Cyprus non-dom plus HK Offshore tax strategy opinion

[CyprusLaw]

Hi,

Just a few thoughts on this -︉ in the suggested structure you will be paid a salary, potentially you could avoid tax︊ on this as there is a 100% exemption on remuneration for salaried services rendered outside︋ Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer︌ (you will need the opinion of a Cyprus tax advisor on this as it depends︍ on activities etc). However, you would still need to pay social insurance which adds up︎ to a high percentage. Having this in mind my suggestion would be to set up️ a Cyprus company (corp tax 12.5% on profit), and as a non dom dividend payment‌ would be tax/sdc exempted.

Generally get professional advice and make a cost benefit analysis, including‍ all costs of running a company in Cyprus vs running one in the IoM.

 

[mallshtow]

Nope, the idea is to comply to be tax resident only‍ in Cyprus.

What determines what is salary and what a dividend?⁢ Could I ask my company to pay me in some way that it is considered︀ a dividend?

So, in general terms, to make a company︄ tax resident in a given a country, it should have directors based there. Would I︅ need to, for instance, have some "employee" in there to make this "residence" more real?︆

Yeah, I guess that could be an option...

Any place where I could︍ check costs?

I have other doubt regarding Cyprus Non Dom, that is that they make︎ you have a business there as well, so I guess that local company should "do"️ something... Right?

 

[CyprusLaw]

The dividend is anything you get directly from the company as a shareholder. The salary is⁠ paid if you are a director and are therefore registered as an employee of the⁤ company - this is not necessary, you can just use the dividend, as this way⁣ you avoid payment of S.I as an employee.
You can use nominee directors and have an office︂ in Cyprus, this is the best you can do to show substance and control in︃ Cyprus. The cost for this is a minimal annual fee.
The cost general for the nominees and for︅ accounting/audit will depend on your activities, risk assessment etc but should be no more that︆ around EURO 5,000 total. Would be happy to discuss more.

 

[mallshtow]

Wouldn't they argue that it is⁠ not a "real" company as it only have a director (or 2) and an office⁤ but nothing is being really done?

I've just seen this answer from you. Thanks︆ for replying! So, you suggest not incorporating in Isle of Man but just use the︇ Cyprus company? This is in the case that the company I work for can potentially︈ pay me everything as dividends, correct? But, in the case I can't make that happen︉ and I just have a salary, I would pay 12.5% corporate tax, correct? And that's︊ when an offshore company (resident offshore) would make more sense, right?

What/s this percentage? Base on what?

Any consultant I can get in touch︎ for this?

Also, are there any other countries which, if having an offshore company (resident️ offshore) would have tax exemption?

 

[CyprusLaw]

There is always a risk, however, I note that so far we have‍ not heard of any cases where the residence has been challenged by the Cyprus authorities.⁠ In any event your advisor will guide you as to the best possible structure to⁤ safeguard your company.

This will depend on what the salary will be, whether you have︄ any exemptions depending on status and activities etc.

If you are ok I︇ can PM you about this.

 

[mallshtow]

Sure!

 

[Sols]

Just to expand on what @CyprusLaw wrote, dividends are paid from a company's capital⁠ reserves. The company needs to be cash positive. As long as you are, pay yourself⁤ all the dividends you want (but keep enough to cover upcoming costs/liabilities). A good accountant⁣ will help you work out how much can you can pay yourself in dividends.

Salaries are drawn from the company under some sort of agreement (such as an employment agreement).⁢ The first few thousand are tax free, so paying yourself a small salary can be︀ a way to lower your tax burden but it's negligible and not worth the hassle.︁ Stick with dividends.

Not necessary. It helps if you're doing some cross-border arrangements but if your plan︅ is to be tax resident in Cyprus, you being the director of the company is︆ all it takes.

Shop around and have discussions with service providers that are law firms and/or registered Administration︈ Service Providers (ASPs): Cyprus Securities and Exchange Commission | APPROVED ASP

I don't know which︉ firm @CyprusLaw represents but as long as they're an actually a lawyer (or a law︊ firm) or an ASP, get pricing from them. But get pricing from a few more︋ just to compare.

