So why do you have to pay 12,5% tax on dividends in Cyprus ?Dividend income is generally exempt from income tax unless the relevant dividend is allowed as a tax deduction in the jurisdiction of the dividend-paying company
Because those aren't dividends but corporate taxes. Since Estonia's corporate tax is 0% and you only pay 20% on dividends, if your company is tax resident in Cyprus because of DTA with Estonia the Cyprus company will pay 12,5% instead of 20%.So why do you have to pay 12,5% tax on dividends in Cyprus ?
Why does he say that he is going to be taxed 12,5% on my dividends in Cyprus?If my thinking is correct, Estonia should not tax my dividends, and Cyprus should only ask me to pay 12.5% on my dividends.
What do you think?
Because those aren't dividends but corporate taxes. Since Estonia's corporate tax is 0% and you only pay 20% on dividends, if your company is tax resident in Cyprus because of DTA with Estonia the Cyprus company will pay 12,5% instead of 20%.
That's not the case. If you run and manage your Estonian company from Cyprus, you will need to register the company with the Cypriot tax authority as a permanent establishment. Any profits generated via that permanent establishment will only be liable to tax in Cyprus, as per the Cyprus-Estonia tax treaty.hen surely the total is 24.75% or 30%?
No because 60 days in Cyprus are all that you need to be considered tax resident in Cyprus, but obviously you can't stay in other countries more than 183 days or you will be considered tax resident there.In this configuration it can be considered that the Estonian company is managed outside of Cyprus?
Yes you are missing the 60 days rule explanation.Or am I missing something?
Many thanks for the information, in fact I had omitted that all these criteria must be met and not only the 60-day stay.An individual who in the relevant tax year:
a. do not reside in any other country for a time period of more than 183 days(aggregate) and
b. is not a tax resident in any other country and
c. resides in Cyprus for at least 60 days and
d. has various other Cyprus ties such as :
1. contract of employment
2. he is a business owner
3. he is a director of a Cyprus Tax resident company
But is it possible to have a foreign company (Estonia or other) as a shareholder and administered outside of Cyprus and which generates the large part of the profit and have another Cypriot company (small business) just so that the 60 day residence rules be respected?An individual is considered to be domiciled in Cyprus for tax purposes when he has been a tax resident for at least 17 years out of the last 20 years prior to the tax year in question.
An individual who is not domiciled in Cyprus for tax purposes is considered a tax resident and he is exempted from taxation in Cyprus on his worldwide income (Cyprus and worldwide sourced), dividends and interest. This is considered a Non-domiciled status.