Cyprus company director salary

[glengoolie]

It seems Cyprus does not have a minimum wage laws, so I wonder if it is possible for the company director to have 0€ salary, hence he and the company would pay no healthcare tax, no social insurance fund tax, no redundancy fund tax, no industrial training fund tax, no social cohesion fund tax and so on...?

Also, can director perform actual work for the company, beside the basic duties defined by the law, under his employment agreement?

I calculated that if the company would pay a salary of 1000€, it would actually cost the company 1149€ and the employer would net 890€, so 259€ a month, or 3108€ a year, would be wasted money(it is not about the amount, it is about the principle). And I don't like wasting money, hence why I am interested in the possibility of 0€ salary, or a symbolic salary of 1€ maybe, whilst being able to do some actual work for the company as the director and not be bothered by these taxes or government breathing on my neck.

(essentially the company is merely a means to transform income into tax-free dividend. there would be no employees, just me)

 

[CyprusLaw]

It seems Cyprus does not have a minimum wage laws, so I wonder if it is possible for the company director to have 0€ salary, hence he and the company would pay no healthcare tax, no social insurance fund tax, no redundancy fund tax, no industrial training fund tax, no social cohesion fund tax and so on...?

Also, can director perform actual work for the company, beside the basic duties defined by the law, under his employment agreement?

I calculated that if the company would pay a salary of 1000€, it would actually cost the company 1149€ and the employer would net 890€, so 259€ a month, or 3108€ a year, would be wasted money(it is not about the amount, it is about the principle). And I don't like wasting money, hence why I am interested in the possibility of 0€ salary, or a symbolic salary of 1€ maybe, whilst being able to do some actual work for the company as the director and not be bothered by these taxes or government breathing on my neck.

(essentially the company is merely a means to transform income into tax-free dividend. there would be no employees, just me)

As you mention there is no statutory minimum wage in Cyprus. A director can be registered as an employee of the company and be paid salary and paying GHS and social insurance, but this is not required. He can carry out any duties afforded to him by the Articles of Association of the Company, he can also work as an employee of the company.

Depending on your country of residence there are situations where in order to get the relevant permit you would be required to show that you are employed in Cyprus, you can put a salary of 200-300 EURO just to evidence such employment.

 

[glengoolie]

"but this is not required. He can carry out any duties afforded to him by the Articles of Association of the Company"

usually when work is performed without some type of a contract and a payment, it is considered illegal. that's why in EU(some?) you cannot have one-man company, do the work on its behalf and just bill for it without paying yourself for the actual work. some people do it but it is completely illegal. since cyprus companies are joint equity companies and not "classic" llc, is this the reason director can work for free and therefore have no income/gesy/social?

 

[CyprusLaw]

"but this is not required. He can carry out any duties afforded to him by the Articles of Association of the Company"

usually when work is performed without some type of a contract and a payment, it is considered illegal. that's why in EU(some?) you cannot have one-man company, do the work on its behalf and just bill for it without paying yourself for the actual work. some people do it but it is completely illegal. since cyprus companies are joint equity companies and not "classic" llc, is this the reason director can work for free and therefore have no income/gesy/social?

Yes one member companies (with one director, secretary etc) are allowed in Cyprus and therefore there is no issue. As long as the duties carried out by the director fall within the articles of association of the company. If they do not, this might create other issues, for example breach of fiduciary duties etc.

I cannot comment about other jurisdictions and how they work, however, I know that common law countries are identical and/or similar to Cyprus.

 

[CyprusLawyer101]

There is no requirement to employ the director nor any illegality in doing work and not recieving salary.

Will you be residing in Cyprus ? If not you could also get salary without the social insurance etc requirements.

 

[amork83]

Yes one member companies (with one director, secretary etc) are allowed in Cyprus and therefore there is no issue. As long as the duties carried out by the director fall within the articles of association of the company. If they do not, this might create other issues, for example breach of fiduciary duties etc.

I cannot comment about other jurisdictions and how they work, however, I know that common law countries are identical and/or similar to Cyprus.

Hi!

Is it possible to get the non dom 60 days tax residency with this setup? Without salary and social insurance, just getting paid by dividends.

