How to evade tax on your cryptocurrencies’ capital gains
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Many cryptotraders look for solutions to not declare their cryptocurrencies’ capital gains for tax purposes. This is clearly fraud. It's 100% illegal! And you risk a lot. Much more than you could imagine!
The simplest and most risky solution because even your banker can report you. Not even mentioning your jealous friends.
Some banks have already hunted out cryptotraders. Any transfer to a cryptocurrency purchasing platform has already been detected by your bank, and the information is already in the hands of the tax authorities.
Reminder: Cryptocurrency taxation->for French residents all cryptocurrency accounts must be declared using Form n°3916 - (Declaration by a resident of an account opened outside France available on the tax site: Foreign Account Declaration Form).
Cryptocurrency transactions can be anonymous, some cryptotraders have evidently considered opening accounts abroad to deposit their cryptocurrency capital gains. The basic idea is to not repatriate capital gains to the original bank account.
A simple and doubly risky solution: hide the capital gains and do not declare the offshore account.
Reminder: for French residentsall foreign accounts must be declared using Form No. 3916 - (Declaration by a resident of an account opened outside France available on the tax site: Foreign Account Declaration Form)
Spending capital gains with a credit card does not make them less taxable. Cryptotraders are very likely to have better lifestyles and get caught. What attracts the tax authorities is that you're officially on the basic minimum wage but you drive a Porsche.
This solution is generally used for "small" frauds; cryptotraders only use the undeclared card for small everyday purchases.
If there is a tax audit, the transactions recorded using this card will be found and the fraud will be easily exposed.
The three solutions presented above are not illegal as long as everything is declared to the tax authorities; by that I mean it is not illegal to have an offshore account if it’s declared to the tax authorities; and there is nothing illegal about spending cryptocurrency capital gains using a credit card if the global capital gain is correctly declared for tax purposes.
But...
Don't try to be smart to evade taxes! If the tax authorities check up on you one day, they will look for all past transactions, on all cryptocurrency trading platforms, on all your accounts, on all your cards. And, with the slightest transaction that is impossible for you to justify, they will stop everything and tax you automatically. That's when the fraudulent cryptotraders start squealing! If so... "SQUEAL"! Because it doesn't matter if you have hidden €10, €10,000 or €1,000,000 from the tax authorities, they will apply a fine 10 times higher than the amount defrauded. Cryptotraders then have two solutions: pay the fine. Or find evidence for all the transactions. Good luck with that! It is no longer the tax department that runs around trying to find the evidence and supporting documents, it is the cryptotrader.
There is only 'capital gains' on cryptocurrencies when the cryptocurrencies are converted back into fiat currencies. So there is “a priori" no fraud in declaring capital gains on cryptocurrencies only from the date of expatriation.
Clearly, this is making a mockery of your country as the capital gains were generated while you were resident there. But if capital gains are only taxable from the day they are converted back into a fiat currency, then I don't really see the problem. NB: to be confirmed... Because the tax authorities are capable of telling us that the capital gains are also taxable in your previous country of residence.
This solution involves staying positioned in cryptocurrencies for a long time. No fiat currency withdrawal is possible as long as you are not an expat, otherwise tax is imposed. These cryptotraders are thus “latent” multi-millionaires, until the day they are expats and become real multi-millionaires. Hard to stomach with so many millions just out of reach that you can't use.
This solution also involves emigrating and leaving behind all your countries’ services (that you pay for). Think about it before you go headlong into becoming an expat. And this solution implies having recorded significant capital gains!
Let's imagine for a moment that you made €1,000,000 in cryptocurrency capital gains; two solutions are available to you:
1/ Stay where you are and receive only about €500,000 (depending on your country’s tax rates)
2/ Go abroad with €1,000,000. On condition also that the country you emigrate to does not impose cryptocurrency capital gains.
It's a complicated choice. Perhaps with just 1 million in capital gains, French people would still choose solution 1. But what if it’s 10 million in capital gains? Ha... Solution 2?
NB: with 1 million you could survive for a long time in Thailand; but in some other countries you would need a little more within reach.
Do you know of other fraudulent and unsavoury solutions? Share them with us on this discussion thread.
