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metronic

New member
hey guys,

on of the fb groups I'm in I saw someone post this in and I am curious to see if anyone here has any experience about it. here's his message:

Hope everyone is well.
If you are a non-dom resident on Cyprus, and have a Cypriot company, you can't pay yourself all profits in tax-free dividends.
Has anyone heard of this?
I spoke to PWC Cyprus (a big accounting firm) last week, when I was told: Most people believe that in Cyprus you can manage a local company (corporate tax 12.5%) and then pay yourself all the profits in tax-free dividends as a non-dom. That's not true apparently.
PWC told me that the tax authorities will not accept that construct. Instead, they will want you to pay a significant portion in regular salary as well. Although there was no guiding percentage on what this "significant portion" should be, I was told 50% would have a high chance of being accepted - 10% certainly wouldn't have.
This, of course, makes a HUGE difference, as the regular salary will face income tax and social security.

personally I never heard of anyone having these issues, personally I think that most people there would pay themselves in dividends on top of the must paid salary. any comments are welcome
 

Sols

Staff member
Mentor Group Gold
Never heard of anything like that. Cyprus is full of people only paying corporate income tax (the 12.50%), Gesy (2.65% or so, max 4,800 EUR/year), and then paying themselves tax free dividends. Some also do a small salary to lower the tax burden of the company. It's all completely within the law and the tax authority has as far as I have heard made no move to change how they interpret the law.

There might be specific cases where you want to take out even more as a salary (as well as dividends), though, but it's not a general rule.
 

metronic

New member
Never heard of anything like that. Cyprus is full of people only paying corporate income tax (the 12.50%), Gesy (2.65% or so, max 4,800 EUR/year), and then paying themselves tax free dividends. Some also do a small salary to lower the tax burden of the company. It's all completely within the law and the tax authority has as far as I have heard made no move to change how they interpret the law.

There might be specific cases where you want to take out even more as a salary (as well as dividends), though, but it's not a general rule.


what do you mean by the last sentence exactly?
 

CyprusBusiness

New member
hey guys,

on of the fb groups I'm in I saw someone post this in and I am curious to see if anyone here has any experience about it. here's his message:



personally I never heard of anyone having these issues, personally I think that most people there would pay themselves in dividends on top of the must paid salary. any comments are welcome
Hello

I can confirm that if one obtains the status of a non-domiciled tax resident of Cyprus, he/she will be exempt from Special Defence Tax ("SDC") of 17% and will only be liable to a trivial 2.65% GESY (National Health System Contribution) on those dividend income with a cap of Euro 180,000. No other taxes will arise and this cannot be refuted or challenged by the Tax Office.

The only logic behind the fact that you may need to show that the company employs personnel, is to strengthen the notion of economic substance to avoid double taxation from foreign tax authorities. This emanates from OECD's BEPS Action 5 which introduced minimum substance requirements which are now a important to adhere to as the Cyprus Company setup may be challenged by the foreign Tax Authorities. In this case if the foreign tax authorities decide that management and control does not reside in Cyprus then foreign tax will apply.

What we see Cyprus companies do to avoid this risk is adopting the steps below:
  • Maintaining an office space in Cyprus that is adequate for the scale and alleged purpose of the company or business
  • Having a functioning telephone line, email, and website
  • Opening a bank account with a local bank
  • Bank account signatories based in Cyprus
  • Signing of agreements in Cyprus
  • Holding shareholder and director meetings in Cyprus
  • Employing or appointing "fit and proper" directors and/or employees
  • Exercising effective management and control of the company in Cyprus
I hope this helps.
 
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