Difference between residence and tax residence for corporate Banking

[MarkusCostigan]

Hi guys. Imagine being tax resident in a European country A, opening a company in country B and taking up personal residence only (not tax, only residence permit, not stay more than 183gg in country B) for example by being hired through the company, apartment, social security etc...

Would the fact of being resident (but not for tax purposes) in country B make it easier to open bank accounts and manage this company? Or do you really have to be a TAX resident (not enough only residence permit)? Thank you.

 

[Sols]

(not tax, only residence permit, not stay more than 183gg in country B)

Be careful with this. The 183 days thing is just one of many ways tax residence can be determined. In Switzerland, for example, you can become tax resident just by intent even if you just set your foot in the country for a second. Many countries use other methods to determine tax residence.

Would the fact of being resident (but not for tax purposes) in country B make it easier to open bank accounts and manage this company? Or do you really have to be a TAX resident (not enough only residence permit)? Thank you.

The bank will ask you about your tax residence when you open the account. If it doesn't match where you actually live, you become a complicated applicant. It's not completely uncommon to have people with tax residence not matching physical residence but the bank will start asking more questions. And if they don't like the answers, they are likely to not proceed, unless you're about to become a high-value client to the bank.

 

[daniels27]

For the banks, they normally ask for the tax ID. For credit cards, they very often also ask for the registration confirmation. You will have to disclose all tax IDs for all countries were you are tax resident (which are both countries with very few exceptions, see below).

In most European countries, it works like this. You register at the city hall. They give you a tax ID and registration confirmation. You are a tax resident already.

You then have to sort it out with the double tax treaties to determine in which country you need to pay tax.

Then, there are the social security contributions for which the rules again are different. You will be paying social security (and health care) in the country where you are employed more. Self employment only comes to play if there is no employment.

 

[MarkusCostigan]

For the banks, they normally ask for the tax ID. For credit cards, they very often also ask for the registration confirmation. You will have to disclose all tax IDs for all countries were you are tax resident (which are both countries with very few exceptions, see below).

In most European countries, it works like this. You register at the city hall. They give you a tax ID and registration confirmation. You are a tax resident already.

You then have to sort it out with the double tax treaties to determine in which country you need to pay tax.

Then, there are the social security contributions for which the rules again are different. You will be paying social security (and health care) in the country where you are employed more. Self employment only comes to play if there is no employment.

Let's say country A is Malta and B is Cyprus.

The idea is to get hired by your company in Cyprus and take up residency through employment (residence permit only - non tax - Already tax resident in Malta). As a Malta non-dom, income generated outside Malta is only taxed if remitted. Obviously paying taxes and social security on your salary is ok in Cyprus. The idea is to run the company in Cyprus (go to Cyprus often? and stay there for a while). Create some sort of real substance (office, maybe an employee in the future??).

The issue of not being a tax resident in Cyprus is because:
1) I don't want to spend more than 183 days in Cyprus.
2) The only way not to pay SDC in Cyprus on dividends is:
2.1: or be non-dom (not possible because you have to give up your previous tax residence)
2.2: or be non-tax resident as a natural person (this).

 

[Don]

Yes, obtaining residency can be a great way to get access to banking and build up credit.
It is possible in some cases to become a legal resident without turning into tax resident.

2) The only way not to pay SDC in Cyprus on dividends is:
2.1: or be non-dom (not possible because you have to give up your previous tax residence)
2.2: or be non-tax resident as a natural person (this).

Thats not entirely correct. You could also operate as a branch office of a foreign company in Cyprus. There is no SDC on profits repatriated to head office.

 

[daniels27]

With Cyprus, you should be fine under 183 days. For social security, see this page
https://europa.eu/youreurope/busine...-security-health/social-security/index_en.htm
If you do not work in Malta, you are subject to it in Cyprus and pay health insurance etc. only there.

 

[Don]

For the sake of completion you can also operate as a Cyprus PE.

Persons that may benefit from the Cyprus tax regime include Cyprus tax-resident taxpayers, tax-resident permanent establishments (PEs) of non-tax resident persons, and foreign PEs that are subject to tax in Cyprus.

 

[MarkusCostigan]

Yes, obtaining residency can be a great way to get access to banking and build up credit.
It is possible in some cases to become a legal resident without turning into tax resident.

Thats not entirely correct. You could also operate as a branch office of a foreign company in Cyprus. There is no SDC on profits repatriated to head office.

By repatriating the capital from Cyprus to Malta I would pay for the remittance I think...

So a non tax resident creating a PE in Cyprus (event if less than 183gg in Cyprus) can become tax liable in Cyprus?
The important thing is that you can file as a non-dom in that case too

However, the TAX number is actually given to you immediately on request (via the yellow slip as employed through your company)

The question is this:

Does the Cypriot non-dom have to be requested or is it automatic like in Malta? That is, if I were a tax resident, would I be treated as non-dom in any case?

 

[Don]

By repatriating the capital from Cyprus to Malta I would pay for the remittance I think...

So a non tax resident creating a PE in Cyprus (event if less than 183gg in Cyprus) can become tax liable in Cyprus?
The important thing is that you can file as a non-dom in that case too

However, the TAX number is actually given to you immediately on request (via the yellow slip as employed through your company)

The rate of tax on Cyprus branch profits / PE profits is the same as on corporate profits (12.5%). No further tax is withheld on transfers of profits or funds to a foreign head office.

Based on DTA, business profits from a foreign PE are normally not double taxed in Malta.

The question is this:

Does the Cypriot non-dom have to be requested or is it automatic like in Malta? That is, if I were a tax resident, would I be treated as non-dom in any case?

Its not automatic. You need to qualify for the status. For example, if you fail to qualify as tax resident in Cyprus you will also not be a non-dom. Depending on your circumstances, there is a chance to be screwed, so plan carefully.

 

[MarkusCostigan]

BUT then at this point, it is possible to take up residence in Cyprus (just residence permit yellow slip), be the director of my company and take a salary (pay salary taxes in Cyprus), make frequent trips to Cyprus to have management and control, but stay still less than 183 days?