Options to reduce taxable income of Cyprus company

[dotpedal]

Hi,
I will be using a Cyprus company to earn around $400K in profit next year
How can I reduce the taxable income of this company? What are my options? I will be living in a territorial tax country

 

[Sols]

How can I reduce the taxable income of this company? What are my options?

Incur costs on the business which are justifiable business expenses. Discuss with a Cypriot tax adviser what this can be, as it depends on your business type.

If you have no operations or management in Cyprus and can prove you have them somewhere else, a company in Cyprus can qualify for 0% tax in Cyprus.

I will be living in a territorial tax country

Then why not form a local company? What's the point of a Cypriot company if you can achieve 0% tax with a local company?

 

[moneyrequired]

use company setup with darks if your business could be more "unoffcial".

 

[dotpedal]

Incur costs on the business which are justifiable business expenses. Discuss with a Cypriot tax adviser what this can be, as it depends on your business type.

If you have no operations or management in Cyprus and can prove you have them somewhere else, a company in Cyprus can qualify for 0% tax in Cyprus.


Then why not form a local company? What's the point of a Cypriot company if you can achieve 0% tax with a local company?

Need to use PayPal and need tax treaty with usa. For royalties income

 

[JohnLocke]

Then why not form a local company? What's the point of a Cypriot company if you can achieve 0% tax with a local company?

second that, what is the point of this?

 

[dotpedal]

second that, what is the point of this?

My income is considered royalties income from USA. If I use a local company it will have 30% tax withheld. I also need access to paypal for some of my other sales.

 

[Gediminas]

Hi @dotpedal,

It depends on the particular activities of the company. It is very unlikely that you will be able to apply the IP Box incentive which was extremely popular before Cyprus implemented post-BEPS measures. Now, this tax incentive is still applicable but you need to develop IP within Cyprus, moreover, it is no longer applied to brands and other “easy to develop” assets.

However, Cyprus implemented another tax incentive that might be very attractive and allow it to reduce the effective corporate income tax rate to 2.5%. The name of the incentive is NID (Notional Interest Deduction). You can apply for it if you have the same (including IP) assets to contribute to the capital of your company and these assets will help the company to generate income.

 

[kkein]

Hi @dotpedal,

It depends on the particular activities of the company. It is very unlikely that you will be able to apply the IP Box incentive which was extremely popular before Cyprus implemented post-BEPS measures. Now, this tax incentive is still applicable but you need to develop IP within Cyprus, moreover, it is no longer applied to brands and other “easy to develop” assets.

However, Cyprus implemented another tax incentive that might be very attractive and allow it to reduce the effective corporate income tax rate to 2.5%. The name of the incentive is NID (Notional Interest Deduction). You can apply for it if you have the same (including IP) assets to contribute to the capital of your company and these assets will help the company to generate income.

What are these post-BEPS measures? If he has royalties from USA, couldn't he transfer the IP (patents, i presume?) to a local company, and get it taxed under the IP Box incentive?

 

[Gediminas]

What are these post-BEPS measures? If he has royalties from USA, couldn't he transfer the IP (patents, i presume?) to a local company, and get it taxed under the IP Box incentive?

As a result of BEPS, the previous IP regime was significantly changed. Now, if you want to benefit from the IP box incentive, as a general rule, IP should not be transferred to CY company but should be created in Cyprus from the very beginning.

And yes, now it only applies to patents, trademarks are no longer subject to this incentive.

 

[kkein]

As a result of BEPS, the previous IP regime was significantly changed. Now, if you want to benefit from the IP box incentive, as a general rule, IP should not be transferred to CY company but should be created in Cyprus from the very beginning.

And yes, now it only applies to patents, trademarks are no longer subject to this incentive.

So you saying that in all these new post-BEPS IPBox regimes (Lux as well, and i suppose a few others), IP acquisition won't be allowed? I have researched a bit but haven't seen this to be forbidden anywhere, rather, simply, that the costs for acquisition won't be deductible?
I'm asking because it's more or less the norm to transfer patents from a physical person to a company post patent-application (= no need to form a company if nobody is needing your patent for which you filed a provisional application)