New Mexico LLC + Cyprus Non-Dom

playboy

New Member
Hey there,

I'm a EU citizen/resident.
I really like the idea of a New Mexico LLC (non-resident) for my activity which is software development services. No presence in USA.
In terms of banking, I am pretty happy with the option of Transferwise.

So I was wondering if I can combine it with a Cyprus non-domiciled tax status.

As I read, a non-domicile individual who becomes resident in Cyprus is subject to zero tax on any passive income either generated within Cyprus or abroad.
So obviously the company is managed and controlled from beautiful and sunny Cyprus. I am pretty confused about CFC rules and reporting for this case.

What do you think about this combination?
Do I miss something?

I'm glad to be part of this forum!
Cheers!
 

Gnux

New Member
I live in Cyprus as non dom. Non dom is only for dividends!! LLC corparations are passthrough meaning money is taxed on personal tax, that means you pay up to 35% tax on it. Careful. ;)

Also since last year, there is some health tax on dividends. (2,5%) Its capped after 300k or something. Not many people know.

And also important: Cyprus has no CFC rules on the personal level (only corparate) but they have some rules of management. Its mostly to establish residency for people who want to have their company resident in Cyprus but they could also read like you get counted as a resident company. You should use nominees which is a problem with bank accounts.

If you want to use an llc you need another company that owns the llc. Also problematic with bank accounts.

I have Seychelle Company and transferwise. But i only have one income source and its a reputable company. Transferwise wanted a shit ton of paperwork. Just send them everything you can think of even if they dont ask. I even got usd account but i didnt get a debit card.

When i moved here i also wrote a government offical in the finance ministry and asked if i am allowed to own an offshore company. This is what i got back, in maybe it helps you:

A foreign company can be considered to be a Tax Resident of Cyprus if it is managed and controlled in Cyprus.

The prerequisites to establish that management and control are exercised in Cyprus are-

-the majority of the Board of Directors is tax residents of Cyprus,

-the meetings of the Board of Directors are taking place in Cyprus, and

-the policy making is taking place in Cyprus and key management and commercial decisions are made by the Board of Directors in Cyprus.



Furthermore, the below are taken into consideration to establish management and control in Cyprus:

- the Board of Directors' minutes must be prepared and kept in Cyprus.

- shareholders’ meetings are taking place in Cyprus.

- corporate seal and all statutory books and records are maintained in Cyprus.

- corporate filing and reporting functions are performed by representatives located in Cyprus.

- agreements relating to the company’s business or assets are executed or signed in Cyprus.



A company that is a Cyprus tax resident is taxed on its worldwide income, including any income from business in any other country, subject to any double tax treaties.



Also , the profits of Cyprus tax resident company which derive from a permanent establishment situated outside Cyprus are exempt from tax. This does not apply if -

(a) the permanent establishment directly or indirectly engages more than fifty per cent (50%) in activities which lead to investment income, and

(b) the foreign tax burden on the income of the permanent establishment is substantially lower than the tax burden of the resident company or person controlling the permanent establishment and resident in Cyprus.





Generally, a foreign company that does not fulfill the above criteria and is not a Cyprus tax resident and that has no income originating in Cyprus and does no business in Cyprus, has no obligation to pay tax in Cyprus.



Please note that advance tax rulings can be issued by the Tax Department if all the data concerning the taxpayers (individuals and companies) involved and the transactions to be carried out, are disclosed. Note that a tax ruling request can be processed only if the form T.D.219 (attached) is submitted and the ruling fee of €1.000, or €2.000 for expedite answer, is paid.
 

marzio

Active Member
I live in Cyprus as non dom.
Do you know it it's possibile to register an Estonian company as a tax resident in Cyprus and pay yourself only via dividends? You will pay a flat 12.5% in corporation tax and nothing at the personal level (as a Cyprus non-dom resident).

I know this thread is about new mexico LLC but maybe this setup could be of interest.
 

Sols

Trusted Member
Business Angel
Running a US LLC from Cyprus as a non-dom resident is risky but in reality, there doesn't seem to have been any cases of the authorities going after foreigners for running LLCs or even more traditional offshore companies (BVI, Seychelles) and not paying tax. At least not on a small, personal scale. Just be smart and keep a low profile.

AFAIK, it's not entirely clear how a US LLC would be treated in Cyprus as it hasn't actually been tested in court. Would they follow US law and classify it as personal income or, lacking a local US-style LLC equivalency, would they treat it as a corporate entity and income as dividends? In the English translations of Cypriot company law, the term "Limited Liability Company" is used in reference to the most common form of company, although it is not at all similar to US-style LLCs.

