liquidate Cypriot company, how to take out assets? move assets to a different non-CRS company?

[sausage]

Hello friends,

Sorry for the long post, it has taken me long time to write my thoughts.

I have a problem, I want to liquidate my Cypriot company but don't know how to move out the assets from it.

Company details:

• One man Cypriot company doing software services (normal resident company paying 12.5% corporate income tax).
• Nominee director.
• I am the shareholder (not using nominee).

Info about me:

• Tax resident in a high tax Scandinavian country.
• I have not declared anywhere that I own the company in Cyprus.
• I also have a second passport. Non EU. Non CRS country.
• I have not taken any dividends, nor salary, nor used the company credit card whatsoever. All the money that has come in to the company has pretty much stayed in the company bank account. The initial plan was to have this company just sitting tight on the money (bank + stocks) for many years to come.

My company bank knows that I am the UBO (Ultimate Beneficial Owner) but I somehow hoped (yes I know, very bad, hope is not good for risk aversion) that since I have not taken out any money privately that I still have not done anything gravely illegal.

With EU getting more and more tax hungry I do not feel safe to stay as shareholder for this company nor to have this company up and running at all.
Also with the coming changes with public Cypriot UBO registry (2021?) I feel the noose is getting tighter and tighter.
My current company bank (in Cyprus) knows I am the UBO so my government pretty much has access to this information already but I can see the writing on the wall that things are getting more complicated with my setup.

I now got cold feet and want to liquidate the Cypriot company!

My problem is, what do I do with the money in the company bank account?

I do not need to get the money privately. It is ok to continue having the money in some company bank account but I do not feel safe to have it in the current company where I am openly shareholder. I do not need to get the money in my private hands for the foreseeable future. It is fine for the cash to just sit in some company bank account for years.

So what options do I have?

My hamster brain has been going crazy thinking of possible solutions and these are my own ideas, all of them mostly crap:

​

1. Open new company with my second passport to avoid CRS reporting to my home country.

I've started to think in terms of me using my second non-EU non-CRS passport and opening another company in different jurisdiction.​

​

Then doing what?​

1. Do some "invoicing" between the companies to empty the Cyprus company and move over all the cash to the new company?
2. Or buy bullion for the money (I will safeguard the bullion in my own possession) and somehow transfer/give-away these assets to the new company (so the new company does not need to have a bank account to receive cash)?

Using my second passport will at least avoid any CRS reporting to my own high tax country in Scandinavia.​

​

I'm leaning towards this solution as it feels "most" clean and legal. I mean, I will still not take out any money privately, all of the money will just sit in the new company's possession.​

The new company will not be actively trading, it will just sit on assets.​

​

But if taking this route, where to incorporate? Seychelles? Georgia? etc?​

2. Buy bullion, empty the company, declare it bankrupt.

What about buying bullion with all the cash and then declare the company bankrupt (not sure how)?​

This way I will sit on the bullion and the company is gone. But I know that this is equivalent of me just taking out all the money in cash so very illegal unless I declare and pay taxes on everything.​

​

This does not seem like a good option and risks getting me into deep trouble.​

​

3. Open a private bank account in non-CRS country and transfer all the money to this account without declaring it and not paying any tax on it.

This option will allow me to close down the Cypriot company but it risks getting me into very deep legal trouble with my home country since I take all the money privately (without paying tax or declaring the sum).​

4. Give or sell (for a symbolic sum) the stocks of the company to a friend outside of EU.

Let him take out all the assets as salary/dividend (he will have to worry about his own tax reporting). He will then give me the money on the side. For this I will give him a percentage of the assets.​

​

Doing this way I will then be out of the shareholder registry for the company. But I may introduce more problems since the company bank will want to know all changes to UBO after I sell the stocks. But maybe I can stay as "Financial Director" and have access to the bank account?​

5. Let the company hire a friend outside of EU to receive salary.

Friend outside of EU is hired as consultant to receive salary. He gives me the money on the side. I give him a percentage of the money.​

He will have to take care of his own tax reporting with his own government.​

​

After the assets have been depleted in the company I will then liquidate the company. This option will take time to execute (more than a year) as I will have to pay him "normal" salary to not raise eyebrows.​

Whatever path I choose I prefer if it can be done in a way that is most clean without having to openly go to my tax authorities and confess everything.

