International cryptocurrency companies -and their owners- can operate in a way they do not pay taxes. Yet nobody seems to understand this.
In its most basic form, cryptocurrency is a decentralized digital currency.
If you want a slightly more complicated explanation, it is a peer-to-peer exchange of digital information through blockchain technology that allows for the purchase and sale of goods and services.
On December 16, 2017, Bitcoin reached its highest point yet of almost $19,200. However, since then it has fallen as low as $7,000 USD and — at the time of writing — currently sits just above $10,000 USD per Bitcoin with 16.9 million units in circulation.
You can use Bitcoin to buy products from over 100,000 merchants, including companies like Overstock.com, REEDS Jewelers, Dell, Expedia, PayPal, Microsoft, and even a private hospital in Poland. You can accept Bitcoin Payments for your store with a Bitcoin POS system, and you can even get paid in Bitcoin by certain websites for completing tasks. You can also always buy or exchange Bitcoins from individuals.
Best of all, Bitcoin is an international currency, which means that you do not need to deal with exchange rates and extra charges. And, while governments are now trying to regulate the disclosure and use of cryptocurrencies, they do not control them as they control fiat currencies.
By accepting payments in Bitcoin, businesses can avoid paying VAT or sales taxes. Considering that most local and federal taxes are based on a percentage of local currency, Bitcoin is not taxable in terms of value added taxes on certain goods. Finland and Belgium, for example, have exempted Bitcoin from VAT, choosing to treat it more like a commodity.
Cryptocurrencies are not without their challenges. The high price volatility, the susceptibility to hackers, and the transaction delays form part of the overall challenges. However, there are additional challenges for many who want to set up a crypto-based business that is conducive to low-tax, offshore strategies. The following are some of the most important ones you should take into account.
One of the first things you should consider if you hold most of your assets in cryptocurrencies is how you are going to convert those assets into cash.
You may be able to use Bitcoin with over 100,000 merchants, but chances are you will still need to make some purchases in regular fiat currencies, regulated by central banks like Euros or Dollars.
In regards to your overall offshore structure, setting up a cryptocurrency company in and of itself is not the issue. There are jurisdictions like Hong Kong, BVI, Bulgaria, and Estonia where it is quite simple to set up a company that uses cryptocurrencies.
The real challenge is finding a bank that will allow you to tie an account to a company that is involved with cryptocurrencies.
The simplest solution is – rather than convincing your current bank to let you participate in crypto activities – to find banks that already engage with companies involved in cryptocurrencies.
You will need to be careful how you represent your crypto business to any potential employees. You will need to be prepared to pay them in fiat currency instead of crypto as not everyone will be as willing as you to jump on the crypto train.
There is still quite a bit of confusion in many countries regarding how cryptocurrency should be categorized and taxed.
If it were up to most folks involved in cryptocurrency, Bitcoin and other crypto ownership would remain anonymous.
The way Bitcoin and other cryptocurrencies are designed, there are no account numbers, names, social security numbers, or any identifying features connected to your account. However, this has not stopped governments from insisting that you tell them about your crypto-holdings.
The challenge that makes Bitcoin so difficult is that it can be targeted by so many different types of tax. It could qualify for capital gains taxes, but it could also qualify for ordinary income if you are trading it, and if you run a business that involves Bitcoin, it could potentially qualify for business income tax as well.
2018 will be a year when Bitcoin starts to really show up on the radar of the IRS and other tax authorities in a bigger and bigger way. With second passport You can avoid some of the taxes.
Someone with $100,000 now can easily expect that amount to increase to $500,000 or even $1-2 million in the next six months and it would be a rather unfortunate situation if you had to pay tax on all of that.
So it is the time to get your cryptocurrency offshore. Move them out of your local exchange and into an offshore structure before governments shut the door on you. Investors in China have already been locked in and the same will happen in the United States, UK and EU soon enough. We all know what happened in China. The government first blocked ICOs. Then they closed all the exchanges. The coup de grace was when they restricted the travel of anyone who has been operating an exchange in China.
The most basic form of privacy and protection is an offshore company. You can form an international corporation or Limited Liability Company in a private and zero tax jurisdiction. Then open an international wallet under that structure.
This will protect your coins from seizure and allow you to keep your transactions private. Just like an international bank account, a wallet inside an offshore company provides excellent protection from future civil creditors and privacy in your transactions.
If you’re a large investor, or your coins have increased to over $1 million in value, you’ll want a max protect international trust. A foreign trust is much more secure than a standard company and gives you a number of tax and estate planning benefits.
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