Moving to Cyprus – Is the HK offshore structure still viable? What are the real risks?

[jiejq]

Hi everyone,
I'm thinking about moving to Cyprus because I want to live in a sunny place by the beach. I run a 7-figure online business and I'm trying to understand the best way to structure things for taxes while living there.

I’ve heard that some people use a Hong Kong company with a nominee director, claim it as offshore, and pay 0% on dividends (just the 2.65% GHS contribution up to €180k). Is this still a viable and safe option?

Do the Cypriot tax authorities actually enforce the management and control test? Or do they generally not investigate where the company is really controlled from?

Would it be better to just set up a Cyprus company and pay the 12.5% corporate tax? Or maybe do both , have a clean Cyprus company and send part of the billing through an offshore one?

Also, if Cyprus considers that the offshore company is actually tax resident in Cyprus because I live there and manage it from there , what exactly are the fines and criminal consequences, if any? I know I'd have to pay back taxes, but I’d like to understand what kind of penalties I could face (percentages, amounts, or legal risks).

If anyone here is in a similar situation or knows more about this, I’d love to hear your thoughts. Thanks!

 

[alley]

Would it be better to just set up a Cyprus company and pay the 12.5% corporate tax? Or maybe do both , have a clean Cyprus company and send part of the billing through an offshore one?

Personally, I would prefer to set up a local company in Cyprus and just pay the required tax, simply to have peace of mind and something to show, if needed. You never know when you might want to finance a house, a car, or move to another country where you’ll need to document your income from the past couple of years.

That way, you can still have a Hong Kong company or any other structure alongside it, giving you a bit more flexibility in how you route income through the Cyprus entity.

 

[Sols]

I’ve heard that some people use a Hong Kong company with a nominee director, claim it as offshore, and pay 0% on dividends (just the 2.65% GHS contribution up to €180k). Is this still a viable and safe option?

Seems to be, but no one can guarantee it'll stay like that.

Do the Cypriot tax authorities actually enforce the management and control test? Or do they generally not investigate where the company is really controlled from?

They generally do not, especially if you're a foreigner that don't cause any problems.

Would it be better to just set up a Cyprus company and pay the 12.5% corporate tax? Or maybe do both , have a clean Cyprus company and send part of the billing through an offshore one?

Up to you.

Also, if Cyprus considers that the offshore company is actually tax resident in Cyprus because I live there and manage it from there , what exactly are the fines and criminal consequences, if any? I know I'd have to pay back taxes, but I’d like to understand what kind of penalties I could face (percentages, amounts, or legal risks).

I'm unsure if it's ever been attempted... However, based on what happens in other jurisdictions with similar laws (and which actually enforce such laws), the fines would depend on the exact circumstances. There's a difference between a simple mistake to actively taking steps to avoid paying taxes. In Cyprus, my guess is you'd be getting hit with the taxes owed plus late tax payment fines. The fines are modest.

 

[CyprusLawyer101]

Hi everyone,
I'm thinking about moving to Cyprus because I want to live in a sunny place by the beach. I run a 7-figure online business and I'm trying to understand the best way to structure things for taxes while living there.

I’ve heard that some people use a Hong Kong company with a nominee director, claim it as offshore, and pay 0% on dividends (just the 2.65% GHS contribution up to €180k). Is this still a viable and safe option?

Do the Cypriot tax authorities actually enforce the management and control test? Or do they generally not investigate where the company is really controlled from?

Would it be better to just set up a Cyprus company and pay the 12.5% corporate tax? Or maybe do both , have a clean Cyprus company and send part of the billing through an offshore one?

Also, if Cyprus considers that the offshore company is actually tax resident in Cyprus because I live there and manage it from there , what exactly are the fines and criminal consequences, if any? I know I'd have to pay back taxes, but I’d like to understand what kind of penalties I could face (percentages, amounts, or legal risks).

If anyone here is in a similar situation or knows more about this, I’d love to hear your thoughts. Thanks!

Hello
The various options you are describing are generally doable however carry with them elements of tax risk uncertainty. A more sound approach would have been to look at each and every part of the operation and seek to create a well defined operational structure which adheres to transfer pricing principles. This would mean that you could still end up with a HK company as your primary operating company but ensure that where certain operstional parts are handled from elsewhere, for example Cyprus, that the Cypriot tax authorities get their fair share of taxes. This way you do not carry the risk of uncertaintly where any tax authority would wake up one day , change its tax policies and start enforcing taxing rights. The fact that you already have the set up in place is good as you generally satisfy motive tests and potential claims of an artificial set up . At first sight it appears that we are able to advice on a sucessful transition. Kindly let me know if you would like to discuss it further.

 

[brianK]

This would mean that you could still end up with a HK company as your primary operating company but ensure that where certain operstional parts are handled from elsewhere, for example Cyprus

So in other words, the Cyprus company acts as a kind of holding company for an HK entity operating outside of Cyprus, and therefore isn't taxed in Cyprus?

 

[SilverNeo]

There are many ways you can do this but I would not take the above approach too many uncertainties there are better ways especially for someone making 7 figures

 

[alley]

There are many ways you can do this but I would not take the above approach too many uncertainties there are better ways especially for someone making 7 figures

Can you inform about a few of them please?

 

[SilverNeo]

Can you inform about a few of them please?

Not happy to talk about them on public forum dm me and i would be happy to share

 

[pesto]

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I’m currently based in the UAE and have been weighing up whether it makes sense to shift part of my structure to the EU Cyprus being a strong contender.
I’ve used HK companies in the past, mainly for invoicing and holding digital assets, but over the last few years, the administrative friction has definitely increased.

Banking has become the main challenge. Even with clean operations, it’s getting harder to maintain accounts linked to Hong Kong entities unless you have a strong physical presence or a local director.
That’s one of the reasons Cyprus started looking more attractive: EU compliance, easier banking, and still relatively tax efficient if you structure things right.

That said, moving to Cyprus means you need to think about personal tax residency and how it ties into your structure especially if you’re planning to spend a significant amount of time there. I’ve spoken to a couple of advisors who mentioned the 60-day rule and non-dom status, which might be useful depending on your situation.

Would be great to hear from someone who’s actually made the switch from HK to Cyprus recently, how did it go in practice?