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Setting up a payment agent in EU

nurredon

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Dec 1, 2016
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We’re setting up a payment agent entity as payment processor for a third party, which is very offshore and won't be easy to transact with. While it’s not gambling or adult or anything scammy, it is considered high risk. I’ve heard that many people use Cyprus for this purpose, but I noticed that Shopify Payments isn’t available there, and PayPal fees are significantly higher compared to other countries like Romania or the Czech Republic.

Assuming banking is not an issue, is there a specific advantage to using Cyprus over these other jurisdictions? I’d appreciate any insights on this.
 
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It probably doesn't answer your question, but you might find some relevant information here:

 
This one as well:

 
Cyprus is popular because it's popular. It's proven to work. The setup is well understood by the tax authority, lawyers, and service providers. You might occasionally see Malta, Lithuania, or Estonia but they are far behind Cyprus in popularity.

Some Casinos use UK ltd's as well.

Since audits are not required in Cyprus for a turnover below 200K EUR, I guess the payment agent won't be required to be audited if the only revenue is the 3% of the processed amounts. So if the cyprus company processes for example 5 million eur per year, takes 3% commission, the revenue for the cyprus entity would be 150KEUR.
 
Some Casinos use UK ltd's as well.

I think it was @EliasIT who mentioned they use UK Ltd.'s as well.

Since audits are not required in Cyprus for a turnover below 200K EUR, I guess the payment agent won't be required to be audited if the only revenue is the 3% of the processed amounts. So if the cyprus company processes for example 5 million eur per year, takes 3% commission, the revenue for the cyprus entity would be 150KEUR.

I guess that would depend on how the contracts are structured (if the Cypriot entity becomes part of the supply chain or not).
 
Some Casinos use UK ltd's as well.
Good call. Although less popular since Brexit, as the purpose of the payment agent often is to access EU market.

Since audits are not required in Cyprus for a turnover below 200K EUR, I guess the payment agent won't be required to be audited if the only revenue is the 3% of the processed amounts. So if the cyprus company processes for example 5 million eur per year, takes 3% commission, the revenue for the cyprus entity would be 150KEUR.
I have never worked with a Cypriot payment agent that wasn't audited. They're dead simple to operate and audit.
 
How is the OSS-VAT resolved?
With the help of a good lawyer/accountant in Cyprus that handles everything for you. You need to structure the company and agreements in such a way that it isn't in scope for VAT.

As @JohnnyDoe so wisely said, speak to someone like @CyprusLawyer101 to iron out the details. Once that's all in place, it's easy to run these kind of companies. Audits should be a complete non-issue.
 
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With the help of a good lawyer/accountant in Cyprus that handles everything for you. You need to structure the company and agreements in such a way that it isn't in scope for VAT.

As @JohnnyDoe so wisely said, speak to someone like @CyprusLawyer101 to iron out the details. Once that's all in place, it's easy to run these kind of companies. Audits should be a complete non-issue.

Digital services are always in scope for VAT. Question is if the payment agent company or the parent company will declare the VAT.
 
We’re setting up a payment agent entity as payment processor for a third party, which is very offshore and won't be easy to transact with. While it’s not gambling or adult or anything scammy, it is considered high risk. I’ve heard that many people use Cyprus for this purpose, but I noticed that Shopify Payments isn’t available there, and PayPal fees are significantly higher compared to other countries like Romania or the Czech Republic.

Assuming banking is not an issue, is there a specific advantage to using Cyprus over these other jurisdictions? I’d appreciate any insights on this.
It all depends on the business activity (which is not stated in your message)
 
The business activity is a perfume dupes setup. I really like @CyprusLawyer101 and will most likely engage him for this regardless. However, PayPal fees are significantly higher compared to Spain, Romania, or the Czech Republic. Additionally, Shopify Payments isn’t available, which means card processing would require extensive custom integrations
 
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