Cyprus is a very good option. AMLD5 has just been transposed into Cyprus law. Crypto Asset Service Providers will be registered (no license requirement) in a register set up by the regulator - the procedure will be simple and straightforward. No further regulation is expected until the implementation of MiCA around 2024 at the earliest. With to tax and vat I note the following: with respect to vat: The Court of Justice of the European Union (ECJ), in its Hedqvist decision, Case 264/14, explained that bitcoin represents a direct means of payment between the operators that accept it, therefore, the transaction concerning the exchange of bitcoin︀ for fiat currency may fall within the scope of the exemption under Article 135(1)(e) of︁ the EU VAT Directive 2006/112/EC, covering, inter alia, currency, bank notes and coins used as︂ legal tender. Hence, most EU countries including Cyprus have a joint consensus that the exchange︃ to or from virtual currencies is not subject to VAT. The same applies for using︄ virtual currencies to buy goods or services. Thus, no VAT should be charged on the︅ use of virtual currencies itself.
With respect to the taxation of cryptocurrencies these will fall︆ under the same tax principles as with any other business activities and a tax rate︇ of 12.5% will apply. This in fact the case as no legal definition was attributed︈ to cryptocurrencies in Cyprus Tax legislation. Thus no clarification exists whether cryptocurrencies are securities (“titles”),︉ currency or a digital asset. The accounting practice (IFRS) considers cryptocurrencies as either inventory or︊ intangible assets, and as the the tax practice usually follows the accounting practice, inventories/intangible assets︋ are part of the normal business operations which are taxed at 12.5%. Due to the︌ uncertainty it could be beneficial to seek an official tax ruling/opinion on the matter if︍ you decide to set up in Cyprus.
Finally, with respect to bank accounts, as things︎ stand banks do not open accounts to crypto asset service providers, this could potentially change️ very soon due to the implementation of AMLD5, however, even if it does not change there are a number of crypto-friendly EMIs in Cyprus for account opening.