That said, given how cheap and easy it is to set up a low-tax, sustainable structure in Cyprus I always suggest compliance and setting up a local company. Paying a little bit of tax is a small price for long-term sustainability in a global environment with automatic reporting, tax havens are closing down, and increasingly onerous regulations make offshore companies practically useless.
 

Gnux

New Member
Do you know it it's possibile to register an Estonian company as a tax resident in Cyprus and pay yourself only via dividends? You will pay a flat 12.5% in corporation tax and nothing at the personal level (as a Cyprus non-dom resident).

I know this thread is about new mexico LLC but maybe this setup could be of interest.
Why would you want to do this? If you register the company as resident it makes more sense to just create a cyprus company. Then you also pay 12,5%. Just dont use the company formation and accounting services you find online. They are all overprized. You can get it much cheaper if you shop around locally. When i arrived 2 years ago i looked around and you can find bookkeeping audit and so on with 30 invoices per month all inkl. for 150 Euro per month.

Running a US LLC from Cyprus as a non-dom resident is risky but in reality, there doesn't seem to have been any cases of the authorities going after foreigners for running LLCs or even more traditional offshore companies (BVI, Seychelles) and not paying tax. At least not on a small, personal scale. Just be smart and keep a low profile.

AFAIK, it's not entirely clear how a US LLC would be treated in Cyprus as it hasn't actually been tested in court. Would they follow US law and classify it as personal income or, lacking a local US-style LLC equivalency, would they treat it as a corporate entity and income as dividends? In the English translations of Cypriot company law, the term "Limited Liability Company" is used in reference to the most common form of company, although it is not at all similar to US-style LLCs.
I would not risk it. Maybe with a rulling. Costs 1k. They recently crack down on a lot of things. I have a local friend who works for a big firm here that mostly have russian clients and she basically was totaly overworked the last year because the goverment got much more strict. They had to change a lot of structures for clients. In this case it was because the USA put pressure on Cyprus because they have problems with Russia. But better safe then sorry.

You are right though Cyprus basically gives foreigners a lot of freedom. I too never heard of them cracking down on foreigners. But you never know the future.

What docs did they requested?
A lot. After the second time they wanted more info i just made pictures of everything i could think of. Got approved pretty fast after that. All together it still took a more then a month.

As I understood, you are not paying any tax for it in Cyprus, right?
No i dont. Honestly i did it because i really really hate bookkeeping and all what comes with it. Takes so much time. With my main business it is also pretty easy to do this setup. Could be very different for others.
Still i am also registered here as self employed and pay social scurity. This way i have health insurance, residency, VAT number if needed and from time to time i do work for customers by the side. You cant bill them with an offshore company.


For most people in general it makes more sense to just go the cyprus company route i think. I dont believe this setup i have, will work a long time. EU and OECD is cracking down hard on this kind of stuff. Better to pay some tax and have your peace. I will prob. just get a cpyrus company in the future. But as long as i can get away with less work, i will do it. The time i spend less on accounting is worth it in my opinion.

Oh and whatever you do. For the love of god dont bank in cyprus. They banks here are the absolut worst. I dont even have a personal account here. I use bunq for private stuff and absolutly love it. (8 Euro per month)

this makes Cyprus less and less attractive
Still the best place in the EU tax wise. Also not everything is about tax. I think its a good place to live. But well, everyone is different. I know people who absolutly hate it. :)
 

marzio

Active Member
Why would you want to do this? If you register the company as resident it makes more sense to just create a cyprus company.
Because:
1. stripe is not available in cyprus
2. you can't get a USD account with a Cyprus business transferwise account

Is it possible to register an estonian company as a tax resident?

Anyway can you suggest a bookkeeping service with honest prices? thanks
 
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Gnux

New Member
Strange i got an usd account with my Seychelle company with transferwise.
One trick you can always do is create a uk company for 30 Euro in the same name as your offshore company and use it to make all the bank accounts. Then just allow your offshore/cyprus company to use it. ;)

Dont tell the banks obviously.

Still you can have your cyprus company just own a us llc and tax it with 12,5%. US llcs are pretty cheap.
 

Gnux

New Member
I am in no way an expert it is just what i heared and researched. I could be wrong...

Also you can prob. get away with a lot of things but the question in this case what if not. I think beeing careful with tax stuff is always the way to go.
 

