Question Cypriot resident working for a UK company from home

[Nucleus]

I am a Cypriot resident and I have started providing professional services to a UK company, part time. I am not an employee of that company, but I am an employee of another company based in Cyprus for my full time job.

What would be the best way to optimise tax?

Basically now I am employee of the Cyprus based company but also self-employed for the UK company. Would it be better to set up a company for my part time job?

I was thinking to declare the additional income from the part time job on the tax return at the end of the year but I am not sure this is optimal. For my full time job tax, NHS and social contribution is handled by the company I work for.

 

[Sols]

What's your relationship to the UK company?

If you own it, you can reduce the corporate income tax by replacing the UK company with a Cypriot company. That company would only pay the 12.50% Cypriot income tax, instead of 19% in UK. Currently (if you own/control it), yhe UK company is tax resident in both Cyprus and UK. If it pays taxes in UK, you can most likely use that as tax credit in Cyprus down to a minimum of 0% owed in Cyprus.

If you are a consultant/service provider, you could replace yourself with a Cypriot company. Then any funds earned for work done to the UK company would be paid into the Cyprus company, which would only need to pay the 12.50% corporate income tax. Then, as long as it's profitable, you can pay yourself dividends instead of a salary. Dividends for a non-domiciled resident are not taxed further — no income tax to worry about.

Either way, there are nuances to this that you'd be wise to discuss with a local tax adviser.

 

[CaptK]

What's your relationship to the UK company?

If you own it, you can reduce the corporate income tax by replacing the UK company with a Cypriot company. That company would only pay the 12.50% Cypriot income tax, instead of 19% in UK. Currently (if you own/control it), yhe UK company is tax resident in both Cyprus and UK. If it pays taxes in UK, you can most likely use that as tax credit in Cyprus down to a minimum of 0% owed in Cyprus.

If you are a consultant/service provider, you could replace yourself with a Cypriot company. Then any funds earned for work done to the UK company would be paid into the Cyprus company, which would only need to pay the 12.50% corporate income tax. Then, as long as it's profitable, you can pay yourself dividends instead of a salary. Dividends for a non-domiciled resident are not taxed further — no income tax to worry about.

Either way, there are nuances to this that you'd be wise to discuss with a local tax adviser.

If they were to register as self employed in the UK, then so long as it is under 12.5K would that be tax free with just a bit of NI to pay?

Could that work?

 

[Nucleus]

What's your relationship to the UK company?

If you own it, you can reduce the corporate income tax by replacing the UK company with a Cypriot company. That company would only pay the 12.50% Cypriot income tax, instead of 19% in UK. Currently (if you own/control it), yhe UK company is tax resident in both Cyprus and UK. If it pays taxes in UK, you can most likely use that as tax credit in Cyprus down to a minimum of 0% owed in Cyprus.

If you are a consultant/service provider, you could replace yourself with a Cypriot company. Then any funds earned for work done to the UK company would be paid into the Cyprus company, which would only need to pay the 12.50% corporate income tax. Then, as long as it's profitable, you can pay yourself dividends instead of a salary. Dividends for a non-domiciled resident are not taxed further — no income tax to worry about.

Either way, there are nuances to this that you'd be wise to discuss with a local tax adviser.

I am a consultant. I was born in Cyprus, so I am domiciled resident I think. Will I have to pay tax on dividends?

How do I exactly pay myself dividends? Or do I just declare it as dividends on the tax return?

 

[Sols]

If they were to register as self employed in the UK, then so long as it is under 12.5K would that be tax free with just a bit of NI to pay?

It's under the 19,500 EUR 0% tax bracket in Cyprus so it might work up until that threshold.

I am a consultant. I was born in Cyprus, so I am domiciled resident I think. Will I have to pay tax on dividends?

Yes, you will most likely have to pay SDC (Special Defense Contribution). Discuss with a local tax adviser but my understanding is there's practically no way around it.

This applies regardless of whether the dividends come from UK or Cyprus, so you're still looking at a tax reduction if you shift to a Cyprus company. But keep in mind the generally higher maintenance/management costs for a CY company so make sure you weigh those against the tax savings.

How do I exactly pay myself dividends? Or do I just declare it as dividends on the tax return?

When your accountants do the monthly or quarterly management accounts, you ask them to also draft a board resolution for paying yourself a dividend. Then it's just a simple bank transfer from the bank to yourself. Just be mindful of SDC.