In recent years, a hundred individuals and companies have moved their tax residence to countries where cryptocurrencies enjoy reduced taxation.
Portugal, Andorra and Panama are highly sought after destinations, but those who wish to pay 0% tax on the sale of cryptocurrencies legally and without risk only have one alternative: the United Arab Emirates, and more specifically Dubai.
Why is Dubai the best place to sell cryptocurrencies?
Many investors have obtained great capital gains with cryptocurrencies in recent years, which logically implies going through the cashier and paying very high tax rates.
If you are one of them and aspire to bank part of your cryptoassets by getting rid of the voracity of Western tax agencies, you should know the option of Dubai, since this city in the United Arab Emirates offers great tax advantages to cryptoinvestors.
Dubai is known to have a 0% personal income tax. This means that if you are a tax resident in Dubai, no matter how much profit you make, you won't have to pay a single dollar on it.
What not everyone knows is that this full exemption also covers cryptocurrencies: whether you actively trade or loiter, you will enjoy 0% tax on gains derived from cryptocurrency activity.
This is completely unusual, as most tax authorities treat cryptocurrency gains with a capital gains tax.
In addition, the rest of the world usually requires extensive recording and tracking of their transactions, as well as exhaustive accounting (FIFO, LIFO, etc).
However, none of this is the case in Dubai.
How much tax is paid on cryptocurrency sales?
As we have said, in Dubai there is no personal income tax or law regulating it, and cryptocurrencies are exempt from taxation in its free zones since September 2021.
And this exemption covers any operation with cryptocurrencies: sale, staking, high-frequency or algorithmic trading, DeFi or farming, mining or sale of NFTs...
However, it should be noted that the cost of living in Dubai is considerable, so depending on the size of your assets, you may not want to relocate.
Generally, our users who want to relocate their residence to Dubai are:
-Crypto traders with earnings in excess of €300,000 per year.
-Large holders who want to make a cash out of cryptocurrencies above 500.000 €.
-Large holders who want to avoid tedious accounting. Large-scale farming and staking professionals.
-Top level NFT artists.
Do I have to live in Dubai to enjoy these benefits?
Indeed: to benefit from the beneficial Dubai tax regime, you must be a tax resident in one of Dubai's Free Trade Zones.
To become a tax resident in Dubai you must meet these two conditions:
1. Obtain an administrative residency through a Business Visa or through an investment in assets in the country (e.g. real estate).
2. Stay more than half of the year in order to be able to apply for a tax certification from the Emirati authorities or the corresponding consulates.
Until recently, the Emirati Ministry of Finance did not issue tax residency certificates. This meant that anyone moving there could not prove their tax residency, as the only certificate issued was that of nationality.
Fortunately, the Ministry of Finance now issues tax residency certificates to individuals who can prove that they have resided more than 183 days in Dubai during a tax year.
However, please note that many of these certificates are not for the purposes of the agreements signed between the Emirates and the countries of origin.
This is because they state that they only apply to Emirati nationals (not to non-resident non-nationals).
What other crypto advantages does residing in Dubai have?
One of the main problems encountered by those who operate with cryptocurrencies is calculating the profits derived from their sale.
Those who only "loiter" do not have this complication because they hardly make operations per year, but those who opt for "trading" or other activities with frequent transactions face real headaches.
This is because states often require accounting for profits via "First in First out" ("FIFO") analysis (pejorative for early adopters), "Last in First out" ("LIFO") or in accordance with IFRS-IRS accounting legislation.
Not to mention that those who do so through an investment fund will be governed by the strict MIFID II (even for a closed-end fund).
All these headaches disappear in Dubai: if you operate with cryptocurrencies on a personal level, in the UAE you will not be required to do any accounting or reporting, so you can forget about costly and difficult calculations.
However, if you bank or want to make a cash out, you will have to prove the traceability of the coins and their legal origin.
For this, we recommend consulting with experts and avoiding DeFi circuits or mixers that further muddy the traceability.
Dubai, the cryptofriendly city
If you are involved in the sector, you will know that many cryptocurrency conferences take place in Dubai and Abu Dhabi.
Not for nothing has the Emirati government boosted the presence of cryptoassets in the Persian Gulf country in recent years.
In fact, Sheikh Mohammed bin Rashid Al Maktoum recently approved the virtual assets law and created the Dubai Virtual Assets Regulatory Authority (VARA).
Since then, reputable banks with SEBA and Sygnum, and exchanges of the caliber of Binance have already set up shop in Dubai, so anyone moving to the emirate can be sure to find themselves in one of the most cryptofriendly environments in the world.
Can I buy cryptocurrencies in Dubai?
Yes, another great advantage is that in some "free trade zones" in Dubai and Abu Dhabi you are allowed to buy luxury cars and even real estate with cryptocurrencies, without the need to convert them to fiat.
Although this is not yet very common, you could get to use your own cryptocurrencies to buy a home for your Dubai stay.
