Tax Avoidance Possible legally with Bitcoin?

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

The only way to figure this out is indeed dependent on your home country. I can tell you quite exactly how it works for my country and no, you couldn't just leave my country with 10 Bitcoins and cash it out with zero tax somewhere else in some of the cases. It is very important to know whether you are declared a private or commercial entity when you obtained the Bitcoins. As both earning/mining is mostly deemed a commercial activity, it would not be possible to avoid taxation in my country unless you took care of the disjunction of the assets from your commercial sphere into your private sphere before, but that would entail taxation already.

It is a delicate topic where subpar consultants are poison to your tax strategies. But the bad thing is that top consultants cost loads of money. Though 10 Bitcoin should be still enough to cover the cost and keep some for yourself! Tongue

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

Capital gains tax only applies to bitcoin that you buy not the ones you earn.

Most attempts to circumvent the system will be caught by the IRS and will get you punished severely. They have shown us that they will even jail celeberties if they try to avoid paying taxes.

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Quote from: zasad@ on March 25, 2023, 02:30:02 PM

Quote from: pawel7777 on March 24, 2023, 05:20:17 PM

Quote from: zasad@ on March 24, 2023, 11:26:11 AM

How naive a person needs to be to hope that the tax office of another country will not notice the purchase of real estate by a foreign citizen and will not ask his source of financing.
Georgia is a very good country with a good climate, but in order to live there, you need to take into account many nuances. Therefore, I always advise legalizing income through a business in your country.

If they allow foreigners to purchase properties, then don't have any interest in checking how did they get the funds, as any taxes would be payable in other jurisdictions anyway, so nothing to gain for them.
Not to mention they don't have any authority to launch any routine investigations in foreign countries, so even if they asked you for the source of funds, they'd probably accept any answer. So not sure how do you imagine the process would look like? Do you think they'd auto-appoint a financial forensic investigator for every house sale?
Again, we're talking about purchasing with fiat with a fiat bank transfer from abroad.

Between the countries there are treaties on tax control. Nobody will prevent you from buying a house or other real estate, because you are making investments in the country.
And after the purchase, the tax office has several years or more to check the legality of your funds with which you bought the house.
If there is no such procedure today, this does not mean that next year it will be the same.

Fair enough, but was a bit puzzled when you called me "naive" for writing what you essentially wrote yourself: the country you're buying property in, is unlikely to prevent you from doing that as you're pumping money into their economy. If anyone was to launch any investigation, usually some sort of red flag would have to be triggered and I'm guessing the country doing the investigation would most likely to be a country of your tax residence.

Quote from: royalfestus on March 25, 2023, 02:42:13 PM

In many countries, there are tax treaties that prevent double taxation, which means that, depending on the details of the tax treaty, someone who earns income in one country but resides in another country may still be required to pay taxes in both countries.

Preventing double taxation would mean you'd only be taxed by one country (in regard to personal income tax), e.g. your country of tax residency could let you deduct any taxes paid on your property owned in a foreign country.

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The OP did not mention where he is from due to the fact that tax laws differ by country, and non-residents may still be required to pay taxes on income earned foreign land even if they are not residents. In many countries, there are tax treaties that prevent double taxation, which means that, depending on the details of the tax treaty, someone who earns income in one country but resides in another country may still be required to pay taxes in both countries.

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Quote from: pawel7777 on March 24, 2023, 05:20:17 PM

Quote from: zasad@ on March 24, 2023, 11:26:11 AM

How naive a person needs to be to hope that the tax office of another country will not notice the purchase of real estate by a foreign citizen and will not ask his source of financing.
Georgia is a very good country with a good climate, but in order to live there, you need to take into account many nuances. Therefore, I always advise legalizing income through a business in your country.

If they allow foreigners to purchase properties, then don't have any interest in checking how did they get the funds, as any taxes would be payable in other jurisdictions anyway, so nothing to gain for them.
Not to mention they don't have any authority to launch any routine investigations in foreign countries, so even if they asked you for the source of funds, they'd probably accept any answer. So not sure how do you imagine the process would look like? Do you think they'd auto-appoint a financial forensic investigator for every house sale?
Again, we're talking about purchasing with fiat with a fiat bank transfer from abroad.

