Offshore or low-tax solution for software developer

[thomio]

Hello,

I have been googeling lot of information about offshore or low-tax solutions and I found couple of useful info, but I still can't create the ideal structure, I think I am still missing some info, so I decided to ask here for an advice. I will describe my situation.

I am doing turnkey software products. It can be sold by different ways. I can always sell it to my customers as a Software License (Intellectual Property), or I can invoice and sell it as turnkey programming hours, or I can sell it as ready-made product. It depends what's better for me, my customers are tolerant to me we have very close relationships and I found that some countries have tax-friendly strategies for Intellectual Properties for example, so that's why I am mentioning this.

All my activities are online and remote, I also travel a lot. Sometimes more, sometimes less, depends on mood. I have customers mostly from EU (private persons) and I am also EU citizen with EU personal tax domicile.

The yearly income is about 300k-500k EUR so of course I am trying to save some money on tax, and here's the info what I have up until now:


Incorporate Offshore/IBC company:

If I will go into some offshore/ibc solution then as I understood there were some changes in the tax laws and this is not attractive solution anymore. Or is it not truth? How is it now? I know that lot of offshore companies have problems to get bank accounts but let's skip this because I have solution for this and let's just say that I can get for myself a bank account for any of my company, so let's not start to discuss this banking-issues for IBCs. I am just asking about the tax-laws here now. Also let's not discuss reputation-issues here, if I will start invoicing my clients from offshore company they are ok with that, we know each other for a while. So.... the management of my IBC company will be travelling with me (sometimes I travel a lot and do not spend more than 183 days in one country, so my company will have changable place from where it is managed). What's the changes in the IBC tax-laws, can I still go by this way?


Incorporate EU low-tax jurisdiction company:

Ok let's say there's another option, an EU company. To incorporate my software company in countries like Ireland, Malta or Cyprus. There's corporate tax, but only about 12% which is quite reasonable and acceptable. But since what I know, the companies from these countries also have some strict regulations and the company is obligated to proof that it is not just virtual p.o. box, is that correct? I am not planning to move and live in any of these, I still want to keep my personal freedom and live anywhere. If Ireland/Malta/Cyprus can offer classic p.o.box and 12% corporate income tax, then this would be ideal solution. But I have heard that this is also not possible anymore. Is that correct??

On the other hand, as EU company it would have to become VAT payer which is big problem (another hidden tax). If I am charging my client 100eur/hour then I can't start to charge him now 100eur+VAT/hour (the clients are private persons, so this is just another tax). If the VAT is let's say 20% then I would have to start to charging them 80eur+VAT/hour which means that I am paying another hidden tax again, and then also the corporate income tax. So at the end of the day it's not 12% but let's say 30%, that's not acceptable.


Incorporate in Montenegro

I found in Montenegro they have really cool solution. Local domestic company, and the corporate income tax is 9% officially (plus also hidden tricks and taxes, but at the end of the day is still just 12.5% which is still acceptable). BUT I would have to stay in Montenegro personally for long time, which is against my "personal freedom" requirement. So the laws are great here, but it requires my physical presence which is not good.



As you see, what I am trying to find is this:

- I want to have my freedom and be able to live where I want to
- I am ok to pay taxes, but I am not ok to let governments to make a milking-cow from me. To give up on 12-15% of my total income is still acceptable (including all other hidden taxes with different names, like insurance and VAT etc).
- I do not have corporate expenses (I just develop software and provide it to my customers, so I don't have corporate expenses, everything what my company will earn is basically net profit). And I have no reason to be VAT payer (but if I am EU-company then I have obligation to be VAT payer anyway, even if I dont want to (if I understood the law correclty?)).
- I am ok to pay for ideal solution, I don't expect to incorporate my company for 100 usd. I was also considering United Arab Emirates solution, what do you think about this?
- I was also reading about solution in Georgia. Low corporate income tax country, do you have an experience with this? It seems to be fine solution for remote/online programmer, please share your experience.
- I don't have reputation problem with jurisdictions, even if my company will be in offshore jurisdiction I still can always get bank accounts for the company and my customers will always pay the invoices and sign agreements with such offshore company because they know that it's me behind the company and we already have long-term relationship. So reputation of offshore is not a problem for me.