Leaning on the cumulative knowledge and brain power of this community I hope to find some guidance here.

Thank you in advance!

 

[Martin Everson]

sausage said:
My current company bank (in Cyprus) knows I am the UBO so my government pretty much has access to this information already
Click to expand...

So your bank has your Scandinavian passport and Scandi address attached to the company? Basically if you used your Scandinavian details then your home country is already getting the data reported by the bank as a shareholder 😕.

I would firstly consider coming clean to your home country. Alternatively move to Dubai or a European country with a resident non-domicile scheme (i.e UK, Ireland, Malta) and taking all the company income as dividends offshore and wind the company down.

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[sausage]

Yes my bank has all my details (Scandinavian passport, utility bill etc). 😕

Moving is not an option so whatever I do it has to be without physically relocating.

But no matter if my government knows or not, how would I liquidate the company? I want to close it down so just in case my government does not check me up for a few years there is a chance that everything will be prescribed (expired) by the time they want to investigate.

 

[Martin Everson]

sausage said:
But no matter if my government knows or not, how would I liquidate the company?
Click to expand...

Speak to your agent who setup the company and file for voluntary liquidation of the company by writing a resolution of voluntary winding up. A quicker solution would be to sell or give the company to your agent and just be removed from company register as shareholder. You will still need to take all the money out of company as dividends. In which case you open up a clear tax liability in your home country.

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[sausage]

Martin Everson said:
Speak to your agent who setup the company and file for voluntary liquidation of the company

You will still need to take all the money out of company as dividends. In which case you open up a clear tax liability in your home country.
Click to expand...

Sorry, I meant to ask "how do I liquidate the company AND be able to take out the money from the company without taking any salary/dividend". So basically my initial question.

I understand that I can legally take out dividends/salary as long as I declare it and pay taxes on it. It is just that I do not want to poke the bear at all (do not touch the government to give them any input to get ideas for any audit of myself).

Would none of my options (in my post) be any good?
I thought that at least option 1 would be, if not 100% legal, at least somehow doable - the option to open a new corporation with my second passport and funnel the money over to it?

sausage said:
1. Open new company with my second passport to avoid CRS reporting to my home country.
I've started to think in terms of me using my second non-EU non-CRS passport and opening another company in different jurisdiction.Then doing what?

1. Do some "invoicing" between the companies to empty the Cyprus company and move over all the cash to the new company?
2. Or buy bullion for the money (I will safeguard the bullion in my own possession) and somehow transfer/give-away these assets to the new company (so the new company does not need to have a bank account to receive cash)?

Using my second passport will at least avoid any CRS reporting to my own high tax country in Scandinavia.I'm leaning towards this solution as it feels "most" clean and legal. I mean, I will still not take out any money privately, all of the money will just sit in the new company's possession.The new company will not be actively trading, it will just sit on assets.But if taking this route, where to incorporate? Seychelles? Georgia? etc?
Click to expand...

 

[Martin Everson]

sausage said:
Would none of my options (in my post) be any good?
I thought that at least option 1 would be, if not 100% legal, at least somehow doable - the option to open a new corporation with my second passport and funnel the money over to it?
Click to expand...

Option 1 will not work in reality. CRS is about where you are resident not what passport you hold. Even if you try and use another address you will likely be using telephone numbers etc that will point to an alternate residency. CRS has a concept called indicia. Where evidence of an alternate tax residency like a telephone number or mailing address results in reporting to that country. Plus you will need to get tax ID in the non-crs country and you will end up entangling yourself in the tax system and reporting affairs of that country even without any new income.

Option 2. What do you hope to do with the bullion when it comes to later selling it and using that income. That is just storing up problems for the future if you don't intend to move. Bullion will also get harder to sell and move about in the future.

Option 3 yes is tax avoidance in your home country.

Option 4 and 5 are unrealistic and risky. You open yourself up to blackmail with no way to complain...lol.

