Cyprus non-dom tax residency + US LLC for internet business?

[Researcher]

What are benefits to getting Cyprus non dom tax resident status as individual and running a US LLC for internet business?

Are there any benefits of this over Cyprus non dom tax resident status with Cyprus registered LLC?

 

[Sols]

A lot of non-doms in Cyprus don't declare their offshore companies as tax resident in‌ Cyprus (even though they probably are) and thereby don't pay the 12.50% corporate income tax.‍ Cyprus isn't lifting any fingers to pursue non-doms at this point. That might change but⁠ probably not anytime soon.

Even so, many people opt for a Cyprus company because of⁤ ease when it comes to SOF/SOW declarations, because it's technically the right thing to do,⁣ because running an offshore company isn't quite as scalable in some cases, and so on.⁢

 

[GrumpyMess]

A lot of things have⁤ changed unexpectedly, so it may be soon. The company can be unmanaged during person's 60⁣ days stay in Cyprus, that's why tax office is skips these persons. It's very strange⁢ that no one has published a response from the tax office on this issue.

 

[Sols]

First time in Cyprus?

The tax office doesn't respond. They have never officially said to non-doms⁤ to keep not paying tax. They just prefer their frappe and smoke breaks over bothering⁣ mostly wealthy foreigners that bring value in other ways.

Welcome to Cyprus. Siga-siga.

 

[baio12]

How Cyprus make it easier than other countries?

 

[Sols]

Let's take‌ two scenarios to illustrate the difference.

Scenario 1: you reside in Cyprus, have a company‍ in Cyprus, and earn your income/wealth from that company. The company pays corporate income tax⁠ and there's the small GHS tax. No further tax is applicable if you take the⁤ profit out as dividends. Everything is completely above board and legal. You can show tax⁣ returns for the company and for yourself, which line up perfectly.

Scenario 2: you reside⁢ in Cyprus, have a company offshore, and earn your income/wealth from that company. The offshore︀ company pays no tax anywhere. You are the sole director/shareholder. You don't pay tax on︁ dividends the company pays you. You have committed tax evasion, which will become apparent to︂ anyone looking at your SOF/SOW documentation.

 

[baio12]

Who request SOF/SOW and what is used for?
Evasion is because you should have declare offshore company as resident in Cyprus and pay⁠ 10% corporate income tax for it before taking out dividends?

 

[Sols]

It's mostly‌ banks and payment processors that ask about it. They ask for it as proof that‍ your funds have a clean and legitimate origin. Banks don't want dirty money anymore. At⁠ least not in the same way as they did 25–30 years ago.

Correct, except it's⁣ 12.50%.

 

[baio12]

If you become resident of new country and transfer money to new bank account there‍ is moment where they ask? Is letter from your old bank where you wire it⁠ from enough for SOF?

 

[Sols]

Yes, that's an example. Another might⁠ be if you open a new account (without changing residence) or if your current back⁤ for some reason (randomly or mandatorily) performs repeat due diligence on your account.

 

[LosAngeles]

In this case, do you mean that⁤ the LLC will have one member, which is the Cyprus company holding 100% of the⁣ shares? So when the LLC distributes profits to the Cyprus company, the Cyprus company will⁢ pay 12.5% tax on those profits.

 

[Sols]

I don't understand the question based on the context of the message⁤ you quoted/referred to. In that post, I was answering a question about who might conduct⁣ SOF/SOW checks.

 

[baio12]

What proof they usually ask to⁠ see for SOF?

 

[jayM]

they asked me for invoices from real person and asked if it was ok to‌ contact them in case they had questions.

 

[Sols]

Whatever it takes to prove that your source of funds is legitimate. Invoices, agreements, bank statements,‌ tax returns, and so on.

 

[baio12]

Did they contact‍ your customers?

 

[JohnLocke]

They will not‍ contact your customers, if they do, it would be the first time I have heard⁠ of that. Please let us know if they have done that.