Thanks for your ideas, suggestions and shared experience

 

[GrumpyMess]

as EU company it would have to become VAT payer which is big problem (another hidden tax).

Not only as EU company, even if you'll have an offshore company you are obliged to pay EU VAT after some treshold

- I want to have my freedom and be able to live where I want to

- I am ok to pay taxes, but I am not ok to let governments to make a milking-cow from me. To give up on 12-15% of my total income is still acceptable (including all other hidden taxes with different names, like insurance and VAT etc).

Unfortunately it's not gonna work this way. You have to start with your personal residence, since your home country is the biggest pain in the a*s in this case. VAT is another story and it's quite risky in your case not to pay it.

For example in case of Cyprus you get a non dom residence there, start a company and pay 2.5% tax on IP income + VAT. But you have to live at least 60 days there and become non resident in any other country.

even if my company will be in offshore jurisdiction I still can always get bank accounts for the company

why are you so sure?

 

[Marc Jacob]

How do you collect payments , via payment processors or direct wires from your customers ?

 

[thomio]

Not only as EU company, even if you'll have an offshore company you are obliged to pay EU VAT after some treshold

How can EU authorities know, what exactly was my company's income, when I am not EU company? Imagine a situation when I will be invoicing mostly EU private persons (so they are not going to indicate this expense into their corporate expense, my customers are not companies but private persons). EU authorities will have no idea what was my turnover in Europe.. or am I not correct? I am just not familiar a lot with these rules, that's why I ask, maybe you know better..? (info and advices appreciated)

For example in case of Cyprus you get a non dom residence there, start a company and pay 2.5% tax on IP income + VAT. But you have to live at least 60 days there and become non resident in any other country.

This sounds interesting, I can be 60days per year in Cyprus, there's nice summer and it's fun there, so I am ok with that. Can you please explain this model little bit more? It seems to be interesting. So I will still keep my permanent residence and citizenthip in XXX(my EU homecountry, which is not Cyprus) and I only have to incorporate company in Cyprus and hang out there 60 days per year? And that's it? Nothing more? And this will give me 2.5% taxation + VAT on corporate income? What's the VAT? Let's say that I have 10 customers per year, and I will sell a software licence to each of them every year. Maximum what they will give me for that licence is 50k EUR and I wish to keep most of it (of course). So whatever special effects like tax, VAT, social security etc will take me part of that profit. How much I will be able to keep at the end of the day? (after paying tax, VAT, insurance and another dirty tricks of governments trying to steal from me). I can not charge my customers more than 50k per licence, so if there is VAT then I need to reduce the price and include VAT so at the end it still makes exactly 50k for the customer, that's maximum what he is going to pay me.

Unfortunately it's not gonna work this way. You have to start with your personal residence, since your home country is the biggest pain in the a*s in this case. VAT is another story and it's quite risky in your case not to pay it.

I agree that I should also consider to change my permanent residency in the future. But it's big move, and I maybe just prefer at this moment to trade via my company and keep all the profits in the company and not withdraw it. Anything what I will withdraw would become subject of my personal income tax and that's what I don't want to. I hoped I can always keep my company's profits on accounts of my company, and in case if I want to buy something more expensive (car, house etc) then just simply my company will buy it and I will be using it. No personal income tax.

I can get bank account for any company or any person for any purpose within one day. Simply said, I have "a contact" on somebody somewhere. Of course that I can't talk about it and not especially publicly here like this. But if you will be so nice and help me with these tax advises which I am bit lost in, then I am ok to share this my "banking friend" benefit with you and get let's say one or two bank accounts for you too, for free of charge (or for your companies or whatever you wish)

I was also googeling about Gibraltar now. What do you think about this place in my case (for my specific situation)? Basically the list of places which I am interested in is

- Gibraltar (I don't have enough of information now)
- Montenegro (12.5% final tax, that's nice, but I would have to start living here for most part of the year and that sucks)
- UAE Free Zone (this seems to be good too)
- Offshore (I guess classic offshore destinations are out of the table, more info I found in article "Massive Changes to Offshore Tax Regimes and Economic Substance Requirements" on Flagtheory pages)
- Georgia (seems to be interesting but tricky, there also exist some kind of Free Zone but I was reading there's some scams with incoporations)
- Ireland/Malta/Cyprus (these could be good, 10-12% tax is fine, but there's the VAT problem (just another name for another tax) so I don't know what's the real final tax at the end of the day) ??
- Jersey/Isle Of Man ?? Somebody has an experience as online software development company here, or Intellectual Property holder?

