How To Move Crypto Offshore

We are often asked “How can I transfer ownership of my Cryptocurrency to my Offshore Company so that any gain or profit realized upon sale of the Cryptocurrency is booked Offshore ie in a nil tax environment?”



Certainly, in most, if not all, jurisdictions (if you are the owner of a quantity of Cryptocurrency) if you’ve bought Cryptocurrency cheaply then made a profit, upon converting that Cryptocurrency into Fiat currency CGT ie Capital Gains Tax (or Income tax or Corporate/Business tax) would apply.



In the perfect world, before you bought/acquired the Cryptocurrency, you would have formed a nil tax Offshore Company to own invest in said Cryptocurrency. That way if/when the Cryptocurrency is sold for or converted to Fiat currency no tax would be payable by the Company in the jurisdiction where it’s incorporated.



For many people that is not the case.



As at the time of writing a LOT of people (who own Cryptocurrency in their own names) are betting that the price of certain Cryptocurrencies are going to rise substantially in the short to medium term. In the perfect world, at the point in time if/when the Cryptocurrency value say has increased substantially (eg doubled in value) – and you decide to sell – that Cryptocurrency would be owned by a nil tax Offshore Company.



So how might you be able to shift ownership of that Cryptocurrency to a nil tax Offshore Company prior to said Cryptocurrency substantially increasing in value, without creating a taxable event (eg a disposal/taxable event for CGT purposes) along the way?



Here are a couple of possibilities:



Form a tax free Offshore Company (ideally with an “Offshore” Management/Ownership structure)
Open a Cryptocurrency wallet in the name of this Offshore Company
Negotiate/sign off on a loan agreement (or investment agreement) with the Company
Transfer Cryptocurrency held in your personal wallet to the Offshore Company’s Cryptocurrency wallet
When the Company converts the Crytocurrency to Fiat currency the Company pays interest on the loan (or an investment return as agree) to you personally
Presumably the interest or investment return would be significantly less than the profit generated by the Offshore Company upon selling the Cryptocurrency/converting it to Fiat currency
You would pay declare and pay tax locally on the interest payment/investment return
The remainder of the money could be banked or re-invested Offshore potentially tax free


NOTE: Whether the above strategy will work or not in your particular case depends on the laws of the jurisdiction in which you are based.






DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.