Have UK LTD, planning move to Cyprus

[heliotrope]

Currently UK tax resident and sole director/shareholder of UK LTD doing IT services. Clients tend to be UK/Swiss.

Planning to move to Cyprus partly as a hedge against Brexit, although some other reasons as well. This is already quite far along. (In some ways Malta would be preferable for access to the Schengen zone, especially Italy, but it's too small for more than a 10d/year residence requirement, and anyway I think slipping in and out of Schengen countries will get much harder when they introduce ETIAS.)

I will set up a CyprusCo, not least for the 60d tax residence. If possible I will sign new clients directly to work with the CyprusCo, although there may be some reluctance. Also I'm finding getting a quote for indemnity insurance is quite hard, and prices seem to be about 10-30x what I pay for the UkCo. Prices in general on the high side in Cyprus.

Depending how reluctant clients are to move over, I may keep the UKCo around and add another director or two in the UK (a family member and a nominee) to ensure it remains domiciled there. Sign clients with the UkCo. Presumably I should do the work with the CyprusCo and bill it as a service to the UkCo, taking account of transfer pricing?

Any feedback on the above or recommendations for relevant service providers? In my view ensuring the UkCo actually remains UK-domiciled is the key point...if I can sign enough clients over to the CyprusCo I may just fold the UkCo altogether. I hope to expand beyond just providing services with the CyprusCo in the future (ebooks/subscriptions/products).

 

[Sols]

heliotrope said:
Depending how reluctant clients are to move over, I may keep the UKCo around and add another director or two in the UK (a family member and a nominee) to ensure it remains domiciled there. Sign clients with the UkCo. Presumably I should do the work with the CyprusCo and bill it as a service to the UkCo, taking account of transfer pricing?
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Assuming you remain shareholder, why not just let the UK company pay you dividends on its profits? That would normally not be subject to any tax in UK or Cyprus.

Alternatively, have the or a different Cyprus company take over ownership of the UK company so that dividends go from UK company to Cyprus company to you. Not that there's any tax advantage in that case (same net tax, but higher admin costs).

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This is the probably the answer to your question.

 

[heliotrope]

Sols said:
Assuming you remain shareholder, why not just let the UK company pay you dividends on its profits? That would normally not be subject to any tax in UK or Cyprus.
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To the extent that I'm working in Cyprus via the UK LTD, I'm concerned the UK or Cyprus tax offices could consider that the company has been re-domiciled (more likely Cyprus, as the UK will be getting its corporation tax share). I'll keep a director in the UK and try to avoid anything strategic in Cyprus, but still. I agree that if no questions were asked it would be simpler.

Also, as I understand the 60d rules, you need to have a company and pump salary through it (and pay social insurance on that) anyway. I prefer to pay some social insurance to make sure my (non-tax) residency is legit. I can either pump some cash into the company artificially, or it can earn it by providing services to the UKCo. Same amount of admin.

 

[Sols]

heliotrope said:
To the extent that I'm working in Cyprus via the UK LTD, I'm concerned the UK or Cyprus tax offices could consider that the company has been re-domiciled (more likely Cyprus, as the UK will be getting its corporation tax share). I'll keep a director in the UK and try to avoid anything strategic in Cyprus, but still. I agree that if no questions were asked it would be simpler.
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You'd have to read the Cyprus”“UK double tax treaty but chances are that even if the UK company were to be considered tax resident in Cyprus, the taxes you pay in UK would be greater than in Cyprus and you wouldn't have to worry about paying any corporate tax in Cyprus. So you could pay yourself dividends from UK.

But in all likelihood, the company having UK directors is enough for the structure to qualify as Cyprus non-resident and you won't even have to invoke the double taxation treaty. It's a little more complicated if you remain a director, but you may be fine as long as the majority of the board are in the UK. Best would be to resign as director, most likely.

There is nuance here; Cyprus is full of it, much more than UK. Discuss with a tax adviser in Cyprus. Someone like Vistra or Grant Thornton, or one of the larger local firms.

Toggle signature
This is the probably the answer to your question.

 

[heliotrope]

Sols said:
You'd have to read the Cyprus”“UK double tax treaty but chances are that even if the UK company were to be considered tax resident in Cyprus, the taxes you pay in UK would be greater than in Cyprus and you wouldn't have to worry about paying any corporate tax in Cyprus. So you could pay yourself dividends from UK.
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Yes, I agree with this. Every adviser I spoke to so far though said that re-domiciling a company in Cyprus is a huge pain in the balls and to be avoided at all costs. Costs yes, but bureaucracy is the bigger consideration. Besides which, there is exit tax in the UK, even if not often spoken about.

I will check out the advisers you mention.