Admin

Forum Moderator
Staff member
I totally agree with you. I have some experience with Cyprus since 2006 and have been close to almost all entities possible to setup there so "tax tools" to get around what official is published.

My point is just, seek professional advise if you consider Cyprus and get someone to the table that know what he is doing. Nothing is black and white or as it is written public. Best example for this is Vladimir Putin, Donald Trump and the rest of the policians that every day polishes the glory.
 

GrumpyMess

Trusted Member
Business Angel
No i dont. Honestly i did it because i really really hate bookkeeping and all what comes with it. Takes so much time. With my main business it is also pretty easy to do this setup. Could be very different for others.
Still i am also registered here as self employed and pay social scurity. This way i have health insurance, residency, VAT number if needed and from time to time i do work for customers by the side. You cant bill them with an offshore company.
I understand you get a 10k/year as a self employed and the rest tax free to an offshore company, a kind of a grey zone. Have you consulted with a tax advisor regarding this setup? If the tax office will require to pay the tax for the offshore company this makes Cyprus completely unattractive.

I have some experience with Cyprus since 2006 and have been close to almost all entities possible to setup there so "tax tools" to get around what official is published.
Which countries do you prefer now?
 

Gnux

New Member
My self employment is a different business. I did it for residency and because i wanted to check out first if i want to stay longterm in Cyprus.

As far as tax advisors go, i was told i should use nominees to be on the safe side. Well the one i trusted most. It is very difficult in cyprus to get decent answers even from tax advisors. I have the feeling that most have absolutly no clue what they are talking about. Some told me stuff i knew 100% was wrong. They want to sell Cyprus Companies. Anything else, good luck. :)

PMG a big provider here, says you can do it this way. Well kind of. :)

You have to undestand Cyprus law is written in a way that it could mean anything. I actually read some of it when i did my research. They dont have CFC Rules (on a personal level, they have on a company level now) but a company managed from Cyprus could be resident or it could be not depending on cirumstances. If they want to fuck you, they can i guess, but i think most of what they do is because else they get to much pressure from other EU countries and OECD.

Many laws are more written in a way that it is easy for companies to get a resident status. Because that is what most people want. They actually want their company to be Cypriot resident because else they are resident in their high tax home country. But this changed recently because now you have to have a real office to have your Cypriot company get resident status here.

I choose to believe PMG (which i do not recommend for company formation and accounting because they are overpriced) but they seemed at least to know what they are talking about.

Here is FAQ from their PDF they released after CFC rules for companies came in effect: (German)

Non-Dom in Zypern besitzt eine Offshore Gesellschaft, aus welcher er Dividenden bezieht:

Die CFC-Rules in Zypern haben, wie bereits erwähnt, hierauf absolut keinen Einfluss. Dividenden, welche der Zypern Non-Dom aus seinem Auslandsunternehmen erhält, werden steuerlich unverändert vorteilhaft behandelt

Basically it says: Non dom in Cyprus owns an offshore company from which he gets dividends. The cfc rules have no influence on this whatsoever. Dividends which the non-dom gets from foreign companies are still no problem. (rough translation)
 

therealmarv

Building Trust
Entrepreneur
I researched that all:
- US LLC is useless together with Cyprus tax residency because it's tax transparent, forget dividends, it's personal income. Also there are withholding taxes on dividends (5% or 15%) on US side and I'm not sure if they are really excluded.
- Estonian company is useless together with Cyprus tax residency because if you live in Cyprus you control the Estonian company within Cyprus and Cyprus income tax law kicks in (it needs to be taxed within Cyprus and plus Estonian rules).

The only safe thing long-term is to be shareholder of an offshore company and there is a local director (with rights and at least minimum salary) and with a real office in the foreign country. Even better are employees there depending of size. No direct control from Cyprus!

P.S.: About banks: Yes, forget them all in Cyprus. It's a nightmare... avoid at all costs!
 
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marzio

Active Member
Estonian company is useless because if you live in Cyprus you control the Estonian company within Cyprus.
Well that exactly the point.
Find me a EU state that give you stripe, a USD transferwise account and only need you to be present 60 days to be considered tax resident. You pay only 12.5% tax because dividends are tax free in Cyprus. If you want to pay zero taxes then you need a much expensive setup.
 

Admin

Forum Moderator
Staff member
Which countries do you prefer now?
Well, if you are able to pay what it cost I'm still satisfied with Cyprus, I have read endless negative about Cyprus since the last two years on this forum, as the number of active posters increase the more neagtive stuff cam around here. It was surprising me because I can only recognize a fraction of all the negative stories which get posted here.
 
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