Individual moving to Cyprus, keeping Limited company in UK.

[brescape]

I was a uk resident till last year 2020, I have now decided to leave UK and move to Cyprus where I want to spend 185 days this year so to become resident.
I want to travel in the rest of the year, both in EU and extra EU, with no more than 30/45 days in any country.

My income comes from a UK limited (not LLC) specializing in software consulting, that pays me only dividends, and some property rentals in EU.

I cannot move my clients out of the UK limited company, in other words, I still need to invoice out of such company, so the company still need to trade as limited (and not as LLC). The company hasn't a physical presence in UK, and all customers are foreigner entity ,extra UK, and extra EU. The company pay UK tax at 19%

From an individual residence perspective, given that 185 days in Cyprus would enough to be resident as in Cyprus, and I will be careful not to become resident also in any other country by spending not much time anywhere, (for example in UK less than 16 days),

From a corporate tax residency perspective, although my company is incorporated in UK there is a question on where the company would be considered resident EIt would be between UK where is incorporated, banking and has accounting, or in Cyprus where it would be day to day controlled for 185 out of 365 days. From what I understand of the double tax treaty, it is however not possible for the company to be considered taxed in both country, that is somehow different than in the case of individuals

I suppose it is hard to call which of the two countries would be, but my point is that at the end of the day, assuming is one or the other, it should not make, for me much differences.

In my view this is a simple setup because it would allow me one of the two below scenarios:

1) If the company is considered UK resident
- Pay 19% corporate tax and keep my accounting and banking structure in UK (where is sensibly cheaper)
- Pay 0% on dividends on foreign dividend
- Pay tax on rental income as resident (progressive)

2) If the company is deemed as Cyprus resident
- Pay 12.5% (or even 2%) corporate tax and move my my accounting in cyprus (were is somehow more expensive)
- Pay 0% on dividends from local company
- Pay tax on rental income as resident (progressive)

The accountant in Cyprus suggested making an effort to move control in Cyprus that would entitle me to a much more beneficial tax situation, but I am not interested in achieving a super efficient tax structure, I am more than happy to keep things simple and pay 19% in uk.

I could also open a company in Cyprus and invoice some time and material for activity to the UK limited, but that in my understanding would require some extra care on profit shifting and understanding of transfer pricing rules.

I guess my question is that, assumed I do not care if paying 19% or 12.5%, do you see anything wrong by moving without a clear understanding on which country my limit would be considered at the end of the year? Some trap I am not considering?

Also, how does this work practically, can I have the two taxes offices agree on where the company is resident? Can they disagree and both say they think the company is resident in their country and therefore finish in a situation in which i need to pay corporate taxes in both countries? What if I pay in uk and then Cyprus think it should be Cyprus?

Any opinion?

 

[CaptK]

Both countries will argue you owe them money. By virtue of an LTD you are tax resident in the UK but by PE and CFC rules its a Cypriot company.
Why Cyprus, if you plan on living a nomadic lifestyle.

 

[brescape]

> Both countries will argue you owe them money. By virtue of an LTD you are tax resident in the UK but by PE and CFC rules its a Cypriot company.
true, and agree that is not clear which of two would be right. Said that, DTT say the company can be only tax resident in one of the two. I guess this is the point of my question, how that would work, can they both claim company residency

>Why Cyprus, if you plan on living a nomadic lifestyle.
I want to avoid that my birth country, an high tax jurisdiction in EU where I have a house available to me (that do not want to sell), in absence of a specific tax residency in the future may claim tax residency there. Although I spend less than 60 days a year there, I have a house, so leaving UK and going nomadic would expose me in country.

 

[CaptK]

So

> Both countries will argue you owe them money. By virtue of an LTD you are tax resident in the UK but by PE and CFC rules its a Cypriot company.
true, and agree that is not clear which of two would be right. Said that, DTT say the company can be only tax resident in one of the two. I guess this is the point of my question, how that would work, can they both claim company residency

>Why Cyprus, if you plan on living a nomadic lifestyle.
I want to avoid that my birth country, an high tax jurisdiction in EU where I have a house available to me (that do not want to sell), in absence of a specific tax residency in the future may claim tax residency there. Although I spend less than 60 days a year there, I have a house, so leaving UK and going nomadic would expose me in country.

