Best Country for Trading (Tax efficiency)

@i am nobody : Butterball is 100% correct. Please show us the law / rule that states that even trading income is considered as capital gains considering the following:
  • you're a full time trader
  • you're using leverage
  • you make at least 15+ trades a month
  • 90% of the time you close your position on the same day
  • you're not employed (no other source of income)
If it's tax-free then I'll relocate to Amsterdam tomorrow (not kidding).
 
dw31583 said:
@i am nobody : Butterball is 100% correct. Please show us the law / rule that states that even trading income is considered as capital gains considering the following:
  • you're a full time trader
  • you're using leverage
  • you make at least 15+ trades a month
  • 90% of the time you close your position on the same day
  • you're not employed (no other source of income)
If it's tax-free then I'll relocate to Amsterdam tomorrow (not kidding).
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ALL income generated from box3 is taxed at 1.2%. Even if it is your only source of income. Frequency of trading and all you mentioned are not important. This was judged by the Hoge Raad (highest financial court), and was confirmed to me by the ministry of Finance.
Now before you move: a few weeks ago the government decided to replace this system. So you are too late. What the new taxation rules will be is not yet decided.

I asked explicitly: my only income is daytrading, I have no job how will I be taxed?
The answer is what you read here above. ALWAYS Box3, so 1.2%.

All this was confirmed by Price Waterhouse, but for safety reason we will ask a fiscal ruling. Just to be sure. But first wait the new taxation levels....

http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:PHR:2011:BQ2071
 
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Hi all,

I´am looking for a solution too, I´am a Portuguese citizen and tax resident and have family in Holland (was borne there and lived there until my 25 years).

I have I think a real solution for any one that is living in the EU.

I will explain how I come to the solution.
When in the summer of 2014 a big bank collapsed here in Portugal (BES) I was looking into there structure to see how they handled there business and one thing that I noticed was that they were using a Holding Company in Luxembourg, I then looked at other big companies and all of them are using Holding companies.

So why not look into the aspect of holding Companies so we can use the directive 90/435/CEE with the use of 0% withholding tax between mother and daughter companies?

I have been talking with a company based in Cyprus that is specialized in structuring this kind of structures using Cyprus or Malta, they come up with a solution for my situation.

Structure:

1. Malta Holding Company with me as the shareholder, hire nominee director and office in Malta so the company is tax resident in Malta,

2. Seychelles IBC with Malta Holding Company as 100% shareholder, nominee director and office in Seychelles so the company is tax resident there. This company will do all my trading activity with 0% tax, the dividend is going to Malta with 0% withholding tax because of trading activity in seychelles (if it was passive income a second layer was needed to get money into Malta without paying tax.

Now with this structure we can do 2 things:
1. I can buy property here in Portugal on behave of the Holding company or,
2. setup another company in Portugal with Malta Holding Company as the shareholder, money flow from Malta to Portugal - 10% withholding tax, Portuguese company can use the money to invest in properties.

So what do you think about the structure?

Another solution for me is going back to Holland and pay 1,2% but I like the weather here in Portugal:)
 
Saber said:
So what do you think about the structure?
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Where happens the REAL activity, the real trading? All this should happen in Seychelles. So the person who does all the trading has to be there physically. You wrote: This company will do all my trading activity. It is not a company that is doing the job it is a living person. That person should live there. You cannot trade from Portugal and pretend you don't.

But if you have enough profits to make this construction it is much easier to move to Monaco. And you can still live in Portugal without any problem. Monaco will cost you roughly 100K a year.
 
@Saber : The reasons why it cannot work in practice:
  1. If you're not the director and the director is not trading with the money then what he/she is actually doing?
  2. If he/she is the real director then why he/she is so under-paid compared to the profits you extract from the company?
  3. If he/she is the real director then why you're the signature on the companies' bank and brokerage accounts?
  4. Who has made the major decisions regarding these companies and where?
  5. Has your company any other source of income other than the trading income you generate?
  6. Who and where executes the trades?
  7. Have you attended to the board meetings? If yes where and why?
  8. Does the director has sufficient knowledge to make profit by trading financial instruments?
Explanation:
  1. Either you as the shareholder or the director has to prove that he/she actually controls the company and he/she makes the profit, not you.
  2. If his/her salary is $1-2k per year then why is it so low compared to the amount he/she declared to you as dividends? This is suspicious.
  3. If you're the only person who controls the companies' money then this shows that you're using a nominee director and you're the controlling person from the shadow.
  4. You have to prove that your nominee director made the investment decisions and he/she made all the decisions regarding your companies and those decisions has been made outside your country of residence.
  5. If the only source of income is the money you make by trading with the company's funds then what this company and the director actually does offshore?
  6. If you execute the trades then it's local sourced income, thus taxable for your companies.
  7. If you flown to Seychelles to attend to the board meetings each quarter then why did you go there as an employee?
  8. The director must have the knowledge to trade and invest with your companies' money. He/she must be able to prove this.
 
@i am nobody : Yes, correct :D

However I don't agree with the Monaco thing. So many people has been caught with this. They used to rent an apartment there but lived in another EU country but their phone, credit card, car usage and other factors like these revealed that they're not actually living in Monaco.
 
dw31583 said:
@i am nobody : Yes, correct :D

However I don't agree with the Monaco thing. So many people has been caught with this. They used to rent an apartment there but lived in another EU country but their phone, credit card, car usage and other factors like these revealed that they're not actually living in Monaco.
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You only have to be physically present in Monaco 3 months every year. So 9 months a year you can live somewhere else. For example on the Cote d'azur a few kilometers away from Monaco.
I know people who have no problems and I know people who do have problems. Each case is different because of the circumstances and the discipline to follow the rules that should be followed. For some professions it is not realistic to live in Monaco, but for trading that's not an issue. You can trade from anywhere.
 
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@i am nobody : Btw, I'm curious to your opinion about the following structure. I was thinking about this problem, about how to be able to claim that the trading income is foreign sourced.

  1. Create a trust in a zero tax jurisdiction like the Cayman Islands. You can be the settlor and the beneficiary as well but not the trustee.
  2. The trustee should be a reputable bank or trust management company (it's up to you).
  3. Setup a company in a typical zero tax jurisdiction like the Bahamas and the trust will be the shareholder and the director also, so the trustee will be the controlling person.
  4. Create a demo account with a broker you like with fake name, fake phone number, fake address, fake e-mail address.
  5. Open an account with a trade copy company that lets you copy traders with demo accounts (Zulutrade for instance but I don't know which lets you copy traders with demo accounts).
  6. When you create the trust, you should properly draft the trust deed and include that the trustee has to open a brokerage account with another broker of your choice and he/she has to open an account with that trade copy company and he/she must copy that specific trader only.
  7. Register for a VPN service and connect to your broker via VPN connection to hide your location and "trade" with your demo account.
  8. According to the trust deed the trustee is obligated to pay either a fixed amount to you each month or a percentage of the profits.
It's still not bullet-proof but it's something I consider fairly acceptable and almost impossible to argue with since you're not the director, you're not the signature on the bank and brokerage accounts and I think they won't be able to reveal the owner of the demo account.

The money you receive from the trust is taxable of course but not the entire money you make. For instance if you make $50k per month and the trustee pays you 20% then only the $10k you receive will be taxable in your country of residence.

Comments?
 
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