Between the countries there are treaties on tax control. Nobody will prevent you from buying a house or other real estate, because you are making investments in the country.
And after the purchase, the tax office has several years or more to check the legality of your funds with which you bought the house.
If there is no such procedure today, this does not mean that next year it will be the same.

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Quote from: zasad@ on March 24, 2023, 11:26:11 AM

How naive a person needs to be to hope that the tax office of another country will not notice the purchase of real estate by a foreign citizen and will not ask his source of financing.
Georgia is a very good country with a good climate, but in order to live there, you need to take into account many nuances. Therefore, I always advise legalizing income through a business in your country.

If they allow foreigners to purchase properties, then don't have any interest in checking how did they get the funds, as any taxes would be payable in other jurisdictions anyway, so nothing to gain for them.
Not to mention they don't have any authority to launch any routine investigations in foreign countries, so even if they asked you for the source of funds, they'd probably accept any answer. So not sure how do you imagine the process would look like? Do you think they'd auto-appoint a financial forensic investigator for every house sale?
Again, we're talking about purchasing with fiat with a fiat bank transfer from abroad.

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

Very much possible! But the amount of bitcoin needs to support your expenses in tax-free countries like Dubai. Also, each country has its own definition of tax systems so first find out how many days you have to spend abroad so that your own tax department considers you as a non-resident and doesn't impose taxes based on that tenure. In my country, a person needs to stay abroad for 180+ days to be considered a non-resident. So, find out that information for your country and plan accordingly.

Also, many tax-free countries will require you to furnish your income statement from businesses you are running there. Not for tax purposes but to stay compliant with the international anti-money laundering law. So make sure you have a real-world business to back up your numbers. If you get these things right, you are good!

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Quote from: pawel7777 on March 23, 2023, 05:44:23 PM

Quote from: zasad@ on March 23, 2023, 08:50:54 AM

Quote from: TraPole on March 23, 2023, 08:20:10 AM

Tax Avoidance Possible but in a few countries. Depends of your passport and residence too. For example Georgia - 0 fees on crypto income, but it can changed in any time. Passport - you should declare your income in your country of residence.

One of the option is: Come to the country where there are crypto exchanger (like Georgia - Tbilisi, i heard also there are a few in Turkey), send them crypto and get cash.

Anyway - the more totalitarian government (USA, EU for example in my opinion) you have the less chance to explain where did u get funds. The less "formed" government you have then easier to explain the source of income \ hide income

Even if you change the cryptocurrency in Georgia, it will not help you. If you want to buy real estate in Georgia, then the tax office may ask you for a source of financing.
The cash withdrawal limit from Georgia is no more than $10,000.
Cryptocurrency can be exchanged for cash without problems in most countries, but it is much more difficult to legalize income.

I don't think Georgian authorities would care that much about the source of your income when buying a house if you are not a tax resident in Georgia.

Like a Russian proverb: "Hope dies last" (C)
How naive a person needs to be to hope that the tax office of another country will not notice the purchase of real estate by a foreign citizen and will not ask his source of financing.
Georgia is a very good country with a good climate, but in order to live there, you need to take into account many nuances. Therefore, I always advise legalizing income through a business in your country.

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Quote from: zasad@ on March 23, 2023, 08:50:54 AM

Quote from: TraPole on March 23, 2023, 08:20:10 AM

Tax Avoidance Possible but in a few countries. Depends of your passport and residence too. For example Georgia - 0 fees on crypto income, but it can changed in any time. Passport - you should declare your income in your country of residence.

One of the option is: Come to the country where there are crypto exchanger (like Georgia - Tbilisi, i heard also there are a few in Turkey), send them crypto and get cash.

