Cyprus company 0% tax on foreign income question?

space

New Member
Hi

I wanted to clarify if I understood correctly the Cyprus tax rates on companies. If I setup an offshore company in Cyprus with all income earned outside Cyprus would the company be exempt from corporate tax in Cyprus? Do I have to setup a specific company in Cyprus for this or will any company formation work this way?

I run an ecom business online with all income generated in US and EU (except Cyprus) and I'm a UK citizen. Cyprus is good for me because I can use an Revolut EMI for a bank.

Thanks
 

Sols

Trusted Member
Business Angel
The company would probably not be in scope for any tax in Cyprus. That part is correct. But it is not by virtue of the company deriving its profits from outside of Cyprus. It is by the company not being tax resident in Cyprus.

Now if we suppose you live in the UK, the company will be tax resident in UK and have to pay full UK corporate income tax and duties.
 

space

New Member
The company would probably not be in scope for any tax in Cyprus. That part is correct. But it is not by virtue of the company deriving its profits from outside of Cyprus. It is by the company not being tax resident in Cyprus.

Now if we suppose you live in the UK, the company will be tax resident in UK and have to pay full UK corporate income tax and duties.
Thanks for the reply.

I understand what your saying. So in essence forming a company in Cyprus doesn't really help me here as if I want 0% corporate tax I will need to form a company in a 0% corporate tax country like Seychelles?

But then a Seychelles IBC would be a resident of Seychelles or not?

Sorry I'm new to understanding this. I am really just looking for a simple structure to pay 0 or close to with the cheapest setup fees. I don't want to form a UK company for privacy reasons.

Thanks
 

Sols

Trusted Member
Business Angel
Unless you plan to move to a tax haven, having a company in a jurisdiction with 0% and running a commercial activity through it is pointless nowadays.

Nearly all jurisdictions determine companies to be tax resident if they are managed, controlled, or operate an office from that jurisdiction. So it doesn't matter if you form the company in Cyprus or Seychelles, the company becomes tax resident where you live and it must pay taxes and duties just like any other local company.
 

blueweb

Corporate Services
Business Angel
Mentor Group
It doesn't matter if where you setup the company and what tax rate you have to pay there. If the country where you setup your business does not have an DTA which you can make use of AND you are unable to provide evidence that your company is managed and controlled where it is incorporated you will have to pay local tax.

Unless you pay a local attorney to help you with this setup you will loose any case about management and control abroad, I'm sure you will.
 

Loizos

Member
Hi

I wanted to clarify if I understood correctly the Cyprus tax rates on companies. If I setup an offshore company in Cyprus with all income earned outside Cyprus would the company be exempt from corporate tax in Cyprus? Do I have to setup a specific company in Cyprus for this or will any company formation work this way?

I run an ecom business online with all income generated in US and EU (except Cyprus) and I'm a UK citizen. Cyprus is good for me because I can use an Revolut EMI for a bank.

Thanks
What is done in Cyprus is using a Nominee director, secretary and shareholder. This will make the company to be taxed in Cyprus since Management and Control is shown to be carried out in Cyprus.
But yet again this does not imply 0% taxes. Depending on the source of income of the company it may be taxed at the rate of 12.5%.

If you have any more questions please do not hesitate to ask.

Loizos
 

Admin

Forum Moderator
Staff member
What is done in Cyprus is using a Nominee director, secretary and shareholder. This will make the company to be taxed in Cyprus since Management and Control is shown to be carried out in Cyprus.
If it was that easy no one on this forum would have troubles to setup a 0% structure. It is something people have adopt from other sources of information and just reposted.
 

Loizos

Member
If it was that easy no one on this forum would have troubles to setup a 0% structure. It is something people have adopt from other sources of information and just reposted.
What do you mean? I do not understand. I an a manager in a Tax/Audit/Advisory firm in Cyprus and co-operate with many international clients.
I did not say anything about 0%. I said that the corporation will have to pay corporation tax at 12.5% on its worldwide income.

Loizos
 

khinkali

Active Member
the corporation will have to pay corporation tax at 12.5% on its worldwide income.
I agree that the company can be taxed in Cyprus. Depending on the location of UBO, effective management and economic activity of the company, it might also be taxed elsewhere and/or the owner might also be taxed on it elsewhere.
 

