Is Cyprus the best option for an EU company ?

[iNomad]

Hallo everyone,

I am looking to incorporate an "easy to operate" location independent business within the EU.

Total corporate tax should not exceed 20%, and no tax on monthly dividends for non resident.

Should be easy to operate, all online or max as possible, and straight forward without many audits and the other non-sense that are required by Hong Kong and similar low tax jurisdictions.

Also, the plan is to send the dividends to Bosnia, and be taxed here at the standard 10% personal income tax rate.

So far I am looking at Cyprus as the best option, but I am also considering Estonia BUT only for the ease of operating, still think 20% is to much to be an option here, but they deserved a mention, ONLY for the ease of operation.

What would You suggest as a better option.

I feel the ease of running a Estonian company is very attractive due to incorporation and accounting services from "leap" and similar companies, but I am also struck with Cyprus, mainly for the anonymity and the 12.5% tax rate.

I guess the question here is :

1. Is it worth to go trough the hassle of obtaining a E-residency and pay a higher percentage in corporate tax, for the ease of doing business there, using services like "leap", or should I go with Cyprus ?

2. What are the cost differences, minimal capital requirements for setting up a company and running cost expenses for this 2 options ?

I would really appreciate Your insights and thoughts on this matter.

Or any other suggestions, if there are better ON-Shore (reputable) options in Your mind.

Thank You.

 

[Sols]

Cyprus requires an annual audit and management/maintenance costs tend to be higher than Estonia. Budget at least 10,000 EUR per year in Cyprus for a business with a few monthly transactions. You can shop around for different pricing and negotiate flat rate accounting if your business is very predictable.

Capital requirements (amount of money you must put into the company) is none in Cyprus (no paid up capital required) and can be very low in Estonia.

Whether Cyprus is worth the extra cost for the lower tax is a simple mathematical equation for you to solve. Calculate the costs and taxes of both and see how it stacks up against your expected revenue and profits. Make sure you consider all applicable taxes, such as any withholding tax and difference in VAT if applicable. You can ask a couple of accountants/lawfirms in either jurisdictions for help. Most will provide basic guidance for free.

I'm not sure what anonymity you expect in Cyprus. Shareholders and directors appear on public record, just like in Estonia. However, while they do add extra cost, nominees are more common in Cyprus than in Estonia, and it's not yet clear how Cyprus' UBO registry will look.

 

[Gediminas]

Hi,

I don’t think Estonia is the best option due to the following reasons. The total effective tax rate would be quite significant (Estonia will charge corporate income tax at the moment of dividend distribution) plus as you mentioned local tax on received dividends. In recent years Estonia faced huge money laundering scandals (Danske Bank, Swedbank) so it is not so attractive from a banking perspective and overall reputational perspective. Moreover, such projects as e-residency do not have a real legal sense, i.e. I don’t see actual benefits of it. Cyprus is almost twice more tax effective in your case and easier to operate.

Cyprus obviously is also not the strongest country from a reputational perspective, but still regulation is Cyprus is very clear, tax environment predictable and stable, also not expensive to operate.

The final price would depend on your particular situation, needs, substance, etc.

 

[iNomad]

Thank You very much for both replies.

I also feel Cyprus is the better way to go here.
At least "most reputable EU jurisdiction" for that tax amount, if I am correct.

What would be the standard operating monthly cost in Cyprus (Accounting, virtual office etc) ?
Also can You recommend a good "online" accounting agency there ?

P.s. I suppose Company bank account can be Transwerwise or similar EMI ?

 

[Gediminas]

What would be the standard operating monthly cost in Cyprus (Accounting, virtual office etc) ?
Also can You recommend a good "online" accounting agency there ?

P.s. I suppose Company bank account can be Transwerwise or similar EMI ?

The prices may vary with different service providers, but this is what I would offer -

Accounting (low-level activity) - from 1000 EUR annually, registered office - 600 EUR annually, company secretary - 500 EUR annually.

Yes, the company bank account can be any EMI account.

 

[iNomad]

Thanks for the reply Sir,

So roughly we are talking about 175-200€ per month for running costs for a Cyprus LTD company ?

If this is the case Cyprus is very affordable to be honest.

What is the going rate for incorporation services ?

 

[Gediminas]

Send me an email, if you wish and we will discuss it through.

 

[iNomad]

Will do so Sir, thank You again.

Anyone else feel free to contribute as well, any info regarding Cyprus is highly appreciated.

Especially from location independent owners, would love to hear their experience with Cyprus.

Thank You.