Anyway - the more totalitarian government (USA, EU for example in my opinion) you have the less chance to explain where did u get funds. The less "formed" government you have then easier to explain the source of income \ hide income

Even if you change the cryptocurrency in Georgia, it will not help you. If you want to buy real estate in Georgia, then the tax office may ask you for a source of financing.
The cash withdrawal limit from Georgia is no more than $10,000.
Cryptocurrency can be exchanged for cash without problems in most countries, but it is much more difficult to legalize income.

I don't think Georgian authorities would care that much about the source of your income when buying a house if you are not a tax resident in Georgia. Probably if you transferred money from a foreign bank account it wouldn't be a problem, but maybe it would raise some red flags if all the funding came from crypto exchange to fiat locally.
Nevertheless, traveling to countries like Georgia just to exchange bitcoins won't help at all in terms of tax liability, and could cause some problems as it'd look suspicious as hell.
The only solution would be to move to Georgia and stay there long enough to become a tax resident, assuming your home country won't double-tax you anyway. There are few countries, incl. US that tax their citizens even if they permanently live abroad.

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Quote from: TraPole on March 23, 2023, 08:20:10 AM

Tax Avoidance Possible but in a few countries. Depends of your passport and residence too. For example Georgia - 0 fees on crypto income, but it can changed in any time. Passport - you should declare your income in your country of residence.

One of the option is: Come to the country where there are crypto exchanger (like Georgia - Tbilisi, i heard also there are a few in Turkey), send them crypto and get cash.

Anyway - the more totalitarian government (USA, EU for example in my opinion) you have the less chance to explain where did u get funds. The less "formed" government you have then easier to explain the source of income \ hide income

Even if you change the cryptocurrency in Georgia, it will not help you. If you want to buy real estate in Georgia, then the tax office may ask you for a source of financing.
The cash withdrawal limit from Georgia is no more than $10,000.
Cryptocurrency can be exchanged for cash without problems in most countries, but it is much more difficult to legalize income.

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Tax Avoidance Possible but in a few countries. Depends of your passport and residence too. For example Georgia - 0 fees on crypto income, but it can changed in any time. Passport - you should declare your income in your country of residence.

One of the option is: Come to the country where there are crypto exchanger (like Georgia - Tbilisi, i heard also there are a few in Turkey), send them crypto and get cash.

Anyway - the more totalitarian government (USA, EU for example in my opinion) you have the less chance to explain where did u get funds. The less "formed" government you have then easier to explain the source of income \ hide income

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Quote from: virasog on March 20, 2023, 10:27:13 PM

Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

First, when you hide your money and do not declare it, it becomes a black money for you and it will hard to cash out (if it is in large amount) as the authorities will as for the source of that money.

As far as if he goes in Dubai (or any country which has no tax on bitcoin), cashes out, develop a business etc, that is ok but when he will move back to his won country he would have to pay his taxes on the amount which he currently holds as per his country law. There is no way you can escape from tax.

Secondly. is there no tax on bitcoin in Dubai and when you convert that bitcoin into fiat, won't the Dubai government charge tax or is there no tax on fiat money too Huh

That's strange by the way.

If you are an individual, then I have not heard about the tax when exchanging bitcoin for fiat. You can buy property there,
but maybe then the Dubai tax authorities will ask you about the source of the money.
If you are planning to legalize bitcoins through a business in Dubai, then first study the costs of starting a business in Dubai,
the cost of licenses and additional costs of living in this country.

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

Yes it's possible and completely legal but go through the laws of your own country to return money from zero tax country to your own cause some countries charges taxes or allows only certain percentage without fees. Well you can do that without moving to any country as well by using decentralised P2P platforms or finding someone who is trusted and can be traded in person in your country itself but I am not encouraging anything illegal or evading taxes.

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Quote from: virasog on March 20, 2023, 10:27:13 PM

First, when you hide your money and do not declare it, it becomes a black money for you and it will hard to cash out (if it is in large amount) as the authorities will as for the source of that money.

As far as if he goes in Dubai (or any country which has no tax on bitcoin), cashes out, develop a business etc, that is ok but when he will move back to his won country he would have to pay his taxes on the amount which he currently holds as per his country law. There is no way you can escape from tax.

