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Question Is Using a Cyprus Trust to Avoid Taxes in Europe Too Good to Be True?

curiosologybusiness

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Good morning everyone,

I think many will find this question interesting.

I saw a viral TikTok video about a company offering Cyprus trusts as a solution for Europeans. Here’s the idea:

1. Open a trust in Cyprus with a Cypriot lawyer as the trustee.
2. Sell your intellectual property to the trust.
3. All money your company makes goes into the trust.

Results:
- Personal income = 0
- Company income = 0
- Money is protected and gets tax benefits in Cyprus.
- You can live anywhere in Europe.

This seems too easy and beneficial. What problems might come up? What are the things to take in consideration?
 
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Also, ownership is just one part of it.

Let's say the company was registered in the Seychelles and owned by some Saudi prince. So what?
Is it the Saudi prince that manages the company? No, you are. So the company is taxable where you are.

Oh, but it doesn't have any profit because it spends all its money on licensing fees for some IP?
The fees have to be at arm's length. Which they are by definition if the parties are unrelated. But they likely wouldn't be if you are in some way a beneficiary of the trust (if the trust was even recognized).
So then the tax authority will check if the price for the IP was artificially inflated.
What is your IP? Some logo anyone could have ordered off Fiverr for $5? And for this the company just happens to pay $1M in fees for, and the director decides this was a good financial decision for the company?
What's really going to happen is they will say the value of the logo is $5 and anything in excess of that was taxable profit shifting.

They may also pull out CFC rules etc. to make the trust itself taxable.

The general idea does work, but the running costs for a compliant setup are so high that it only makes sense once you have reached a certain level of profit.
And you would usually still have to pay personal income tax.
 
You could do something similar with a foundation instead. Foundations are usually recognized in Europe.
But all the other points still hold true. You cannot have control of the foundation, so you will have to pay someone to manage it for you, for a proper salary (=high costs), and then you also run the risk that they will just take your money and leave.
And if you manage the company from another country, then there will be tax in that country, on the profits.
If you don't have profits, of course there will be no tax, but you probably won't be able to reduce the profits to zero, because you are not Starbucks.

Starbucks can do that, they can put their IP (brand, logo, franchising concepts, ...) into a Cayman Islands company, hire 100 people to sit around in the Cayman Islands doing basically nothing, and then charge their global subsidiaries high fees for licensing the IP. That works because Starbucks is a valuable brand. But if it's your own company that nobody knows and you don't have 100 employees in the Cayman Islands, the tax man will just laugh in your face.
 
Good morning everyone,

I think many will find this question interesting.

I saw a viral TikTok video about a company offering Cyprus trusts as a solution for Europeans. Here’s the idea:

1. Open a trust in Cyprus with a Cypriot lawyer as the trustee.
2. Sell your intellectual property to the trust.
3. All money your company makes goes into the trust.

Results:
- Personal income = 0
- Company income = 0
- Money is protected and gets tax benefits in Cyprus.
- You can live anywhere in Europe.

This seems too easy and beneficial. What problems might come up? What are the things to take in consideration?
Are you talking about Arka Wealth? If yes I had some communication back and forth with them and once you start asking the hard/important questions they will simply ghost you. I wouldn't TRUST a service that cannot even communicate properly. Sadly same experience with other Cyprus trust providers, it feels like they just want you to pay for the setup and not ask questions.
 
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Are you talking about Arka Wealth? If yes I had some communication back and forth with them and once you start asking the hard/important questions they will simply ghost you. I wouldn't TRUST a service that cannot even communicate properly. Sadly same experience with other Cyprus trust providers, it feels like they just want you to pay for the setup and not ask questions.

Yes, they’ve gone very viral on TikTok. I haven’t contacted them but I tend to be wary because they promise a one-size-fits-all setup. It’s better to contact an international tax advisor and get a tailored solution.
 
I spoke with a lawyer yesterday after reading threads about Trust, he said the same
Check The Hague Convention on trusts. Lack of domestic legislation on trusts doesn’t mean that they are not recognized.
But if you follow TikTok advice you will most likely end up with a sham trust that doesn’t exist anywhere.
 
Based on just a cursory glance at Arka Wealth, you should be glad your critical mindset protected you from probably making an expensive mistake.

This won't work. It's a facade that will crumble if a tax authority so much as glances at it too long.
 
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Based on just a cursory glance at Arka Wealth, you should be glad your critical mindset protected you from probably making an expensive mistake.

This won't work. It's a facade that will crumble if a tax authority so much as glances at it too long.
Yet I have no doubt some people will fall for it. Especially those who have no idea about how anything offshore works
 
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A Trust advertising on TikTok, I can hardly understand this world anymore. It was already enough that Presidents and governments appear on social media, but an offshore Trust on TikTok takes the cake. And now there’s even someone who believes what they saw on TikTok!

Is it just me, or are people getting dumber by the day?
 
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Why not? To attract a younger generation that has acquired wealth with social media you have to go where they are.
Some of them are too dumb to open a carton of milk. How do you expect them to understand what a trust is? They’d probably confuse it with “trust” and fail to see how trust could help them protect their money.

TikTok is for generation DUMB, and DUMB can’t protect their money for what, anyway? They’ll just spend it.
 
Some of them are too dumb to open a carton of milk. How do you expect them to understand what a trust is? They’d probably confuse it with “trust” and fail to see how trust could help them protect their money.

TikTok is for generation DUMB, and DUMB can’t protect their money for what, anyway? They’ll just spend it.
So many assumptions.

To be clear upfront, I am by no means from the TikTok generation. I however do understand a thing or two about marketing. One of the first items is that you need to be out there where your potential clients are to raise awareness. From there on the provider has a duty of care (which is obligatory under common law anyways) and the client similarly has a duty of being well informed.

In the end there are enough from Gen Z that will make wise decisions similarly to how people from my generation made wise decisions (and are now in the drivers seat).

That you dont like it, which is ok, doesnt mean its bad.
 
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Good morning everyone,

I think many will find this question interesting.

I saw a viral TikTok video about a company offering Cyprus trusts as a solution for Europeans. Here’s the idea:

1. Open a trust in Cyprus with a Cypriot lawyer as the trustee.
2. Sell your intellectual property to the trust.
3. All money your company makes goes into the trust.

Results:
- Personal income = 0
- Company income = 0
- Money is protected and gets tax benefits in Cyprus.
- You can live anywhere in Europe.

This seems too easy and beneficial. What problems might come up? What are the things to take in consideration?
Can you let me know what you figured out with the Trust you setup to pay less tax ? I'm looking for a legal way of doing the same, more to pay less tax.
 
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