Day-Trading in Cyprus: A traders Paradise. A Cyprus, German, and United Kingdom Comparison Example

Day-Trading in Cyprus: A traders Paradise. A Cyprus, German, and United Kingdom Comparison Example

When looking for countries that are brilliant for day trading, one country which seems to be generally overlooked online is Cyprus. Although much of the international entrepreneurial community has heard and is taking advantage of Cyprus due to its low Dividends Taxes and great business environment, day-trading sources seem to have largely ignored the many great benefits of the island.

Cyprus offers 0% tax on sale of stocks/securities and an associated mix of financial instruments, plus the incredible benefit of 0% dividends tax available to foreigners who apply for the Non-Domicile status.

But how much better off would a day trader be in Cyprus as opposed to some other destinations? That was the answer I wanted to find out and so I conducted a comparison of Cyprus, Germany, and the United Kingdom to see how much I would be paying. I conducted the calculations testing both myself day-trading as an individual and as a corporation in the three nations, with and without Cyprus Non-Domicile status.

Before we get started, the readers are advised to remember that these are example calculations for entertainment purposes only to highlight certain concepts, and do not constitute financial advice. For financial advice on these topics please consult your accountants, lawyers, or relevant financial professionals. Tax laws often change, and it is paramount to speak to a professional to get the most up-to-date advice on your tax planning.

So what were the core assumptions used in the calculations?

• The day-trader was making 60000 a year through trading activities.
• For simplicity of calculations no distinction was made between Euros and Sterling in terms of exchange rate. Thus we are talking about 60000 Units throughout the article.
• That in Cyprus the 0% tax for the sale of stocks was applied both as an individual and as a corporation.
• A 0% dividends tax was applied to those in Cyprus using the corporation setup while having the Non-Domicile tax status.
• A 17% Dividends Tax was applied to those in Cyprus using the corporation setup while not having the Non-Domicile tax registration.
• In Germany a 26.375% (including solidarity tax) was placed on capital gains for selling of shares as an individual.
• In Germany a 30% Corporate Tax rate was assumed as this tends to vary slightly depending on the region of establishment.
• In Germany an additional 26.375% to withdraw dividends as an individual after paying Corporate Tax through the corporation day-trading setup was assumed.
• When trading as an individual in the United Kingdom, this would be classed as trading activity for income and as such would be subject to income tax. 0-12500 at 0%. 12501-50000 at 20%. 50001-150000 at 40%.
• That Corporation Tax in the United Kingdom was 19%.
• That Dividends withdrawn in the United Kingdom in the corporation day-trading setup would fall under the 20% taxation bracket.

So, what did the calculations show? In the case that the day trader was acting as an individual in Cyprus, making a profit of 60000 through trading of shares, he/she would get taxed 0% on it, leaving them with 60000. In Germany after the above stated taxes were paid, the day trader would only be left with 44175, having a difference of roughly 15000 between those enjoying the sun in Cyprus. In the United Kingdom 48500 would be left, leaving a gap of roughly 12000 a year compared to Cyprus.

As can be seen even at the 60000 level the money difference is quite large. When considering the huge effects that this level of difference would have on compounding investment income over a 30-year period, you can see why Cyprus may be a great choice for anyone who wants to be in this line of work.

That was for a day-trader using an individual model. What about day-trading using a corporation set-up?

Firstly, there are many reasons why someone may opt for a corporation setup over an individual set-up. Sometimes such a set-up may confer tax benefits, or allow for multiple partners, limited legal liability. The various benefits are dependent on the nation that such a setup is used and the individual circumstances that a trader finds themselves in. As your accounting and financial professional to give you the most up-to-date advice.

When considering the corporation trading setup, those in Cyprus with the Non-Domicile status would have 60000 yearly, while those in Cyprus without would have 49000. Those in Germany would have roughly 31000, and those in the United Kingdom would have 38000. Now again a very large difference can already be seen from the three nations, even without considering the large compounding investment returns of a whole career.

To summarise, the distinction between a day trader using an individual or a corporate set-up will depend on the individual circumstances of that trader including level of income and country they wish to operate in. However what can be seen as a whole is that regardless of this Corporate or Individual set-up, or even Non-Domicile tax status, Cyprus seems to be a great location for day-trader who wish to live within Europe and enjoy one of the most beautiful countries in the world.

If you are interested in finding out more on the individual tax benefits of Cyprus you can read here. Furthermore if you are interested in learning about the Corporate Tax benefits and business environment in Cyprus you can read more here.

Written Febuary 2019