Secondly. is there no tax on bitcoin in Dubai and when you convert that bitcoin into fiat, won't the Dubai government charge tax or is there no tax on fiat money too Huh

That's strange by the way.

The @OP is looking for a way to reduce taxation, not hide it and find a illegal way in order to not pay tax.

There's a way he can hide paying tax by creating a business in your country and the other one is on a country where it's tax free. Although you need to lie since you need to create a fake purchasing and selling evidence, so you can manipulate the financial report to set the maximum amount where you will not get taxed.

Maybe you still need to pay small amount money for money changer or tax, but it do greatly reduce paying tax.

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Quote from: virasog on March 20, 2023, 10:27:13 PM

As far as if he goes in Dubai (or any country which has no tax on bitcoin), cashes out, develop a business etc, that is ok but when he will move back to his won country he would have to pay his taxes on the amount which he currently holds as per his country law. There is no way you can escape from tax.

It depends on tax policy, again. My country exempts taxes for foreign income if the taxpayer has complied in the country where the income was earned. Assume that Dubai is completely tax free, at this point OP can make good excuses and some technical preparations that the 10 BTC was earned while in Dubai (eg moving 10BTC gradually to another wallet). cmiiw

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

First, when you hide your money and do not declare it, it becomes a black money for you and it will hard to cash out (if it is in large amount) as the authorities will as for the source of that money.

As far as if he goes in Dubai (or any country which has no tax on bitcoin), cashes out, develop a business etc, that is ok but when he will move back to his won country he would have to pay his taxes on the amount which he currently holds as per his country law. There is no way you can escape from tax.

Secondly. is there no tax on bitcoin in Dubai and when you convert that bitcoin into fiat, won't the Dubai government charge tax or is there no tax on fiat money too Huh

That's strange by the way.

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Quote from: FatFork on January 31, 2023, 10:45:46 AM

Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Is this possible?

Depending on the tax laws of the country you move to and the country you are leaving, you may or may not have to pay taxes in both countries. Some countries have tax agreements with each other to avoid double taxation, while others tax residents on their worldwide income. For example, if the country you are moving to has a tax agreement with the U.S., you may be exempt from paying taxes on your worldwide income. However, if you are moving to a country that does not have such an agreement with your home country, you may be required to pay taxes in both places. In some cases, this can lead to double taxation and result in higher taxes than what would have been due if you were only taxed once.

When in doubt about whether or not you have to file, consult an accountant or tax professional who is familiar with international taxes.

If you are a US resident Puerto Rico will be a good place to carry out this tax exemption plan. Puerto Rico has a policy of %100 tax exemption for capital gains. And this country could be cheaper than Dubai. But you still have to face some hurdles because one has to be a permanent resident to enjoy these exemption benefits. Purchasing a property in Puerto Rico might be the easiest means of becoming a bonafide residence. Depending on your location you kind find other countries that offer tax exemption policies based on the diplomatic relationship between your country and other nations.

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

I have friends who did this. There are no taxes on cryptocurrencies in Dubai, but there are many other nuances.
To open a company and get a license, you will have to spend 10-30 thousand dollars. This procedure takes 3-6 months or more. Renting an apartment in Dubai is 5-10 thousand dollars per month. You can live in a hostel with workers from India and other countries

it's cheaper there. Dubai is very expensive.
The cost of flights, accommodation, company registration, tax services, legal services will take you a very large part of your savings.
__
Dubai is considered a shadow tax zone for many countries, then you will have additional problems of legalizing your income in another country. Your 10 bitcoin idea is not worth the effort.

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

From what I've heard anecdotally, if you are or ever have been a US tax payer, the IRS will continue to hound you for a looong time, even if you change residence and become tax liable in another country.

That being said, if you're serious about tax optimization I'd recommend getting in touch with a professional tax advisor. As pointed out by FatFork, taxes, especially international taxes, can be very complicated, will vary from case by case and can come with a bunch of pitfalls that you don't want to fall into.