I'm an EU citizen, and company would be only me doing securities trading.

 

[CyprusLaw]

Hi,

The '60 day rule' for Cyprus tax residency is satisfied for individuals who, cumulatively, in the relevant tax year:

• do not reside in any other single state for a period exceeding 183 days in aggregate
• are not considered tax resident by any other state
• reside in Cyprus for at least 60 days, and
• have other defined Cyprus ties.

To satisfy the fourth criteria, the individual must carry out any business in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year.

So in short yes, as long as you are carrying out a business in Cyprus and/or be a director in the Cyprus company.

 

[Cyprustr]

Hi,

The '60 day rule' for Cyprus tax residency is satisfied for individuals who, cumulatively, in the relevant tax year:

• do not reside in any other single state for a period exceeding 183 days in aggregate
• are not considered tax resident by any other state
• reside in Cyprus for at least 60 days, and
• have other defined Cyprus ties.

To satisfy the fourth criteria, the individual must carry out any business in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year.

So in short yes, as long as you are carrying out a business in Cyprus and/or be a director in the Cyprus company.

Can you give me your email or something? I want to contact you because I'm interested in opening a company in Cyprus because that's the only way to get 60 days Non-dome status.

I want to know about the costs and some other questions.

 

[Zireael]

Hi,

The '60 day rule' for Cyprus tax residency is satisfied for individuals who, cumulatively, in the relevant tax year:

• do not reside in any other single state for a period exceeding 183 days in aggregate
• are not considered tax resident by any other state
• reside in Cyprus for at least 60 days, and
• have other defined Cyprus ties.

To satisfy the fourth criteria, the individual must carry out any business in Cyprus and/or be employed in Cyprus and/or hold an office (director) of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year.

So in short yes, as long as you are carrying out a business in Cyprus and/or be a director in the Cyprus company.

Does anyone offer a service where I could be signed up as a director of some (dormant) company? To satisfy the derectorship requirement.

 

[CyprusLaw]

Does anyone offer a service where I could be signed up as a director of some (dormant) company? To satisfy the derectorship require

Using a dormant company could be challenged. Happy to discuss more about this through PM.

 

[Zireael]

Using a dormant company could be challenged. Happy to discuss more about this through PM.

Hi, thanks for your reply. I'm looking at the 60-day non dom tax residency route. Planning to use a different offshore company to handle my business, so starting/running a Cyprus company would be a drain on my time and resources. My thought was to become a co-director of an established company to share the burdens.
If you have experience/advice of this kind of an idea then let's PM

 

[Onassis]

The following website: https://www.qnta.biz/resources/publ...ed-business-strategies-directors-remuneration

...states that "the tax efficiency of drawing funds from your company in the form of director's fee or remuneration could become even more advantageous when a NED is not tax resident of Cyprus".

Could someone please confirm that a Cyprus limited company can pay a director's fee/remuneration to a director who is not a tax resident of Cyprus without it being subject to PIT in Cyprus? Thanks.

P.S. Seems like a good option for PTs.

 

[CyprusBusiness]

Appointment of a non-CY tax resident director is possible but this will denote that management and control of the Cyprus entity will be performed from abroad (where the Director will reside).

My suggestion is to explore the 90 days rule and other personal income tax benefits (i.e. 50% exemption) as appointment of a non-resident Director will create the following issues:

Please see some issues below:

Permanent establishment

An overseas business could create a permanent establishment (PE) in Cyprus or vice versa, when it has such a business activity that triggers taxable presence. The creation of a PE can be an important consideration as it creates a number of compliance obligations. In general, different factors can determine whether a PE has been created, like the length of stay of the remote workers, the functions they perform, the place of their work and its degree of permanency etc.

Dual tax residency

Cyprus is party to more than 60 tax treaties, providing for “tie-breaker” rules where two countries claim the tax residency of an individual. You need to make sure you understanding taxing rights of both countries

Payroll taxes and social insurance contributions

The large majority of the tax treaties that Cyprus has with other countries, contain an ‘employment income’ article which does not give taxing rights to Cyprus if certain conditions are met, including that the individual spends no more than 183 days in Cyprus in any 12-month period.

