Cyprus company taxes

[QeMB]

According to what I've read, there's an income tax of 12.5% in Cyprus. Also, I couldn't get any information about VAT taxes.

From what I've read, Cyprus seems like the best option for online business I'm trying to form. Since I'd like to accept credit cards, 2co and just generally want to have a business formed in a country that is generally accepted by merchants etc.

So do you have any information about taxes? I'm going to sell digital goods. Mostly in EU.

Are there any alternatives with 0% tax?

 

[dotbloup]

Hi,

Cyprus corporate tax:
I know for sure you can use an offshore company at the bottom of a Cyprus company to lower your corporate tax. i have heard also of a tax exemption if your company is managed from outside Cyprus. Nevertheless, if you wish not to pay tax, you have to prove the company is managed from outside Cyprus and go through more administration like providing a proof that you have paid your are a fiscal resident somewhere else. It looks simple but it is not that simple. You can also use a Seychelles, BVI or panama company that would held rights, trademarks, domain names and bill your Cyprus company to lower the corporate tax and add it as expense in bookkeeping. That's what the big companies do to stay away from trouble.

Merchant accounts:
Big companies of the internet never use offshore jurisdictions to gather money, they only use it to lower their expense. All of them use Ireland (which is like Cyprus but now it is less interesting) to bill people (Amazon, Linkedin, Facebook, Google...). I have never heard of someone who opened a 2checkout merchant account for a seychelles company & seychelles bank account. that would be worth to know if someone succeeded.

Cyprus and VAT:
You have to sell 35000 euros of digital goods per year before being forced to get a CY vat number whatever the destination of sell.
Last paragraph:
VAT Services - Information for Buisiness

 

[QeMB]

dotbloup said:
Hi,

Cyprus corporate tax:
I know for sure you can use an offshore company at the bottom of a Cyprus company to lower your corporate tax. i have heard also of a tax exemption if your company is managed from outside Cyprus. Nevertheless, if you wish not to pay tax, you have to prove the company is managed from outside Cyprus and go through more administration like providing a proof that you have paid your are a fiscal resident somewhere else. It looks simple but it is not that simple. You can also use a Seychelles, BVI or panama company that would held rights, trademarks, domain names and bill your Cyprus company to lower the corporate tax and add it as expense in bookkeeping. That's what the big companies do to stay away from trouble.

Merchant accounts:
Big companies of the internet never use offshore jurisdictions to gather money, they only use it to lower their expense. All of them use Ireland (which is like Cyprus but now it is less interesting) to bill people (Amazon, Linkedin, Facebook, Google...). I have never heard of someone who opened a 2checkout merchant account for a seychelles company & seychelles bank account. that would be worth to know if someone succeeded.

Cyprus and VAT:
You have to sell 35000 euros of digital goods per year before being forced to get a CY vat number whatever the destination of sell.
Last paragraph:
VAT Services - Information for Buisiness
Click to expand...

Wow! Thanks! That's a lot of information.

So I could set up a separate company in Belize or Seychelles for example and bill my Cyprus company for digital product supplies. Even if I don't use this for lowering the taxes, it would be beneficial as this way I won't have to report the actual sources of product in Cyprus, as that would be more complicated (it's all legal though).

 

[JohnLocke]

You can find a lot of threads on the forum about how to setup a Seychelles Holding company for your Cyprus trading company! You can transfer money tax free between these two entities.

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[dotbloup]

QeMB said:
Wow! Thanks! That's a lot of information.

So I could set up a separate company in Belize or Seychelles for example and bill my Cyprus company for digital product supplies. Even if I don't use this for lowering the taxes, it would be beneficial as this way I won't have to report the actual sources of product in Cyprus, as that would be more complicated (it's all legal though).
Click to expand...

It is not more complicated as compared to try to pay no tax at all in Cyprus. Tax exemption is the hardest to get in all onshore jurisdictions. It is better to pay a bit of corporate tax because it is a very simple process in Cyprus.

Paying Tax in Cyprus are important for several reasons:

• Don't forget Turkey wants to get the whole Island and your tax goes to Defence and protection of the Republic of Cyprus.
• When you pay a reasonable amount of tax (Chartered accountants of Cyprus will help you to determine it), the Cyprus authorities will let you alone.
• Cyprus banks still need deposits to overcome the past banks crisis. The more the money stay in Cyprus, the more the future of Cyprus is bright and stable for us as the Fitch and S&P scores improve.

In order to be clear, you can buy a domain name by a Seychelles company (which will be shown in the whois), then you license the use of this domain to your Cyprus company. In your book keeping this will be shown as License - Expenses.
You can also license the name use of your company to your Cyprus company as their is no withholding tax on royalties from Cyprus company.

A seychelles company and an offshore bank is easy to setup.

 

[QeMB]

dotbloup said:
It is not more complicated as compared to try to pay no tax at all in Cyprus. Tax exemption is the hardest to get in all onshore jurisdictions. It is better to pay a bit of corporate tax because it is a very simple process in Cyprus.

Paying Tax in Cyprus are important for several reasons:

• Don't forget Turkey wants to get the whole Island and your tax goes to Defence and protection of the Republic of Cyprus.
• When you pay a reasonable amount of tax (Chartered accountants of Cyprus will help you to determine it), the Cyprus authorities will let you alone.
• Cyprus banks still need deposits to overcome the past banks crisis. The more the money stay in Cyprus, the more the future of Cyprus is bright and stable for us as the Fitch and S&P scores improve.