So we can assume you are talking about one of the Nordic countries.

I would suggest a UAE structure instead of Cypriot. You can keep the UK structure and the model you want to follow fits.

 

[brescape]

Actually it is not, southern countries are actually also high taxation in my opinion... (Spain, Italy, France...)

Even assuming I want to move to UAE, I am not sure how UAE structure would help me compared to Cyprus. Individual and corporate taxes are 0 there, but so is dividend tax in Cyprus. Again, I am not looking for a zero setup, but for one that would be as simple as possible (and for me moving to Cyprus as EU citizen is way easier) while making sure I am compliant in the eye of the tax offices where I am going eventually to move in the future and possibly buy a house.

I actually pretty much narrow down my choice to Cyprus, anybody can comment on my initial question?

 

[heliotrope]

If your tax residence moves to Cyprus (nb., you should also note that it is possible to obtain tax residence there with a mere 60 days, although at the very least you need a Cyprus company for that purpose, even if it does not trade), the UK company's tax residence will also shift. This leads to a number of undesirable consequences; exit taxes can be due in the UK; redomiciliation of the company in Cyprus is absolutely non-trivial. In short, avoid. You're thinking of it strictly as if you're at a supermarket choosing the better rate of tax, but there are many many other reasons to avoid this scenario.

If you're hellbent on keeping the UKCo, then ensure that it has a proper structure. There should be UK-based directors. There should be a genuine attempt to ensure that management and control takes place in the UK -- you should fly there for board meetings etc. You should pay for professional cross-border tax advice to show that you took these questions seriously. The UK certainly won't object to you paying 19% and for the rest you must rely on Cyprus' reputation for being fairly relaxed. If that holds up when they are looking for extra funds to plug Covid gaps.

 

[brescape]

Thanks Heliotrope.
I do want to keep the limited structure in UK.
Talking about professional cross-border tax advice, would you suggest one of the big four?
Also, in terms of keeping the limited structure in UK, would it be any different if I, as individual (and director) move to Cyprus or in Portugal (maybe as NHR)?

 

[heliotrope]

Thanks Heliotrope.
I do want to keep the limited structure in UK.
Talking about professional cross-border tax advice, would you suggest one of the big four?
Also, in terms of keeping the limited structure in UK, would it be any different if I, as individual (and director) move to Cyprus or in Portugal (maybe as NHR)?

Again, providing you have a couple of directors in the UK, it is reasonably unlikely that the UK would be unhappy about you continuing to want to pay CT there. (The directors thing is a bare minimum because otherwise there's no possible way to argue that the company's tax residency hasn't followed you out the door).

In theory Portugal is also quite lax about this. Either you find somewhere lax and trust that (not sure if there's much difference between Portugal and Cyprus), or you find somewhere the tax law doesn't redomicile your company by virtue of management and control shifting there.

 

[brescape]

>or you find somewhere the tax law doesn't redomicile your company by virtue of management and control shifting there.

Can you please point me on which countries do not redomicile your company by virtue of management and control? or even better how can I find them?

 

[heliotrope]

>or you find somewhere the tax law doesn't redomicile your company by virtue of management and control shifting there.

Can you please point me on which countries do not redomicile your company by virtue of management and control? or even better how can I find them?

A general impression from reading around these threads is that Switzerland and UAE would be good places to begin investigating.

 

[brescape]

Any chance there is any country in the European Union?

 

[heliotrope]

Any chance there is any country in the European Union?

Switzerland is part of the Single Market, therefore it's difficult to see what more you could need. Otherwise there's so much common policy via the EU's ATAD that you'll find little variation from one to the next.

 

[sylwiasj]

Thanks Heliotrope.
I do want to keep the limited structure in UK.
Talking about professional cross-border tax advice, would you suggest one of the big four?
Also, in terms of keeping the limited structure in UK, would it be any different if I, as individual (and director) move to Cyprus or in Portugal (maybe as NHR)?

Why not UK LLP? instead of LTD?

[the post was from Feb, did you decide on anything? ]