Those licensed by CySEC are required to provide you with an itemised︌ list of fees. Make sure you get that and can fully assess/estimate your costs for︍ year 1 and year 2. If you know how many transactions your business will have,︎ ask about a general estimate for audit as well. You can appoint your own auditor,️ but in the beginning at least it's easier to work with one recommended by your‌ corporate service provider.

 

[lavel]

Wonder if OP got setup like suggest in the thread?

It used to be easy‌ but after all the crap with AML5 and now AML6 I believe some need a‍ very good tax lawyer to avoid troubles if they plan to do business outside of⁠ their own country!

 

[Piano]

Hello Dllttrading,‍

how many months a year you have to spend in Cyprus to keep the non⁠ Dom status ?

 

[CyprusLaw]

Hi Piano,

Just to clarify‍ - the requirement to stay for a certain amount of days in Cyprus relates to⁠ the 'tax residency' status, not with the non dom status. You can be a tax⁤ resident in Cyprus (60 day rule) and have the non dom status and therefore have⁣ the benefits afforded to non-doms, such us dividend payments being SDC exempted.

In order to⁢ officially get the non-dom status you need to complete a form declaring your status. I︀ note that even if you actually relocate and live in Cyprus, you are still granted︁ the non-dom status for 17 years.

I hope this helps.

 

[orangekangaroo]

Ok here is my 2 cents:

The OP states he is making 70K which in‌ my opinion is not enough for a Cyprus structure. Company setup, admin fees (sky-high in‍ Cyprus), CIT and the requirement of a full-time residence = 25-30% overall costs.

HK structure⁠ could work, but this is on Cyprus turning a blind eye on you doing the⁤ management. Still, you need to be self-employed, pay minimum wage and socials on top and⁣ have an expensive structure in HK. How long this is viable I don't know. Work⁢ out the cost of each structure.

Cyprus works fine if you earn more per year︀ (200K) and can build substance abroad.

I am geared more to Romanian Micro company for︁ my line of business 1 to 3% tax on turnover and 5% divi tax. Romanian︂ tax residency can also be established by making it your country of domicile (it is︃ your centre of the universe), so you could get away with a 4-month stay as︄ long as no other country claims residency, you will then have to fall back on︅ DTTs. I have no issue staying 6 months plus as I need to build substance.︆

This is the 2nd time I am hearing that company and bank account have to︇ be in the same country. I have heard of a case where within the EU︈ PAYMENTS WERE REFUSED because the EU IBAN number was from a different country than the︉ EU company, this goes against EU rules.

 

[kkein]

to remain in OP topic: how much would it cost in average to set up‌ an HK company with a local office and managing director (through a trusted provider, ofc),‍ so that remote "practical" management will trigger no objections from the taxman? (in the example,⁠ Cypriot taxman)

 

[JohnLocke]

valid questions, if someone is able to answer⁤ this or point us in the right direction it would be very friendly.

 

[kkein]

I think maybe @GiGoGo was the HK expert? 🙂 not sure what's the setup in that‌ case, and if only for crypto or what

 

[5K1PP3R]

I am Cyprus 60 days tax resident and non dom.
So basically if I make‌ a HK offshore company that means, I will be in the CRS as UBO and‍ risk getting busted by Cyprus tax services, 12.5% on profits + penalties. If I make⁠ an onshore HK company (local director), the company will need to pay 16.5% profit tax⁤ in HK, no point doing that, because Cyprus has 12.5%.
Is this correct?

 

[kkein]

why would cyprus ask you taxes for your foreign company? besides, i think you will‌ be UBO in both cases

 

[CyprusLaw]

Management and control test. If‍ his HK company has no substance in HK it will be deemed by tax authorities⁠ as being managed in Cyprus and therefore be taxed in Cyprus.

So no real point⁤ doing this, you can set up a Cyprus company since you are a non dom⁣ here it is the perfect scenario

 

[kkein]

Is a local director all it's needed to make an HK company substanced? But⁣ in that case i don't think HK company has to pay taxes on global income,⁢ does it?

 

[CyprusLaw]

Unfortunately I can only speak for Cyprus, I assume⁠ that as with most countries local director would be a strong case towards creating substance⁤ in HK. However in the OP’s scenario I think the most beneficial would be to⁣ avoid HK all together as he is a non dom in Cyprus so he already⁢ has a very attractive set up