Like I your account details are already with your Scandi home country via CRS. You have to assume they are watching you. They have all the time in the world to take action which they will eventually as there is no rush to do anything.

Seriously what is the dividend tax rate in your country? How much money on the account are we talking about here?

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[sausage]

Thank you very much for your attention to my post.

Martin Everson said:
ike I your account details are already with your Scandi home country via CRS. You have to assume they are watching you. They have all the time in the world to take action which they will eventually as there is no rush to do anything.
Click to expand...

Are they really in no rush? What about that cases get prescribed after say 7-10 years? So whatever I do today will be prescribed in say 10 years? But maybe I got this wrong and they can come after me in 15 years for things not reported today.

Martin Everson said:
Option 1 will not work in reality. CRS is about where you are resident not what passport you hold. Even if you try and use another address you will likely be using telephone numbers etc that will point to an alternate residency. CRS has a concept called indicia. Where evidence of an alternate tax residency like a telephone number or mailing address results in reporting to that country. Plus you will need to get tax ID in the non-crs country and you will end up entangling yourself in the tax system and reporting affairs of that country even without any new income.
Click to expand...

I would handle this with having all documents and utility bills from the non-CRS country, having phone number/address from there and so on. I do understand it is not fool proof and honestly I would want to stay away from this solution anyway.

Martin Everson said:
Seriously what is the dividend tax rate in your country? How much money on the account are we talking about here?
Click to expand...

Dividend tax for a one man company like my own is (mostly) taxed as salary so roughly 2/3 tax and social contribution and 1/3 remains for myself. Not a good deal.
Money in total, around 200k EUR.

But writing this about "coming clean" I started to think about other options instead of taking dividends/salary.

I found out that it is not illegal in my home country to not declare ownership of foreign company as long as I have not taken any dividend/salary. I have not taken any dividend nor salary at all.

So what if I sell the stocks of the Cypriot company to another company that I own in my home country?
Step 1: The Cypriot company will then become a subsidiary.
Step 2: All the assets will be legally transferred to the parent company in my home country.
Step 3: After that I will liquidate the Cypriot company.

What will I accomplish by doing this?

• I "come clean" somehow with regards to my own government and tax agency.
• I do not take any money privately and so no need for declaring private income.
• All assets transferred from Cyprus to my home country will be owned by the parent company and can be used in that company's daily business operations. If I want to take out any money privately I will of course have to pay income tax on that, but as long as I leave the money in the company all should be fine.

Isn't this a viable solution for me that will make me come clean with my government and (hopefully) with no repercussions? And at the same time no high private tax bill since all the money stays in my current home company?

 

[Martin Everson]

sausage said:
Are they really in no rush? What about that cases get prescribed after say 7-10 years? So whatever I do today will be prescribed in say 10 years? But maybe I got this wrong and they can come after me in 15 years for things not reported today.
Click to expand...

It depends on your countries statutes of limitations for tax investigations. For tax fraud in most countries it can be very long if not unlimited.

sausage said:
So what if I sell the stocks of the Cypriot company to another company that I own in my home country?
Click to expand...

So you will just creating a new company with the money in it. Then declare that company and declare to taxman also as you have not made any distribution from that new company.

sausage said:
Isn't this a viable solution for me that will make me come clean with my government and (hopefully) with no repercussions? And at the same time no high private tax bill since all the money stays in my current home company?
Click to expand...

Whats the advantage of doing all this if you say there is no offense being committed by having the Cyprus company and not distributing any income? Why are you setting up a new company to transfer assets to it? Your just wasting time and money with such a move.

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[sausage]

I already own another company in my home country so no extra costs to set up a new company.

Even though I read that there is no offense in avoiding reporting as long as I have not received dividend/salary I would still prefer to give my tax agency as few reasons as possible to initiate any audit of me or any of my companies.
I can imagine the tax agency to start asking questions whether I have really not received any dividend/salary and then start digging deeper because they don't trust what I say. Of course all the books would show that I have not taken any dividends/salary but then they could start asking further, start asking about suppliers, customers, if all the costs are valid business costs etc. I want to avoid this as much as possible.