Thanks guys for your comments and advices

 

[thomio]

How do you collect payments , via payment processors or direct wires from your customers ?

Bank accounts. As I said little bit more info above

 

[GrumpyMess]

How can EU authorities know, what exactly was my company's income, when I am not EU company?

I don't know much about VAT rules enforcing and probably you can hide your profits, but it's illegal.

Can you please explain this model little bit more? It seems to be interesting. So I will still keep my permanent residence and citizenthip in XXX(my EU homecountry, which is not Cyprus) and I only have to incorporate company in Cyprus and hang out there 60 days per year? And that's it? Nothing more? And this will give me 2.5% taxation + VAT on corporate income? What's the VAT?

It depends on will you be able to get 2.5% IP tax or just a general 12.5% tax. You have to move your permanent residence to Cyprus, rent an apartment and live there for 60 days. Nothing more. Vat is 19%.

I agree that I should also consider to change my permanent residency in the future. But it's big move, and I maybe just prefer at this moment to trade via my company and keep all the profits in the company and not withdraw it. Anything what I will withdraw would become subject of my personal income tax and that's what I don't want to. I hoped I can always keep my company's profits on accounts of my company, and in case if I want to buy something more expensive (car, house etc) then just simply my company will buy it and I will be using it. No personal income tax.

It's not working in 2019. You will be taxed in your home country even if you don't extract the dividents from the company. Read about CFC laws. You have to give up the residence in your current country.

I was also googeling about Gibraltar now. What do you think about this place in my case (for my specific situation)? Basically the list of places which I am interested in is

It's a hard and expensive place to get a residency. You can add Andorra to your list, but since you travel a lot it's not a good base for your logistics.

 

[Sols]

Why not just form a local company and use a local bank account?

Offshore companies are dead, for the purposes of legally and sustainably avoiding tax. If you think it's hard now, it's only going to get worse. Just look at the numbers of companies coming out of the registrar in most IBC and IBC type jurisdictions. They're dropping. Fast.

If you're serious about taking steps to reduce taxes, pick up your bags and move to one of the more livable tax havens such as Malta and Cyprus (especially if you're an EU/EEA national). Gibraltar, Isle of Man, Jersey, and Guernsey can work but you introduce Brexit-related risks to your setup, not to mention how boring those places are to live.

It sounds like you have a good business. Invest in it by setting it up in a manner that's compliant with 2019 and going to continue working into 2020 and beyond.

 

[thomio]

@GrumpyMess and @Sols thanks a lot for your advices, you have some reasonable points.

If I can't leave profits in my company and just let my company to sponsor my personal life, then it changes everything. To be honest I didn't even know that there's some law regulating this.

Yes, I have EU citizenship and also pemanent residency.

Ok I see there's a good chance to settle down in Cyprus. As EU citizen I don't need any visa or anything. Maybe I will check real estates there today and it's not that bad idea to buy there an apartment. In fact, I was considering this option in Montenegro. But an apartment and get temporary residency (for apartment holders they issue temporary residency for one each, renewable each year). Montenegrian tax is quite fair. BUT you HAVE TO stay in Montenegro for 11 months of the year. This is big personal limitation, it will basically become your personal prison.

Tax in Cyprus - it seems to be fair as well. It's not problem for me to hang out there for summer, 60 days is not that much "limitation" from my point of view. Especially the Cyprus is nice and warm place, so thins could be a good choice.

Ok, let's talk bit more about Cyprus and explore this option:

1) I know I can go there at any time and stay as much long as I want to (because of my EU citizenship). What do I need to do to become tax resident in Cyprus and not to be tax resident in my home-country anymore? Stay there not 60 but 183 days, if I am correct. Right? Or am I missing something here? I am confused by this "60 days" rule, why actually 60, why not 183 ?

2) I have heard in Malta that their government was trying to shut down the p.o.box game there, and now if you want to have a company in Malta you need to be able to proove that you really have real office there, really somebody is there every day in the office (so it's not a p.o.box game only) and proove that the business is really managed from Malta. Is there something similar in Cyprus too? Or is incorporation in Cyprus really easy and fast?

