Corporate tax - income or profit?

[dodgeviper]

I'm looking to set up a company in EU, preferably Cyprus, maybe with a bank account there as well so that I can use a high risk payment gateway for an online adult entertainment related business.
As you all know - Cyprus corporate tax rate is 12.5%.
Ok, but I won't pay that much, especially when they have a public records on directors and shareholders so I don't feel like I'm paying for something that may be worth. The 0 tax rate jurisdictions usually are not accepted by high risk payment gateways (CCBill for ex. requires the company to be in EU/UK/USA). I know there are some that do not have an issue with this, but their transaction fees and rolling reserves are really high - verotel, instapay etc.

Now here is my question: Can I transfer money from the Cyprus company to another company of mine in another jurisdiction under the cover of costs or doing business with it, so that the profit in the Cyprus bank account gets really low and I'm taxed on that amount?
I heard that someone was doing that with a Maltese corp, wiring 95% of the company income to another company of his control in Belize under the disguise of "buying consulting services" and at the end he pays taxes on just those 5% left. I'm not completely sure how this works, but if it is true it means the corporate tax is calculated on the profit rather than the income/revenue? Or does it depend on a jurisdiction?

If someone has more info please share, thanks.

 

[Sols]

Now here is my question: Can I transfer money from the Cyprus company to another company of mine in another jurisdiction under the cover of costs or doing business with it, so that the profit in the Cyprus bank account gets really low and I'm taxed on that amount?

Yes. You need to keep some small amount in the Cyprus company and there needs to be a proper agreement between the Cyprus company and the parent or sister company, usually in the range of 5–10%.

Make sure a lawyer who understands Cypriot tax law drafts that agreement for you.

 

[clemens]

Can I transfer money from the Cyprus company to another company of mine in another jurisdiction under the cover of costs or doing business with it, so that the profit in the Cyprus bank account gets really low and I'm taxed on that amount?

That is possible without the big issues. You can simply issue invoices as you go. It is done by many including me

 

[dodgeviper]

That is possible without the big issues. You can simply issue invoices as you go. It is done by many including me

Thanks for the answer, are you doing it from a Cyprus based company or? And you never had issues so far?

If for ex. there's an income of 100k in the company's books but you wire 95 of those in another company acc and sign it off as "direct costs", you end up with 5k and you get taxed on the 5k instead of the 100 received?

Yes. You need to keep some small amount in the Cyprus company and there needs to be a proper agreement between the Cyprus company and the parent or sister company, usually in the range of 5–10%.

Make sure a lawyer who understands Cypriot tax law drafts that agreement for you.

Is that a specific agreement that is needed? I thought you would be able to just wire money to a company bank's account with a generated invoice of doing some business with it?

 

[Sols]

Is that a specific agreement that is needed? I thought you would be able to just wire money to a company bank's account with a generated invoice of doing some business with it?

Invoices must have an agreement behind them or your auditor will give you problems. The agreement must state the purpose, duration, cost, and other terms of the arrangement.

 

[GrumpyMess]

As you all know - Cyprus corporate tax rate is 12.5%.
Ok, but I won't pay that much, especially when they have a public records on directors and shareholders so I don't feel like I'm paying for something that may be worth.

I've read that Cyprus doesn't want to make ubo register public, but directors and shareholders visibility can be avoided with nominees.

Can I transfer money from the Cyprus company to another company of mine in another jurisdiction under the cover of costs or doing business with it, so that the profit in the Cyprus bank account gets really low and I'm taxed on that amount?

This is exactly how the most of companies are doing. Just make all agreements between the companies.

 

[clemens]

Thanks for the answer, are you doing it from a Cyprus based company or? And you never had issues so far?

If for ex. there's an income of 100k in the company's books but you wire 95 of those in another company acc and sign it off as "direct costs", you end up with 5k and you get taxed on the 5k instead of the 100 received?

You can very simple ask your Cyprus agency service to help you draft a contract or business agreement and invoice each other. You can most often ask some of the agency service to simply invoice you local company and they will transfer it internally to your corporate account. There are endless options for that if you get in the hands of the right agent. If you go for what is allowed by officials then you are lost.