 

[iNomad]

Also question, user Sols mentioned above: Budget at least 10,000 EUR per year in Cyprus for a business with a few monthly transactions.

Is this the norm or is it more in the 200€ range per month.

Any info would be highly appreciated from people who operate a location independent business in Cyprus.

Thank You.

 

[Sols]

Since you haven't provided any indication about the size of your business, I based the 10,000 EUR/year figure on an average of a couple of Cypriot companies where accounting and management are done through reputable lawyers, tax advisers, and accountants. This includes about 10 predictable transactions per month, audit, and provision of local directors.

If you have more transactions, accounting work required goes up and so do your costs. You can find cheaper accountants. There are hundreds of firms on Cyprus. I usually recommend people work with international firms as they tend to offer more reliable quality than the smaller local ones.

You need local directors for the company to be tax resident in Cyprus. Without that, the company normally pays 0% tax (instead of 12.5%) in Cyprus but then you can't avail of any double taxation treaties to lower your final tax burden.

For 200 EUR per month, you're looking at maybe one or two hours work by a junior accountant. Per month. For all your accounting needs. That's only realistic if you have a company with very few and very predictable transactions. And it does not cover your audit costs at all.

 

[iNomad]

So realistically is more in the 500€ per month range for a location independent (small) online business with 150 incoming transactions monthly and around 100k yearly revenue?

Or if merchants pay in the company account once every week in that case there are 4 bigger transactions for the accountants.
This would be the way to lower the transactions received to company account i guess ?

But I see the total picture now better, thanks for the answer.

I guess it would be around 500€ per month for all the standard running cost services, excludes the yearly audits etc ?

Incorporation around 1500€ if I am not mistaking and no minimum paid up capital required.

No tax residency needed for me as individual, can be opened and run as non-resident, would pay 12.5% to Cyprus as corporate tax and forward the rest as dividends to Bosnia where I would be taxed 10% personal income tax and no tax on sending the dividends from Cyprus ?

Or is the reality different as expected here ?

 

[Spinat]

So realistically is more in the 500€ per month range for a location independent (small) online business with 150 incoming transactions monthly and around 100k yearly revenue?

I agree, you can get a "office" at "some" place in Nicosia or a little outside of the town for aprox 500 - 600 / month so you will need water supply and electricity if you consider someone to be there and work.

 

[iNomad]

I think a Virtual office would be enough, if that is allowed there ?
No need to have someone to sit there, in my case, except the accounting service.

Looking for a setup like in Estonia, all online, only to communicate with accounting service, will not personally be in Cyprus.

Hope a setup like this is possible in Cyprus.

 

[curiousmarv]

I think a Virtual office would be enough, if that is allowed there ?
No need to have someone to sit there, in my case, except the accounting service.

Looking for a setup like in Estonia, all online, only to communicate with accounting service, will not personally be in Cyprus.

Hope a setup like this is possible in Cyprus.

Definitely not. That was okay some years ago. Cyprus is actively fighting against so called shell companies. In fact using a address at your accountants office is not 100% compliant since 2019, even for locals living in Cyprus. You need an office where somebody can sit inside theoretically and you need minimum 1 person in place in Cyprus for sure.

 

[Sols]

Definitely not. That was okay some years ago. Cyprus is actively fighting against so called shell companies. In fact using a address at your accountants office is not 100% compliant since 2019, even for locals living in Cyprus. You need an office where somebody can sit inside theoretically and you need minimum 1 person in place in Cyprus for sure.

Where did you get this information from? That's just not true. You can still incorporate in Cyprus and use your lawyers'/accountants' address as the company's sole address. I see it done on a daily basis. There is no requirement to rent an office space and have employees. But it is increasingly common that doing so is expected to have a permanent establishment, especially if you are doing any kind of international tax planning.

 

[JohnLocke]

I don't know what is required to say here, the requirements you have are very simple and can be achieved by most certified accountant in Cyprus. There is no problem to maintain a Cyprus company from abroad on a "virtual office address" works fine for years.

You won't get around the annual financial reports and the accounting stuff but with the right accontant this will bea hands off process and your end.

 

[iNomad]

Thank You all for the detailed comments!

Great Forum with lots of info, feeling much better about Cyprus now.

 

[JustAnotherNomad]

You don’t have to distribute dividends from an Estonian company. If you bill your own company from Bosnia, then Estonia will not tax that money at all, it will simply be a business expense. But beware of permanent establishment in Bosnia/effective place of management/CFC rules.
The biggest downside with Estonia is that everything is public. You can google a company to find everything down to how much tax was paid and the date of birth of the shareholders and directors.