3) Do you please have personal experience with Cyprus incorporation, pros and cons? Can you please share?

4) Let's say my software company will be domiciled in Cyprus. And I will provide my software licences to private persons from Spain, Germany, Italy etc. Turnover about 500k per year. Does my company have obligation to become VAT payer? I am afraid the answer will be yes.

5) In the worst possible scenario, my corporate income tax will be 12.5 % But if I can proove that the company has created one software product and it is selling the licence for this product (permission for a third party to use this product under some specific conditions and for one-time paymnet, no more additional payments after the first initial payment, they have life-time licence) then I can use the benefit of only 2.5 % tax? Is that correct? Or is there some exact specific conditions which I need to be compliant with to be able to have the right to pay only 2.5% tax ??


Thank you guys, really appreciate that!

 

[Sols]

1) I know I can go there at any time and stay as much long as I want to (because of my EU citizenship). What do I need to do to become tax resident in Cyprus and not to be tax resident in my home-country anymore? Stay there not 60 but 183 days, if I am correct. Right? Or am I missing something here? I am confused by this "60 days" rule, why actually 60, why not 183 ?

The 60-day programme is based on starting a business in Cyprus or having other strong business ties (co-owner, co-founder, director, C-level/senior management, that type of thing). It also requires you to not reside in any other country for more than 183 days or tax resident anywhere else, which in your case sounds like an easy criterion to meet.

Once the 60 days are fulfilled, you can go to the local tax office and get a TIN.

2) I have heard in Malta that their government was trying to shut down the p.o.box game there, and now if you want to have a company in Malta you need to be able to proove that you really have real office there, really somebody is there every day in the office (so it's not a p.o.box game only) and proove that the business is really managed from Malta. Is there something similar in Cyprus too? Or is incorporation in Cyprus really easy and fast?

Both islands want to avoid having letterbox companies, which is why it's increasingly common for serious people to move to Cyprus or Malta. You don't have to have an office and a receptionist, but you should have a permanent establishment of some kind. To my understanding, you satisfy the requirements by being tax resident.

3) Do you please have personal experience with Cyprus incorporation, pros and cons? Can you please share?

Overall good. While I'm comfortable with (and in many cases prefer) using smaller local firms in Malta, in Cyprus I almost only deal with the likes of Vistra, Appleby, and similar international firms. The smaller local law firms aren't as organised and often have dodgy pricing. Not really worth saving a few thousand a year (if even that much) when they might lose important letters from the government, or get argumentative about accounting costs.

4) Let's say my software company will be domiciled in Cyprus. And I will provide my software licences to private persons from Spain, Germany, Italy etc. Turnover about 500k per year. Does my company have obligation to become VAT payer? I am afraid the answer will be yes.

Yes. But it needs to be even if your company is registered (or even located) outside of the EU. While many non-EU companies still dodge this requirement, it doesn't mean the EU won't eventually start cracking down on it. If you do business in or into the EU, factor VAT into your business plan and budget.

5) In the worst possible scenario, my corporate income tax will be 12.5 % But if I can proove that the company has created one software product and it is selling the licence for this product (permission for a third party to use this product under some specific conditions and for one-time paymnet, no more additional payments after the first initial payment, they have life-time licence) then I can use the benefit of only 2.5 % tax? Is that correct? Or is there some exact specific conditions which I need to be compliant with to be able to have the right to pay only 2.5% tax ??

Maybe, but very hard to say without looking at the whole picture and how you structure the agreements. Definitely something to discuss with a lawyer.

 

[thomio]

Cyprus Personal Tax Residency: I have been doing some Google research, and you were right @Sols and @GrumpyMess , the Cypriot tax residency is easy and for free. All I have to do is stay 2 months in Cyprus, and then I can just travel for the rest of the year.


How to register myself for the residency: Do you have this residency as well? Where do I have to register myself after my arrival to Cyprus? I mean for this purpose to announce them that I will be hanging out there for 2 months and then I will be traveling randomly and not exceed 183 days in any country. I think I should "tell them" somehow, right?


Intellectual Property: I was also Googling which activities can be considered as an income from IP rights, and actually exactly what I do is there. So I guess I will be able to use the benefit of the 2.5% corporate income tax. Your advice made me really happy guys, thanks for this a lot.