I was thinking (hoping) that by selling the ownership of the Cypriot company to my home country company I would be able to transfer out all the Cypriot assets "under the radar" to my home company, then just close down the Cypriot company. By "under the radar" I mean to not raise any eyebrows and initiate any question asking from the authorities.

I'm thankful for your input. I realize that my case risks giving me ulcers. :/

 

[CaptK]

The is no crime committed until dividends are paid and not declared.
I personally would make a loan to the new company on a repayment to begin in 10 years. Keep the company for a year or two, filling dormant returns, then liquidate.
Structure is that they are not a group they are individual entities.

Or retain the new company for a period of 10 years for the 200K then liquidate after a year or two.

 

[Martin Everson]

The issue is your corporate account has already been reported under CRS. So your taxman is aware of the account and your UBO status for the company but it might be of no tax gain for them to investigate immediately as they have easier fish to fry right now. So imagine they get CRS details of the account in 2018,2019,2020 and suddenly no CRS reporting of the account in 2021. They can check if the company has been dissolved. They now can check where the assets went by kicking of an audit with you as a tax event is likely to have been triggered by money moving out of company and potentially into your hands.

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[sausage]

CaptK said:
The is no crime committed until dividends are paid and not declared.
I personally would make a loan to the new company on a repayment to begin in 10 years. Keep the company for a year or two, filling dormant returns, then liquidate.
Structure is that they are not a group they are individual entities.
Click to expand...

So you mean, old Cypriot company gives out 200k loan to the new company and then I liquidate Cypriot company after one two years? Still keeping the new company?
Isn't this a big risk of getting audited already in Cyprus because I try to liquidate a Cypriot company that still has an asset (the loan) on the books?

CaptK said:
Or retain the new company for a period of 10 years for the 200K then liquidate after a year or two.
Click to expand...

I don't understand this. You mean keep the new company for 10 years and then liquidate the old Cypriot company at that time?

Keeping the Cypriot company will cost annual maintenance fees and still show my name as shareholder. I try to get out and close everything as quick as possible. I have already taken steps to not have any more activity in the Cypriot company.
I realize that what I try to do should have been done differently or much earlier than now. 🙁

 

[CaptK]

sausage said:
So you mean, old Cypriot company gives out 200k loan to the new company and then I liquidate Cypriot company after one two years? Still keeping the new company?
Isn't this a big risk of getting audited already in Cyprus because I try to liquidate a Cypriot company that still has an asset (the loan) on the books?



I don't understand this. You mean keep the new company for 10 years and then liquidate the old Cypriot company at that time?

Keeping the Cypriot company will cost annual maintenance fees and still show my name as shareholder. I try to get out and close everything as quick as possible. I have already taken steps to not have any more activity in the Cypriot company.
I realize that what I try to do should have been done differently or much earlier than now. 🙁
Click to expand...

Move funds out then take yourself off but dont shut it down. Get a nominee and file dormant returns.
DM me to discuss.

 

[no1d]

I'm opening this discussion because I'm in a similar situation.

Same situation, I want to liquidated my Seychelles company and don't know what to do with the assets. I took money from company account many times.

Maybe transfering the ownership of the SEY company to my local (RO) company is a good idea.

But I'm a bit worried about tax authority opening up a tough tax investigation when they see 7 figures coming in to the local company.

@sausage what did you do in the end?

 

[tariq]

CaptK said:
Move funds out then take yourself off but dont shut it down. Get a nominee and file dormant returns.
DM me to discuss.
Click to expand...

all ears how it could be done 🙂 basically removing yourself from company, registering it on the homeless guy and sailing into horizon? sounds amazing if it does not involve any criminal or other punishment

 

[AMD]

tariq said:
all ears how it could be done 🙂 basically removing yourself from company, registering it on the homeless guy and sailing into horizon? sounds amazing if it does not involve any criminal or other punishment
Click to expand...

It does not, it is how people all around the world do it, not only in Cyprus.

If you have registered a Cyprus company as an foreigner, you don't need to worry about anything if, you take out the money, remove yourself, and leave the company until it get stroke off.

Have done it many times in Seychelles, Cyprus, Iceland, Sweden, BVI, Belize and many other places.