Company formation for cryptocurrency token

Hi,

From first look your token looks similar to a security token. Generally speaking, security token raises legal / licensing questions first (i.e. if you can raise money using security tokens without having a license from local authorities).

There are only a few places worldwide you can do it without having a license.

Distribution of security tokens usually does not cause VAT-related issues, because most countries consider it as financial services from a VAT perspective (nontaxable with VAT).

If it is a utility token, the situation is different. Then on the opposite most likely (depending on the country) you would not face legal / licensing questions but would face VAT-related questions.

Generally, when a token buyer pays money it is considered as income of the company neither from corporate income tax nor from VAT perspective.

But when the token is utilized (services are used), it becomes taxable with VAT and also should be attributed to income from a corporate income tax perspective.

So I would start by understanding all token features and then apply some strategy.

I hope this helps.

Gediminas said:

There are only a few places worldwide you can do it without having a license.

Do you know which countries that would be ?

hiyongnu said:

@Gediminas , Thank you very much for the information. I would like to give a little more detail. We launched our token last year and were raising funds through our own website. We will use the funds we have collected for the production of industrial machines that support CO2 recycling and the recycling of some special materials. We have produced 3 machines in this regard so far. But we were receiving payments from the sale of this token via PayPal. On the accounting side, it is very difficult to explain this to the relevant institutions in Germany. Since they view the issue as profit, there is a problem with taxation. In fact, with this fund, we will produce machines and invest in projects and new machines that will support recycling. Our profit will be when the value of the token rises. We have some stock. Therefore, we want to determine a new country, establish a new company and continue these processes from there by benefiting from tax exemption. Our investments will again be in Germany. Even though the money collected for the fund is in country X, as a result, machines will be produced and industrial investments will be made in Germany. I hope that has been revealing.

Thanks for the explanation.

Can you please elaborate on what exactly token holders will receive from these investments?

Legal and tax questions mainly depend on the type of the token (security, utility, payment) which is classified under the benefits it gives to investors.

As a general rule, we start with a white paper to understand the project.

JohnLocke said:

Do you know which countries that would be ?

At this point of time (until new laws will come into force) - the best jurisdiction IMO would be Saint Vincent and Grenadines.

hiyongnu said:

After we implement the projects we mentioned and start to get productive results, we will increase our PR efforts, increase our token sales even more, and publish them on stock exchange sites. When the value of the Token increases, Token holders can exchange their existing tokens on the exchange and make a profit. For example, when a token currently $0.00010 is placed on the exchange, they will make a lot of profit when its value increases. By supporting recycling, they will both benefit a sustainable world and make a profit.

Generally speaking, if the main reason for buying the token is an expectation to get financial returns it might be considered a security token.

In such a case I would most likely use two entities: established in low regulated country and a “back office” established in the EU / other places

hiyongnu said:

@Gediminas What would be your recommendation for a low regulated country? Thanks.

Each country has pros and cons, so I suggest to evaluate them first.

You can consider SVG, Belize or SEY.

Gediminas said:

Each country has pros and cons, so I suggest to evaluate them first.

You can consider SVG, Belize or SEY.

Belize, Seychelles are both blacklisted by EU.
Do you think it wouldn't affect the setup?

Don said:

Belize, Seychelles are both blacklisted by EU.
Do you think it wouldn't affect the setup?

It might affect it, it needs to be discussed in the light of tax rules.

hiyongnu said:

@Gediminas What would be your recommendation for a low regulated country? Thanks.

Bulgaria is low regulated country about this segment. If you have good advisor here, nobody will reach you. Tax for legal profit is 10% per year, other things -nobody care. The only thing you have to be careful is to do no bloc your bank accounts, because you have to create new or start to work with EMI.

Last edited by a moderator: Dec 15, 2023