Self-Employed: I found that there's two options how to do my international business. Self-employed is one of them. I will just hire local accountant who will take care of my income records and bank account statements and invoices and I guess that's it. Is this IP tax rate 2.5% available also for self-employed, or is it only for Ltd companies? Is also self-employed obligated to register for VAT or not? Is there some big advantage/disadvantage to go with the self-employed way?


Ltd company: Another solution there is the classic Ltd company. It's bit more expensive comparing with the self-employed, but that's ok. Is the maintenance of Ltd more difficult, do I need to hire some specific positions or can I also just have the outsourced accountant and that's it? Is there some big advantage/disadvantage to go with the Ltd company?


Dividends: Actually what's the tax on dividends? Let's say I have local Ltd company, and the company is taxing the corporate income based on the 2.5% rate. But to be able to spend these profits on my personal expenses, I need to withdraw the money from my company, so my company needs to pay me dividends. And right in the moment, when the company will pay me dividends it's becoming personal income of me as a private natural person, and subject of my personal income tax. How does this work here when I have the Cypriot tax domicile? As a Cypriot tax payer, do I need to pay another additional tax from profits which I will receive from my own company?


Interesting concept which I have found: I found an article, where someone was describing a model, where I will get the Cypriot personal tax domicile by staying there for period of 2 months and avoiding to stay in any other country for more than 183 days. And I will register myself as self-employed in Cyprus. And then I will incorporate UK Ltd company, and my UK Ltd company will be invoicing my clients and making profits. And this UK company does not have to tax these profits, because it's "non-dom" profits (if I am saying it correctly) which means that it's profits of my UK company which where generated outside of UK (none of my customers is based in UK) and I do not have UK tax residency or citizenship and I do not live there. So based on these facts the UK company pays 0% tax from these incomes. And then the UK company will just send me these profits to Cyprus as foreign dividends and I do not have to pay tax either. Are you familiar with such model? Is there a limitation in UK for such non-dom 0% tax profits only up until some specific sum?


Social security and health insurance: Do I have to pay some social security in Cyprus? Also some health insurance? If yes, these are somehow calculated by some percentage from my profits, right? (just another "hidden" tax, this is ridiculous). Do you know some details about this, is there some min or max limit on this insurance and social security expenses?


VAT topic:

One of my EU-based company is paying for the G-Suite (paid google email) package. So each month my company is receiving an invoice from Google Ireland Ltd. In this invoice, Google charges me just the price for the services, and then there's column VAT = 0%. Later there in the invoice it says:
"Services subject to the reverse charge - VAT to be accounted for by the recipient as per Article 196 of Council Directive 2006/112/EC"
Do you somebody understand what does it mean? How it's possible that Google can give me invoices where it's VAT 0%. If I have the Cypriot company, can I also issue invoices to my customers (EU-based natural persons and EU-based legal persons) with VAT 0% ???

I am sorry if my question is stupid, I just really don't understand the whole VAT thing and whole my life I am still learning something, hope you understand.

 

[GrumpyMess]

Is this IP tax rate 2.5% available also for self-employed, or is it only for Ltd companies? Is also self-employed obligated to register for VAT or not? Is there some big advantage/disadvantage to go with the self-employed way?

Ltd company: Another solution there is the classic Ltd company. It's bit more expensive comparing with the self-employed, but that's ok. Is the maintenance of Ltd more difficult, do I need to hire some specific positions or can I also just have the outsourced accountant and that's it? Is there some big advantage/disadvantage to go with the Ltd company?

Just go with ltd company route. Self-employed tax in Cyprus is disadvantageous and has no benefits comparing to LTD. Nothing difficult.

How does this work here when I have the Cypriot tax domicile? As a Cypriot tax payer, do I need to pay another additional tax from profits which I will receive from my own company?

Dividend tax is 0 when you are non dom tax payer. No additional tax.

So based on these facts the UK company pays 0% tax from these incomes. And then the UK company will just send me these profits to Cyprus as foreign dividends and I do not have to pay tax either.

It's a kind of grey zone and I doubt that this is possible in practice. You can fly to Cyprus and find out yourself regarding your case with local advisors and share their answer with us.

There is still Malta. You can find out about it's system too.

