IP Box setup to avoid problems

[mgs999999999]

Hi everyone,

I was wondering if the following setup would be legal and acceptable.

A little bit of background about me first. I do data analysis. I develop very complex and sophisticated mathematical models. My clients are all from USA and EU. I was born in EU.

I have a company in Andorra where I am tax resident. In Andorra you have 10% CIT but 0% dividends. I have developed some apps and very sophisticated codes to optimize my workflow and do my work more efficiently. PI BOX in Andorra is 2%.

I was thinking about the following setup.

1) create a company in Cyprus, Bulgaria, wherever… and invoice all my clientes from the USA and EU there. Let’s assume I make 50k per month in Cyprus with my clients doing consulting.

2) My company in Andorra charges 50k/month for a subscription to my Cyprus company for using the software I developed.

Therefore, company in CY would have 0 benefit and Andorra company will have 50k/month benefit but under PI BOX instead of under consulting. Then, my question are:

1) With this setup, should I end up paying 2% PI BOX tax in Andorra?

2) do you see any problem with this setup and the fact that both companies will only be managed by me?

3) do you see any better option?

Thanks a lot in advance,

Best wishes

 

[CyprusLawyer101]

You cannot leave 0 benefit to the Cyprus company.

 

[mgs999999999]

thank you for your reply. What is the minimum money I should leave in CY? Let’s say I have a benefit in CY of 15000€ per year. Would that be enough to avoid problems?

 

[CyprusLawyer101]

thank you for your reply. What is the minimum money I should leave in CY? Let’s say I have a benefit in CY of 15000€ per year. Would that be enough to avoid problems?

A transfer pricing study should determine this by assessing risks assumed and operations performed in each jurisdiction.

 

[mgs999999999]

A transfer pricing study should determine this by assessing risks assumed and operations performed in each jurisdiction.

Sorry for my ignorance. Who performs transfer pricing studies? Why is a study needed? Is it done by the government?

 

[CyprusLawyer101]

It becomes an official requirement in cross border transactions when certain thresholds are met and it must be prepared by the relevant company itself and according to rules of the jurisdiction of tax residency. However even in instances where the thresholds for performing such a study are not met, like in your case most likely, still the same principles should be applied when structuring in order to have sound tax optimization.

 

[myhand]

You will have your tax firm to help you make that audit as @CyprusLawyer101 already mentioned.