Advice Needed - Moving my company
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I'm not sure if I read this right https://www.ey.com/Publication/vwLU...s_2019/$File/Tax_Facts_2019_Eng_FINAL_INT.pdf
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So why do you have to pay 12,5% tax on dividends in Cyprus ?
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PAGE 9
So why do you have to pay 12,5% tax on dividends in Cyprus ?
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Because those aren't dividends but corporate taxes. Since Estonia's corporate tax is 0% and you only pay 20% on dividends, if your company is tax resident in Cyprus because of DTA with Estonia the Cyprus company will pay 12,5% instead of 20%.
Why does he say that he is going to be taxed 12,5% on my dividends in Cyprus?
I don't get it??
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Because in Estonia there's 0% corportae tax and 20% on dividends.
In Cyprus there's 12,5% corporate tax and 0% on dividends so probably in his thinking he accorped the 12,5% and 0% in one tax that he calls dividends.
Great, so we have an explanation to this, thanks for pointing that out.
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@marzio if the Estonian company pays 14% or 20% company tax on distribution and then the Cyprus company pays 12.5% then surely the total is 24.75% or 30%?
If the Estonian company pays dividends regularly (every year) then it pays only 14%. Given that Cyprus is on the exempt list from the 7% withholding tax for 14/86 companies in Estonia, it would be surely cheaper (and simpler) to take the dividend from the Estonian company as a Cyprus resident natural person?
If the Estonian company pays dividends regularly (every year) then it pays only 14%. Given that Cyprus is on the exempt list from the 7% withholding tax for 14/86 companies in Estonia, it would be surely cheaper (and simpler) to take the dividend from the Estonian company as a Cyprus resident natural person?
That's not the case. If you run and manage your Estonian company from Cyprus, you will need to register the company with the Cypriot tax authority as a permanent establishment. Any profits generated via that permanent establishment will only be liable to tax in Cyprus, as per the Cyprus-Estonia tax treaty.
So 12,5% total tax both at corporate and personal level.
I do not understand well, It does not seem very convenient to register the Estonian company fiscally in Cyprus in the case of a person who stay only 60 days per year in Cyprus?
In this configuration it can be considered that the Estonian company is managed outside of Cyprus?
In this configuration it can be considered that the Estonian company is managed outside of Cyprus?
No because 60 days in Cyprus are all that you need to be considered tax resident in Cyprus, but obviously you can't stay in other countries more than 183 days or you will be considered tax resident there.
Yes I know that, I was referring to corporate tax. 60 days a year in Cyprus implies that one is a personally tax resident, but does it not mean that the Estonian company is necessarily managed from Cyprus?
That is why I do not understand the advantage of fiscally registering the Estonian company in Cyprus. The fact of being 10 months per year outside of Cyprus is sufficient evidence to prove that the company is not managed from Cyprus. Or am I missing something?
That is why I do not understand the advantage of fiscally registering the Estonian company in Cyprus. The fact of being 10 months per year outside of Cyprus is sufficient evidence to prove that the company is not managed from Cyprus. Or am I missing something?
Yes you are missing the 60 days rule explanation.
This rule came in 2017 as an amendment to the “183 days” rule and provides incentives to high profile individuals, professionals and executives to become Cyprus Tax residents.
The 60 days rule is effective as from tax year 2017.
An individual can become a tax resident by either the case.
An individual who in the relevant tax year:
a. do not reside in any other country for a time period of more than 183 days(aggregate) and
b. is not a tax resident in any other country and
c. resides in Cyprus for at least 60 days and
d. has various other Cyprus ties such as :
1. contract of employment
2. he is a business owner
3. he is a director of a Cyprus Tax resident company
Registering the Estonian company in Cyprus and residing in Cyprus for at least 60 days it's enough for them to consider the company tax resident there.
Many thanks for the information, in fact I had omitted that all these criteria must be met and not only the 60-day stay.
But is it possible to have a foreign company (Estonia or other) as a shareholder and administered outside of Cyprus and which generates the large part of the profit and have another Cypriot company (small business) just so that the 60 day residence rules be respected?
The profits of the foreign company would be considered worldwide sourced and without taxes in Cyprus. Would taxes be paid only on the benefits of the Cypriot company (small benefits)? My reasoning is correct?
@jim Beam : I'ld be interested in hearing HOW LONG you have had your cyprus company and learn the contact info of your accountant. I've contacted 3 but no answer. I'ld rather pay a bit more for a reliable office than look for the cheapest solution and then after X years get presented a huge bill because accounting wasn't done seriously ...
Do I understand correctly that you don't have to pay social security as your own director of your own cyprus company ?
Do I understand correctly that you don't have to pay social security as your own director of your own cyprus company ?
You can not "just" become a tax resident and live there for 2 months without paying any tax : they will consider that you have expenses while living in cyprus so this is money you bring into cyprus so on this money you must pay social security 14,xx %.
Elve is right : by staying only 2 months in cyprus you can difficultly claim a PE for a OU. But why do that ? There is the EU parent directory, so dividends coming from any EU company go tax free to another EU company. And then when the dividends arrive in Cyprus you take them out tax free, out of your cyprus company.
Estonia's tax rate is 14 %, the 0 % only applies if you keep your money in the company (which also means : if you don't pay out dividends ; you can only pay out dividends AFTER paying corporate tax)
Estonia's tax rate is 14 %, the 0 % only applies if you keep your money in the company (which also means : if you don't pay out dividends ; you can only pay out dividends AFTER paying corporate tax)
@ admin : how would you feel about this please :
now in several threads, there is interesting information being mixed up from different countries and everything is a bit spread out.
How about you make a sub-forum called RESIDENCY AND PERSONAL INCOME TAX PER COUNTRY - and every country gets 1 thread + a second sub-forum called COMPANY STRUCTURES AND CORPORATE TAX PER COUNTRY - and every country gets 1 thread ?
This way, all information about LIVING in 1 country can be grouped and all information that is company related can be grouped together in 1 thread ?
now in several threads, there is interesting information being mixed up from different countries and everything is a bit spread out.
How about you make a sub-forum called RESIDENCY AND PERSONAL INCOME TAX PER COUNTRY - and every country gets 1 thread + a second sub-forum called COMPANY STRUCTURES AND CORPORATE TAX PER COUNTRY - and every country gets 1 thread ?
This way, all information about LIVING in 1 country can be grouped and all information that is company related can be grouped together in 1 thread ?
Hi @Gandalf, we are in a very similar situation, but I own a travel agency in EU already. I'm looking for a better options as I'm not living in the EU anymore.
Could you make an update on your research? Have you finally incorporated your travel company in Estonia? Any comment is appreciated. Why not a LLC in the USA + residency in a territorial tax country? Thank you!
Last edited: May 27, 2021
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