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Short tax residency options

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@Cyprustr

so what is your planned⁣ setup, if I may ask
could you wrap it for us here, one could get⁢ lost on the current state of things
- crypto trading as a natural person, main︀ source of income
- social contributions required
- expected taxation
- are crypto‘s considered as︁ stocks by the revenue service of CY or have no classification as they don’t fit︂ the stocks/bonds etc definition
 
Just on the last point, stock trading is tax exempt on Cyprus, this is provided⁢ for explicitly in the income tax law. Cryptos are not included ans as things stand︀ will not be included in this exception. The curewnt treatment is that they are taxed︁ as income, noting however that the tax trigger is the conversion to FIAT
 
It sounds⁠ like you're talking about trading in the sense of goods trading as is typical in⁤ most countries outside of US. If you're trading any physical goods or providing certain services⁣ then you fall into this category.
Investment gains, whether it's short term as trading or⁢ long term investing, don't fall into this category. How is buying and selling securities under︀ my own name a business, it doesn't become a business arbitrarily based on frequency (again,︁ outside of US).
 
This has been confirmed by⁢ the SC department and I would urge you to speak with them. If your sole︀ income derives from trading and you live in Cyprus then I find it reasonable that︁ it would be considered as a business.

In any event stock trading is tax exempt︂ so any sc or ghs obligations are still minimum compared to other jurisdictions.

Please note︃ that the tax dept has issued a circular which clarifies that when you have passive︄ income from stocks, interest, rent you may have an obligation for audited accounts as an︅ indicidual (if this income if over Euro 70,000) in the event that such income is︆ deemed to be a business and not passive.
 
In other jurisdictions at least, you won't be categorized as a business if⁠ you're not juridical person and don't identify as a physical person acting as an entrepreneur,⁤ this classification is not applied automatically onto anyone. Granted, Cyprus can be different.

With Social Insurance at 15.6% + GESY 2.65% we're at 18.25%.︄ Note: GESY website also specifies that "self-employed" pay 4% instead of 2.65%. Adding to that︅ the requirement of filing audited returns on a turnover of €70k (not profit) which is︆ achieved in a day for most, audit costs are easily in the tens of thousands︇ for an active investor. From this aspect, Cyprus loses attractiveness quite fast (total basis upwards︈ of 20%) as there are many better options even in EU. But both SI and︉ GESY are capped at €57k and €184k respectively. So when earning roughly €500k and up︊ annually, it starts to justify itself.

What did I miss?
 
1) Audit does not cost︃ as much as you think - unless of course you are using one of the︄ Big4

2) Hence why non doms are better off setting up a company if they︅ fall into the above category.

3) Please note that whether or not it would be︆ deemed a business is subjective and would depend on the circumstances, so it’s always best︇ to discuss with an advisor on a case by case basis.

Also, as it seems︈ their are differing opinions on this matter it is always better to get a signed︉ opinion by your advisor so that you have evidence that you relied on that in︊ case you do something wrong or something that is challenged in the end.
 
It starts to dawn on me why some recommend a BVI company + residency in‌ Cyprus. Receiving dividends a few times a year (or less) is unlikely to be classified‍ as being self-employed. Still liable for GESY and anything upwards of €70k needs an audit⁠ but that is a simpler audit as it's only a few dividend payments vs. potentially⁤ thousands of trades.
 
If you are getting dividend it’s completely⁣ passive so the situations where it will be deemed a business it will be very⁢ rare, and very unlikely to be honest. Even though the tax circular is clarifying this︀ as mentioned above I have never seen this in practice
 
currency swaps including FIATs are taxable.
Crypto - stablecoins - crypto are impossible to track‌ down
In such case intraday trading is non taxable, if fiats are not involved,

Regular profits required to cover daily expenses travel through revolut account or other EMI where they‍ remain semi invisible
Am I missing something?
 
It depends if⁤ you want to be legit / near-legit or dark. I personally would never go dark,⁣ it can come back to you at any point.
 
this sounds fantastic !! i need this letter too hehe

I would love to consult with this accountant if you would be so kind to send︂ over his/her contact info. My email is [email protected]
 
Which are the alternative options that are good︄ in EU- if you can let know it will be very helpful.

How much does audit cost annually??
 
It would be interesting to︅ get the criteria the tax office / courts apply to evaluate if sb is private︆ or business. In Bulgaria, for example, everything above 2 trades anually seems being considered business.︇ Rather simple, but although many accountants don't know.
 
I consider myself an investor, a private person, but not a professional‍ trader. With let's say 2 sales transactions per year and no other income - is⁠ there the risk that Cyprus' tax office may deem me being professional + liable to⁤ pay social fees?
 
So if i am trading 10-20 times a year then i am‍ considered a full time trader and i cant get the benefits of zero taxes on⁠ capital gains if i am trading through a company??
 
Just to clarify, at⁠ least for Cyprus:

(a) Capital Gains are only imposed on the sale of real estate⁤ or shares connected to real estate.

(b) Cryptocurrency trading falls under the normal income tax⁣ rules, so at the moment your income is taxed.

(c) The discussion for the badges⁢ of trade above related to whether or not as an individual you would be deemed︀ to be a professional and therefore having to pay social insurance contributions.

(d) If you︁ are doing the trading under a company then you only have 12.5% corp tax and︂ no social insurance.

Generally for the badges of trade, it is based on common law︃ and there are a number of considerations to be taken into account, namely:

  • profit seeking︄ motive
  • the number of transactions
  • the nature of the asset
  • existence of similar trading transactions︅ or interests
  • changes to the asset
  • the way the sale was carried out
  • the source︆ of finance
  • interval of time between purchase and sale
  • method of acquisition.
Therefore each case︇ has to be considered in its own merits.
 
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