 

[Sols]

How to register myself for the residency: Do you have this residency as well? Where do I have to register myself after my arrival to Cyprus? I mean for this purpose to announce them that I will be hanging out there for 2 months and then I will be traveling randomly and not exceed 183 days in any country. I think I should "tell them" somehow, right?

http://moi.gov.cy/MOI/CRMD/crmd.nsf/All/69E690A161D174D6C2257D2C0045750B
You submit a MEU1 form at the local immigration office in your region and in a day or two come back to collect your yellow slip, which is your proof of residence registration.

Keep copies of your flight information in case they ask but I have never heard of anyone with an EU passport having to prove when they arrived.

Self-Employed: I found that there's two options how to do my international business. Self-employed is one of them. I will just hire local accountant who will take care of my income records and bank account statements and invoices and I guess that's it. Is this IP tax rate 2.5% available also for self-employed, or is it only for Ltd companies? Is also self-employed obligated to register for VAT or not? Is there some big advantage/disadvantage to go with the self-employed way?

Ltd company: Another solution there is the classic Ltd company. It's bit more expensive comparing with the self-employed, but that's ok. Is the maintenance of Ltd more difficult, do I need to hire some specific positions or can I also just have the outsourced accountant and that's it? Is there some big advantage/disadvantage to go with the Ltd company?

Always incorporate. That way you separate yourself (you, the human) from your business, which you will be very grateful for in case anything goes wrong such as lawsuit, bankruptcy. The only upside with being self-employed is it's easier (less paperwork) but it's almost never worth it for a business of any significant size.

Dividends: Actually what's the tax on dividends?

None if you are non-domiciled resident. The structure is typically that a non-dom resident goes to Cyprus, forms a local company, and after the company has paid the 12.50% corporate income tax, you can pay yourself dividends without any additional tax to you or the company.

Domicile is an intentionally legally unclear term but it typically means that you have no family ties to Cyprus, one day intend to leave, and have no intention of being buried in Cyprus. It's exceedingly rare for a foreigner to not qualify.

Interesting concept which I have found: I found an article, where someone was describing a model, where I will get the Cypriot personal tax domicile by staying there for period of 2 months and avoiding to stay in any other country for more than 183 days. And I will register myself as self-employed in Cyprus. And then I will incorporate UK Ltd company

I would avoid this. It's unnecessary and introduces risks and complications. The non-domiciled resident scheme in UK is not as friendly as the Cypriot one.

The UK company would very likely have to pay tax. UK companies are tax resident in the UK by being incorporated there and residents are taxed on their worldwide income.

Social security and health insurance: Do I have to pay some social security in Cyprus? Also some health insurance? If yes, these are somehow calculated by some percentage from my profits, right? (just another "hidden" tax, this is ridiculous). Do you know some details about this, is there some min or max limit on this insurance and social security expenses?

It's not stated anywhere but they want you to have a private health insurance if you use this setup. It doesn't have to cost more than a few hundred euro per year for basic coverage.

Social security would really only come into play if you start hiring people. As long as it's just you, you can normally avoid it.

If I have the Cypriot company, can I also issue invoices to my customers (EU-based natural persons and EU-based legal persons) with VAT 0% ???

If you are selling to a natural person resident in the EU, you must pay VAT. If you are selling to a legal person resident in the EU and which has a valid VAT number, you can issue a zero-VAT invoice from a Cypriot company.

In some jurisdictions, you often have to pay VAT but can instead claim it back on your next VAT return. VAT can get complicated. Let a lawyer give you guidance and then have an accountant handle it for you.

 

[fshore]

You should check what you current country of tax residency requires to let you go. This vary from country to country. They might not be satisfied with you staying only 60 days in Cyprus, even though you don't stay with them for more than 183 days.

 

[thomio]

60 days rule - how they can know in which European country I really am? : Here's a thing. I have a friend in Italy, another friend in Greece. I can ask one of them to give me "fake" rental agreement, to virtually rent me a room in his apartment for period of 5 months. Also the other friend will "rent me" his room for another 5 months. And another friend in Cyprus (I actually really also have one friend there too, I traveled a lot in my past) can give me two months rental agreement in his apartment in Cyprus. So with these agreements, I can proof that I spent 5 months in Italy, next 5 months in Greece and 2 months in Cyprus. And let's say that I will use sim cards and ATM cards of my friends/family (so it is not possible to track my activities online, where I physically was living/staying based on my GSM signal or based on my ATM withdrawals). So then I don't really understand how can any authority know or not know, where exactly I was hanging out and for how long, if I am compliant with the 183 days rule or not and so on?

