CY NonDom tax resident UBO I assume.
Is it still common in CY to have a BVI Trading company in combo with CY NonDom?
Back then knew several people who traded like that through their offshore BVI company.
If I remember well, one guy even had CY HoldCo with BVI TradeCo below and paid out dividends from BVI to CY tax free. Thats at least what he told me back then.
Now I think with the PE Rules this wont work anymore in combo with CY NonDom tax resident UBO I assume.
Member CyprusLawyer101 writes in another topic:
"If trading i.e. regularly transacting then only stcks should be exempted."
Different from member: CyprusLaw above.
Interesting to see that experts from Cyprus have a different views.
I am not sure where is the difference that you refer to, stocks are tax exempt.
First of all, I mentioned that with respect to trading cryptos it appears that it will be treated as explained above, i.e. either tax exempt if capital gain, or as taxable income if actively trading. So again only stocks have a flat exemption from tax. Both myself and CyprusLawyer︀ are saying the same thing.
Also, the post you are referring to is from August︁ 2024, at which point Cyprus tax authorities had given no guidance as to taxation. During︂ the tax reform presentation which took place a month ago the statement I have indicated︃ above was made with respect to the taxation of crypto.
First of all, I mentioned that with respect to trading cryptos it appears that it will be treated as explained above, i.e. either tax exempt if capital gain, or as taxable income if actively trading. So again only stocks have a flat exemption from tax. Both myself and CyprusLawyer︀ are saying the same thing.
Also, the post you are referring to is from August︁ 2024, at which point Cyprus tax authorities had given no guidance as to taxation. During︂ the tax reform presentation which took place a month ago the statement I have indicated︃ above was made with respect to the taxation of crypto.
You wrote above the underlined:
"With respect to stock trading/investing, holding and selling, or occasional trading falls under the ambit of capital gains and therefore exempt. Active trading would potentially be considered as income and therefore be deemed as personal income"
"With respect to stock trading/investing, holding and selling, or occasional trading falls under the ambit of capital gains and therefore exempt. Active trading would potentially be considered as income and therefore be deemed as personal income"
I had clarified in the following post that my reference related to the potential imposition of social insurance, not tax. Stocks are non taxable, whether actively trading or as capital gains. But if actively trading they could have social insurance implications. Crypto on the other hand will not be like this. My initial post was not very clear and it would not let me edit it for some reason so I made a︀ new post clarifying this. I am setting out below again the post I had made︁ previously clarifying the matter:
"Just to clarify something which I believe maybe I was not︂ clear above, in terms of taxation, trading any type of securities that falls under the︃ exemption afforded by the income tax law would be non-taxable. However, actively trading could potentially︄ make you liable to social security (if traded on a personal level).
On the other︅ hand, with respect to trading cryptos it appears that it will be treated as explained︆ above, i.e. either tax exempt if capital gain, or as taxable income if actively trading."︇
"Just to clarify something which I believe maybe I was not︂ clear above, in terms of taxation, trading any type of securities that falls under the︃ exemption afforded by the income tax law would be non-taxable. However, actively trading could potentially︄ make you liable to social security (if traded on a personal level).
On the other︅ hand, with respect to trading cryptos it appears that it will be treated as explained︆ above, i.e. either tax exempt if capital gain, or as taxable income if actively trading."︇
Any updates on this?
And also, what qualifies︆ "crypto trading"?
If long term holds are sold in batches, that shouldn't be a "trade",︇ but selling of capital, correct?
Let's say, if nothing is bought, just crypto sold for︈ fiat via batches, but not back and forth.
Same way you would sell a stock︉ in batches when needing money.
And also, what qualifies︆ "crypto trading"?
If long term holds are sold in batches, that shouldn't be a "trade",︇ but selling of capital, correct?
Let's say, if nothing is bought, just crypto sold for︈ fiat via batches, but not back and forth.
Same way you would sell a stock︉ in batches when needing money.
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