Solution 1: do not report anything on the tax form
The simplest and most risky solution because even your banker can report you. Not even mentioning your jealous friends.
Some banks have already hunted out cryptotraders. Any transfer to a cryptocurrency purchasing platform has already been detected by your bank, and the information is already in the hands of the tax authorities.
Reminder: Cryptocurrency taxation->for French residents all cryptocurrency accounts must be declared using Form n°3916 - (Declaration by a resident of an account opened outside France available on the tax site: Foreign Account Declaration Form).
Solution 2: transfer to an offshore account
Cryptocurrency transactions can be anonymous, some cryptotraders have evidently considered opening accounts abroad to deposit their cryptocurrency capital gains. The basic idea is to not repatriate capital gains to the original bank account.
A simple and doubly risky solution: hide the capital gains and do not declare the offshore account.
Reminder: for French residentsall foreign accounts must be declared using Form No. 3916 - (Declaration by a resident of an account opened outside France available on the tax site: Foreign Account Declaration Form)
Solution 3: Bitcoin and cryptocurrency credit cards
Spending capital gains with a credit card does not make them less taxable. Cryptotraders are very likely to have better lifestyles and get caught. What attracts the tax authorities is that you're officially on the basic minimum wage but you drive a Porsche.
This solution is generally used for "small" frauds; cryptotraders only use the undeclared card for small everyday purchases.
If there is a tax audit, the transactions recorded using this card will be found and the fraud will be easily exposed.
Conclusion on these three fraudulent solutions
The three solutions presented above are not illegal as long as everything is declared to the tax authorities; by that I mean it is not illegal to have an offshore account if it’s declared to the tax authorities; and there is nothing illegal about spending cryptocurrency capital gains using a credit card if the global capital gain is correctly declared for tax purposes.
But...
Don't try to be smart to evade taxes! If the tax authorities check up on you one day, they will look for all past transactions, on all cryptocurrency trading platforms, on all your accounts, on all your cards. And, with the slightest transaction that is impossible for you to justify, they will stop everything and tax you automatically. That's when the fraudulent cryptotraders start squealing! If so... "SQUEAL"! Because it doesn't matter if you have hidden €10, €10,000 or €1,000,000 from the tax authorities, they will apply a fine 10 times higher than the amount defrauded. Cryptotraders then have two solutions: pay the fine. Or find evidence for all the transactions. Good luck with that! It is no longer the tax department that runs around trying to find the evidence and supporting documents, it is the cryptotrader.
The only solution that does not seem to be fraudulent: emigrate
There is only 'capital gains' on cryptocurrencies when the cryptocurrencies are converted back into fiat currencies. So there is “a priori" no fraud in declaring capital gains on cryptocurrencies only from the date of expatriation.
Clearly, this is making a mockery of your country as the capital gains were generated while you were resident there. But if capital gains are only taxable from the day they are converted back into a fiat currency, then I don't really see the problem. NB: to be confirmed... Because the tax authorities are capable of telling us that the capital gains are also taxable in your previous country of residence.
This solution involves staying positioned in cryptocurrencies for a long time. No fiat currency withdrawal is possible as long as you are not an expat, otherwise tax is imposed. These cryptotraders are thus “latent” multi-millionaires, until the day they are expats and become real multi-millionaires. Hard to stomach with so many millions just out of reach that you can't use.
This solution also involves emigrating and leaving behind all your countries’ services (that you pay for). Think about it before you go headlong into becoming an expat. And this solution implies having recorded significant capital gains!
Let's imagine for a moment that you made €1,000,000 in cryptocurrency capital gains; two solutions are available to you:
1/ Stay where you are and receive only about €500,000 (depending on your country’s tax rates)
2/ Go abroad with €1,000,000. On condition also that the country you emigrate to does not impose cryptocurrency capital gains.
It's a complicated choice. Perhaps with just 1 million in capital gains, French people would still choose solution 1. But what if it’s 10 million in capital gains? Ha... Solution 2?
NB: with 1 million you could survive for a long time in Thailand; but in some other countries you would need a little more within reach.
Do you know of other fraudulent and unsavoury solutions? Share them with us on this discussion thread.