North of Cyprus: I found one more interesting information. The north part of Cyprus is not officially recognized as Cypriot area belonging to EU and the only country which is recognizing it as a country is just Turkey. I was reading that a trick like this is possible: You will arrive to Cyprus (you have fly tickets to proof when you have arrived). You will do what you need and then you will go to the north of the island, to the "turkey zone" and sneak out of the island from there to Istambul and from Istambul back to EU. So the Cypriot authorities have no idea that you are gone and you are not present on the island anymore. Theoretically you could also "secretly" arrive back to Cyprus the same way as you sneaked out so you can pretend you have been there the whole time. Do you know something about this?

Health insurance: I have the one which is mandatory in my country. It costs about 50-100 EUR / monthly and it covers my medical expenses in my country plus if needed in other EU countries as well. Officially I am unemployed (I am director in my company in other country in EU, but not receiving salary) so I have to pay only the legal minimum on this insurance in my home country and I do that. But the price for the insurance is rising up based on your income from salary when you are employed (which I am not at this moment and I prefer it this way). Don't you have any information how is it with the price of the insurance if my only income is profit from dividends and I am also not employed in my Cypriot company and I only am the director and receiving dividends?

@Sols as you said that the local Cypriot authorities prefer me to have some private health insurance, do you have some info from where I can get it or the lawyers will instruct me and give me name is specific insurance which I should buy?

Lawyers and accountants: Do you someone please have some contact on really good local lawyers and accountants you can trust to and you can outsource this parts and tasks of your business? I know I can google these things and contact them but if someone here has good positive feedback, can you share your experience with specific lawyers and accountants there in the country?

 

[thomio]

When to start? : By the way, it is the end of september now, let's say that I would like to incorporate the Cypriot company as soon as possible, no reason to wait for anything, when can I start? Should I go to Cyprus now and submit the MEU1 form at the local immigration office? I can say that I have already been there on the island for period of 2 months (I can travel there this week just using my nationl ID card, no passport no stamps in there). I think there is only two options: Either they will believe me or not. If they will ask me to proove it with fly tickets well then I will just walk away and stay on the island and come back to immigration office again after two months. What do you think?

 

[Sols]

60 days rule - how they can know in which European country I really am?

Generally speaking, they don't and won't know unless you are audited. However, I don't understand your concern. You don't plan to be tax resident anywhere else, right? That's all that matters.

North of Cyprus: I found one more interesting information. The north part of Cyprus is not officially recognized as Cypriot area belonging to EU and the only country which is recognizing it as a country is just Turkey. I was reading that a trick like this is possible: You will arrive to Cyprus (you have fly tickets to proof when you have arrived). You will do what you need and then you will go to the north of the island, to the "turkey zone" and sneak out of the island from there to Istambul and from Istambul back to EU. So the Cypriot authorities have no idea that you are gone and you are not present on the island anymore. Theoretically you could also "secretly" arrive back to Cyprus the same way as you sneaked out so you can pretend you have been there the whole time. Do you know something about this?

Your passport is scanned at Ercan airport, at entry into Turkey, and at entry into EU. Sometimes passports are stamped at entry into or exit from TRNC. That's a lot of paper trail in case of a hostile audit, which it sounds like you're doing your best to attract. I'm baffled by the whole idea. Why would you sneak out via TRNC? Aside from being a legal quagmire, what are you trying to accomplish? Why not just come and go via the Paphos and Larnaca airports?

By involving TRNC, you risk losing any kind of goodwill from the Republic of Cyprus government. To them, it's their rightful territory occupied by hostile Turkish forces.

Again: Spend at least 60 days in Cyprus and don't be tax resident anywhere else. If you can't even follow this simple and friendly scheme, you're honestly just wasting time.

Health insurance:
@Sols as you said that the local Cypriot authorities prefer me to have some private health insurance, do you have some info from where I can get it or the lawyers will instruct me and give me name is specific insurance which I should buy?

Lawyer will help you with that. The most basic insurances can be had for under a 100 EUR per year.