In order to be clear, you can buy a domain name by a Seychelles company (which will be shown in the whois), then you license the use of this domain to your Cyprus company. In your book keeping this will be shown as License - Expenses.
You can also license the name use of your company to your Cyprus company as their is no withholding tax on royalties from Cyprus company.

A seychelles company and an offshore bank is easy to setup.
Click to expand...

I understand that paying tax for Cyprus is important. Actually, I don't really want to withhold any taxes. The only reason why I'd like to incorporate there is first of all low tax, no tax for dividends and most important is that ecosystem for online businesses is thriving. But as I said, there are some elements in the chain of the trades which are unregulated and generally hard to account for. That's why I'd like to manage that part of the business through the offshore corp like in Belize. So Belize corp. will be something like a payment processor for the Cyprus corp.

I'm still going to pay full tax in Cyprus for the 100% actual income I have.

 

[dotbloup]

QeMB said:
I understand that paying tax for Cyprus is important. Actually, I don't really want to withhold any taxes. The only reason why I'd like to incorporate there is first of all low tax, no tax for dividends and most important is that ecosystem for online businesses is thriving. But as I said, there are some elements in the chain of the trades which are unregulated and generally hard to account for. That's why I'd like to manage that part of the business through the offshore corp like in Belize. So Belize corp. will be something like a payment processor for the Cyprus corp.

I'm still going to pay full tax in Cyprus for the 100% actual income I have.
Click to expand...

No offense, but there is no perfect jurisdiction. People on the net may make you believe there is such a thing as a paradise land for online biz but it is not the case.

I think that in Europe, Cyprus is perhaps the only country where you don't need to ask for dividend tax exemption or declare your dividends.

 

[negon]

There is no tax if you setup the company with an Seychelles offshore company as an holding corp. and register the company offshore / abroad! There will also be no width holding tax if you are doing it this way. That said I 100% agree with dotbloup to pay the 12,5% tax in Cyprus is a good thing!

 

[dotbloup]

auric said:
There is no tax if you setup the company with an Seychelles offshore company as an holding corp. and register the company offshore / abroad! There will also be no width holding tax if you are doing it this way. That said I 100% agree with dotbloup to pay the 12,5% tax in Cyprus is a good thing!
Click to expand...

Big companies usually transfer their trademarks, domain names, patents to their Seychelles or Belize company and they charge their Cyprus company. Then, in book keeping, this counts as royalty costs, licenses, domain names are counted as expenses. Consequently, they pay less than 12,5% of tax because the money already left the Cyprus company to the Seychelles company before profit as expense. So at the end, you may pay only 8% corporate tax. In my thread, i wanted to say it was important to be reasonable and not to overuse this technique because then the government and tax authority will say it is not normal.

 

[JohnLocke]

dotbloup said:
So at the end, you may pay only 8% corporate tax. In my thread, i wanted to say it was important to be reasonable and not to overuse this technique because then the government and tax authority will say it is not normal.
Click to expand...

Second that. I totally agree that overusing a method will sooner or later force a change in the tax regulations in Cyprus. However, I'm sure that many already know about this and many other ways to reduce and avoid to pay tax in Cyprus.

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[dotbloup]

Admin said:
Second that. I totally agree that overusing a method will sooner or later force a change in the tax regulations in Cyprus. However, I'm sure that many already know about this and many other ways to reduce and avoid to pay tax in Cyprus.
Click to expand...

I thought about the fact that the UK gov. busted Starbucks tax planning who systematically declared losses to the HMRC while making profits somewhere else:

 

[negon]

great share thanks.. I wasn't aware of Starbucks troubles with the UK tax system.

 

[JohnSeed]

dotbloup said:
No offense, but there is no perfect jurisdiction. People on the net may make you believe there is such a thing as a paradise land for online biz but it is not the case.

I think that in Europe, Cyprus is perhaps the only country where you don't need to ask for dividend tax exemption or declare your dividends.
Click to expand...

Seems Cyprus is the perfect place for most online business that requires a Payment solution like PayPal, 2checkout, skrill and so on. If you can live with only accepting wire transfer payments from your customers many other offshore jurisdictions may be better and even cheaper to incorporate your business in. For instant the Seychelles and Belize are some of the most famous and discussed jurisdictions here and on all other blogs and forums.

 

[dotbloup]

moneynetwork said:
Seems Cyprus is the perfect place for most online business that requires a Payment solution like PayPal, 2checkout, skrill and so on. If you can live with only accepting wire transfer payments from your customers many other offshore jurisdictions may be better and even cheaper to incorporate your business in. For instant the Seychelles and Belize are some of the most famous and discussed jurisdictions here and on all other blogs and forums.
Click to expand...

I have seen an article some times ago comparing Gibraltar and Cyprus. It is stupid because a Gibraltar company even with a Gibraltar bank will never be accepted at all online merchant accounts.
If a company is incorporated in Gibraltar, the paypal account requires a debit card issued from Gibraltar to withdraw the money. However, it is as hard to open a bank account in Gibraltar as in the UK, so if you fail you find yourself with a gibraltar company and you have nothing to do with it because 2checkout wants the company country to match with the bank country.

 

[JohnSeed]

dotbloup said:
because 2checkout wants the company country to match with the bank country
Click to expand...

Not true, you really need to stop spreading these rumors, I don't know why some people or some person has started this s**t. I read it already for 4 years ago on other forums. I have unambiguous evidences that this is not true. It is possible to open an account for instant with a Belize corp and a Cyprus bank account.. you simply just need to get in touch with a support staff.

 

[cosmo]

A Cyprus Company only pay 12,5% tax right? Does this change anytime soon or do you think it will stay at this rate?