Admin

Forum Moderator
Staff member
Thanks for the advertsing :D It does not even imply 12,5% taxes for the vast majority on this forum. In the position you claim you are you know Governments and so their tax offices don't believe this story any longer with nominees! Maybe you can fool them the first year or some years if your business is very small but if you put real money thrugh this mashine you will get huge troubles unless it's indeed setup with real management and control in, say, Cyprus!
 

khinkali

Active Member
huge troubles unless it's indeed setup with real management and control in, say, Cyprus!
There must be some places where the ownership and management wouldn't cause a problem? I mean if you're resident some place with no income or profit tax and have a sensible nationality (not USA or North Korea) then I guess the Cyprus company is only taxed in Cyprus. Apart from VAT and the new "tech taxes" which for now will only be for the biggest of businesses.

I run an ecom business online with all income generated in US and EU (except Cyprus) and I'm a UK citizen.
Space didn't mention their residence. UK citizenship shouldn't matter at all and previous UK residence shouldn't matter for most purposes once the statutory residence test is satisfied. So it's down to where the business is run from, and the residence of UBO and management?
 

unicorn

Active Member
What do you mean? I do not understand. I an a manager in a Tax/Audit/Advisory firm in Cyprus and co-operate with many international clients.
I did not say anything about 0%. I said that the corporation will have to pay corporation tax at 12.5% on its worldwide income.

Loizos

hello Loizos, let us suppose you are a tax resident of cyprus, living in cyprus anywhere between 2 and 6 months per year, and having an offshore company that pays you dividends.

Now that is the part that is unclear to me : are these dividends, received from your offshore company, taxed (the 17 %) when you are a tax resident in cyprus, or not please ?

Also : what happens to your offshore company ? Can it still pay (low) taxes in its country of incorporation, or not (as the UBO will not manage this company all year from cyprus, but only part of the year).

I'ld greatly appreciate it if you could clarify this ?

thank you !
 

Loizos

Member
hello Loizos, let us suppose you are a tax resident of cyprus, living in cyprus anywhere between 2 and 6 months per year, and having an offshore company that pays you dividends.

Now that is the part that is unclear to me : are these dividends, received from your offshore company, taxed (the 17 %) when you are a tax resident in cyprus, or not please ?

Also : what happens to your offshore company ? Can it still pay (low) taxes in its country of incorporation, or not (as the UBO will not manage this company all year from cyprus, but only part of the year).

I'ld greatly appreciate it if you could clarify this ?

thank you !
OK lets clarify things. The 17 % is not income tax but SDC (another tax). Now if a person is tax resident in Cyprus is liable to SDC on dividend income EXCEPT if he gets a Non-Domiciled status. This is easy to get for a Non-Cypriot person. This is done by the republic of Cyprus to attract foreigners with high net worth lets say. If you get the Non-Domiciled status then you are not taxed on dividends.

Since July 2015, non-Cyprus domiciles do not have to pay defence tax. Generally, you will be considered Cyprus-domiciled if you were born here or you have been resident for 17 out of the last 20 years. Most UK expatriates therefore escape tax on interest and dividends for their first 17 years of residence.
 

unicorn

Active Member
hello Loizos, thank you for clarifying this - and so early in the morning !

So basically, a EU foreigner would then obtain the status of non-domiciled tax resident, would not be taxed on dividends, not on dividends received from his/her cyprus company and also not on dividends received from his/her offshore company (outside of cyprus) - is that a correct summary please ?

(so you don't find yourself in a situation all of the sudden that your (foreign) dividends are put under worldwide income tax and taxed at 35 %)

My final question is this : what happens with the foreign company if you run some daily activities from Cyprus but spend several months abroad to run the foreign company ?

Thank you kindly for your return !
 

Admin

Forum Moderator
Staff member
OK lets clarify things. The 17 % is not income tax but SDC (another tax). Now if a person is tax resident in Cyprus is liable to SDC on dividend income EXCEPT if he gets a Non-Domiciled status.
Thank you for pin pointing this out.

If we get more confusion about it I may consider to make a sticky thread about Cyprus Dividends tax - No Tax !
 
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