Cyprus holding + USA LLC

[metronic]

hey guys,

I was wondering how Cyprus would see the income coming from a USA LLC. would it be seen as dividends or as dividends or as a regular (salary) income? if so, would Cyprus holding company owning the USA LLC help with that? (since the holding would own the company the profits would go to the parent company and since they are foreign not be subject to CIT in Cyprus).

if anyone with a Cyprus company/residency has any experience with this I would love to hear more about it.

thanks for all the tips

 

[Sols]

AFAIK, it has not come up in the courts yet nor has the tax authority issued any ruling or guidance. It seems people get by with calling income from an LLC dividends, even if it technically isn't under US law.

If you insert a holding company, the holding company wouldn't necessary have to pay CIT if the income from the US LLC into the CY holding is considered a dividend payment, which it most likely would be.

 

[metronic]

AFAIK, it has not come up in the courts yet nor has the tax authority issued any ruling or guidance. It seems people get by with calling income from an LLC dividends, even if it technically isn't under US law.

If you insert a holding company, the holding company wouldn't necessary have to pay CIT if the income from the US LLC into the CY holding is considered a dividend payment, which it most likely would be.

yeah, that's what I was also thinking about. I think it would be better to go with the 2 tier structure of the LLC and the Cyprus holding. thank you for your answers, they are always very helpful

 

[sujoe]

Yes this is the way to go, a lot of countries like Canada, Germany and UK (case by case basis) treat it as dividends, regarding the LLC as opaque entity, rather than transparent. If you want to be safe, use Hong Kong. Dividends are not taxed, and even if IRD regard it as profits, it is offshore profits anyway (you need to claim it though). so you have a double protection

 

[Jerry1911]

Wouldn't CFC rules kick in since the parent entity is an EU company? Cyprus has CFC rules for companies!

 

[sujoe]

When it comes to CFC rules, the devil is in the detail, if OP really wants to incorporate it in Cyprus, he would have to talk to professionals in Cyprus. However a cursory glance on the internet revealed that:

There should be no CFC charge if there are no significant people functions in Cyprus that are instrumental in generating the income of the CFC. A Transfer Pricing Study will be required in this respect.

https://www.mondaq.com/cyprus/corporate-tax/1024880/the-anti-tax-avoidance-directive-atad
I still think Hong Kong would be the best option though