Quote from: Poker Player on February 01, 2023, 03:36:26 AM

I think this sums it up, correctly. Since I became interested in the subject I see that there are several forms of tax avoidance, legal as you rightly point out. One of the ones I have seen most mentioned is the creation and sale of NFTs. It seems that cryptocurrencies open a whole new world for tax avoidance, and I am surprised that it has not been discussed more in the forum.

I'm pretty sure that the tax games and money laundering (the real kind, not the kind of "money laundering" that Bitcoin has been accused of in the early days) that NFTs enable are an open secret at this point; with people just keeping their mouth shut about it for fear of normies and governments catching wind of the effectiveness and trying to combat it.

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Quote from: pawel7777 on January 31, 2023, 05:43:05 PM

First of all, tax avoidance is not illegal, tax evasion is.

To even have a slight chance of getting any valuable advice here, you'd have to be more specific and state what's your current tax residency and include more details on how you acquired those 10 bitcoins.

In vast majority of western countries, simply owning 10 bitcoins is not something you would have to declare at all. You would have to declare and pay tax on it when you exchange it for something (e.g. fiat, goods, and sometimes, but not always - other cryptos) and make a profit on that trade.

I think this sums it up, correctly. Since I became interested in the subject I see that there are several forms of tax avoidance, legal as you rightly point out. One of the ones I have seen most mentioned is the creation and sale of NFTs. It seems that cryptocurrencies open a whole new world for tax avoidance, and I am surprised that it has not been discussed more in the forum.

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

First of all, tax avoidance is not illegal, tax evasion is.

To even have a slight chance of getting any valuable advice here, you'd have to be more specific and state what's your current tax residency and include more details on how you acquired those 10 bitcoins.

In vast majority of western countries, simply owning 10 bitcoins is not something you would have to declare at all. You would have to declare and pay tax on it when you exchange it for something (e.g. fiat, goods, and sometimes, but not always - other cryptos) and make a profit on that trade.

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You also have to live somewhere for long enough to be able to not be liable for the tax. For income, a lot of countries agree you pay tax on where you lived for 6 months of the year (the US and a few others don't).

If you become wealthy quickly and then plan to return, expect an investigation. They're not going to let you get a lot of money without seeing if you've made a mistake they can claim against in most cases (it's a fairly reasonable procedure though considering you were trying to avoid paying it anyway).

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Is this possible?

Depending on the tax laws of the country you move to and the country you are leaving, you may or may not have to pay taxes in both countries. Some countries have tax agreements with each other to avoid double taxation, while others tax residents on their worldwide income. For example, if the country you are moving to has a tax agreement with the U.S., you may be exempt from paying taxes on your worldwide income. However, if you are moving to a country that does not have such an agreement with your home country, you may be required to pay taxes in both places. In some cases, this can lead to double taxation and result in higher taxes than what would have been due if you were only taxed once.

When in doubt about whether or not you have to file, consult an accountant or tax professional who is familiar with international taxes.

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Quote from: NinjaBitcoiner on January 31, 2023, 10:05:50 AM

Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

It’s very important to determine when do you acquire it. Is it before the tax law implementation or after because you will be in trouble if you acquire after the law is implemented because a simple chainalysis on blockchain record will find out your laundering in the future especially if you became an instant millionaire.

Your plan is good if your Bitcoin doesn’t come for any centralized exchange. Your only problem will be explaining to IRS on how you get your capital for your company that funded by your 10BTC since everything will be documented when came back to the US. I think it’s better to live on 3rd world country and use your money there instead on returning back to US.

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Say if someone owns 10 Bitcoins which is not declared and government doesn't know about it (earned/mined etc but did not buy) and now that someone want to avoid paying tax on cashing it out. Can he simply move to countries where there is 0 tax like (UAE) specifically dubai and setup a company there and cash out crypto over years in dubai bank account and later decide to move to his home country with all that money. Since dubai has 0 personal tax and his home country can't charge tax on it because of non-resident of home country. Is this possible?

Topic: Tax Avoidance Possible legally with Bitcoin? (Read 352 times)