Lawyers and accountants: Do you someone please have some contact on really good local lawyers and accountants you can trust to and you can outsource this parts and tasks of your business? I know I can google these things and contact them but if someone here has good positive feedback, can you share your experience with specific lawyers and accountants there in the country?

Take a look at Vistra, Grant Thornton, and probably Anastasiades & Partners (owned/run by the current president of Cyprus). There are many others but I prefer the first two. Have had some unimpressive experiences with local smaller, boutique firms in Cyprus.

When to start? : By the way, it is the end of september now, let's say that I would like to incorporate the Cypriot company as soon as possible, no reason to wait for anything, when can I start? Should I go to Cyprus now and submit the MEU1 form at the local immigration office? I can say that I have already been there on the island for period of 2 months (I can travel there this week just using my nationl ID card, no passport no stamps in there). I think there is only two options: Either they will believe me or not. If they will ask me to proove it with fly tickets well then I will just walk away and stay on the island and come back to immigration office again after two months. What do you think?

Read the MEU1 requirements again. You will need to prepare more documents than you have right now.

You can arrive in Cyprus tomorrow and start the process of incorporation and signing up for social security (which can be substituted with the private health insurance in most cases), but it will take a few months to complete everything. Start by speaking with a lawyer. Do it right and honestly, from the start. It's worth it.

 

[GrumpyMess]

Generally speaking, they don't and won't know unless you are audited. However, I don't understand your concern. You don't plan to be tax resident anywhere else, right? That's all that matters.

They will check for sure if residence certificate is requested and I don't think is that easy to get a certificate without questions asked with 60 days rule

Do it right and honestly, from the start. It's worth it.

Have you tried? I still have doubts because I assume that Cyprus tax office knows that the island is often used to avoid high taxes from the other countries. How strict is tax office with non doms? For example a person already owns an offshore company and relocates to Cyprus. Is the tax office going to check company's profits or they don’t care about everything that happened before the move?

 

[Sols]

They will check for sure if residence certificate is requested and I don't think is that easy to get a certificate without questions asked with 60 days rule

When you apply for the MEU1, they only care that you can prove that you have a place to stay (normally a rental agreement) and either a source of income (employment or self-employment) or financial self-sufficiency (bank statements). On the form, you fill in the date when you entered Cyprus. I have never heard of anyone having their date of entry on an MEU1 questioned. If you have all the documents in order, you can drive from the airport right to the immigration office in your region and submit the MEU1 on day 1.

Next, when you go get your tax ID, they just ask you when you started working in Cyprus (if it's for yourself) or when your business started trading (if it's for a company). You show them your passport and yellow slip. After a few minutes of awkward chitchat, you walk out with a tax ID.

Have you tried? I still have doubts because I assume that Cyprus tax office knows that the island is often used to avoid high taxes from the other countries. How strict is tax office with non doms? For example a person already owns an offshore company and relocates to Cyprus. Is the tax office going to check company's profits or they don’t care about everything that happened before the move?

Cyprus only cares about Cypriot law. As long as you follow Cypriot law, you will not have any problems. Following Cypriot law implies that any funds you bring into Cyprus should have been taxed (if subject to tax). If your offshore company hasn't been paying taxes, the general advice you'd get is to keep that money outside of Cyprus and start a new company in Cyprus instead to enjoy the local tax benefits.

 

[georgio]

I had a similar situation in the past where I charged EU pharmaceutical companies from my company in the UK (the software is not sold any more). You mentioned your clients are not EU-VAT registered, that mean you are selling b2c software? So it should be lots of individual sales ? For example UK has an 83,000 pounds threshold, where you can be no-VAT registered.

 

[GrumpyMess]

After a few minutes of awkward chitchat, you walk out with a tax ID.

I'm not talking about tax id, it's easy to get. I am talking about tax residence certificate TD 126.

Following Cypriot law implies that any funds you bring into Cyprus should have been taxed (if subject to tax). If your offshore company hasn't been paying taxes, the general advice you'd get is to keep that money outside of Cyprus and start a new company in Cyprus instead to enjoy the local tax benefits.

The whole value of non dom status is to benefit of tax free dividends and capital gains. If it is impossible to receive the dividends of the offshore company tax free and without further questions the non dom status is a joke. In relation to previous obtained personal assets the tax office will receive the info via AEOI, will they began to ask any additional questions regarding these assets?