Such being the case, for short-term remote workers that can choose Cyprus as a remote location for less than 6 months within a given year and their presence in Cyprus does not create a PE for their employer.

In case this will not apply, if Director resides more than 183 days and is considered a Cyprus tax resident, you may opt for the 90 days exemption whereby all employment income tax will be exempt.

Contributions to the Social Insurance and General Healthcare System may arise in such case, however EU individuals can be exempt if they hold a Certificate of coverage (A1 certificate) that would allow them to continue their contributions in their home country. Similar option does not exist for non-EU nationals.

A decision to live and remotely work away from Cyprus for more than 6 months during the calendar year, would mean that an individual would not become a Cyprus tax resident. Although in such case, Cyprus would not have taxing rights over the income of the employee, the country of the Directors residence will most probably have taxing rights.

Compliance obligations

Where the country of residence of the Director would have taxing rights over the income of any employee, the Cyprus employer would most probably need to register as a local employer at the country of Director and maintain a payroll for the purpose of withholding the relevant tax and contributions.

Whilst the freedom of establishment would mean that an EU organisation would only register as an employer for payroll purposes, otif Director is resident to other non-EU the cyprus entity may also have an obligation to register a branch or a company in that foreign jurisdiction for the purpose of withholding such taxes and contributions and remit them to the foreign authorities.

 

[AndyAresa]

It is interesting how this issue of a non-resident director being a PE for the company keeps coming up here on the forums all the time.

Now some ad regarding a tax conference was shown to me somewhere on internet. I clicked and there was a list of speakers with brief info. So the note on one of the speakers said that he is a director of a Luxembourg trust company, and a director of a licensed trust company in the US. A simple search on internet on his name and the second google link is that he is also a director of a UK company. So how does he do it? Does he not have exposure to PE risk in his country of residence, in respect of the two foreign companies?

 

[Onassis]

Appointment of a non-CY tax resident director is possible but this will denote that management and control of the Cyprus entity will be performed from abroad (where the Director will reside).

So if we:
1) set up a limited company in Cyprus,
2) become a tax resident (non-dom) shortly after,
3) after a year or two decide to leave Cyprus (aka become a non-resident) and travel full time as a PT

...we are not going to be able to get a tax residency certificate for the LTD anymore, at least not as long as we are the director?

My suggestion is to explore the 90 days rule and other personal income tax benefits (i.e. 50% exemption)

Staying a (tax) resident is a decent option but requires paying for an apartment throughout the year even if we are travelling full time

 

[CyprusBusiness]

So if we:
1) set up a limited company in Cyprus,
2) become a tax resident (non-dom) shortly after,
3) after a year or two decide to leave Cyprus (aka become a non-resident) and travel full time as a PT

...we are not going to be able to get a tax residency certificate for the LTD anymore, at least not as long as we are the director?

Yes your understanding is correct. Please see Tax Residency Certificate Application form https://www.mof.gov.cy/mof/TAX/taxd...82280036DC11/$file/TD 98_2015.pdf?OpenElement

If any of the questions under Section C.2 raised in the application form is answered 'No' then the Tax office will not issue this certificate.

Staying a (tax) resident is a decent option but requires paying for an apartment throughout the year even if we are travelling full time

Yes that is true, depending on budget there are lower priced options to specific locations.

Happy to PM you if you need more details

 

[Onassis]

Yes your understanding is correct. Please see Tax Residency Certificate Application form https://www.mof.gov.cy/mof/TAX/taxd...82280036DC11/$file/TD 98_2015.pdf?OpenElement

All clear, thank you.

 

[kkein]

Dual tax residency

Cyprus is party to more than 60 tax treaties, providing for “tie-breaker” rules where two countries claim the tax residency of an individual. You need to make sure you understanding taxing rights of both countries

Payroll taxes and social insurance contributions

The large majority of the tax treaties that Cyprus has with other countries, contain an ‘employment income’ article which does not give taxing rights to Cyprus if certain conditions are met, including that the individual spends no more than 183 days in Cyprus in any 12-month period.

Do i understand correctly that this also mean that the 60 days rule that Cyprus has to grant TRCs to individuals can be challenged by other countries due to the type of DTA Cyprus has with said countries?