PwC talks expressly about "Cyprus CIT payer" so i presume CFC rules apply only to Cyprus tax resident companies?
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Does Cyprus CFC rules apply to non-dom tax residents?
- Thread starter Marzio
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Hello
I already posted this in other thread but please see below as well:
At the moment, on a Cyprus level we have a rather peculiar position regarding CFC rules. It seems the local legislation pertaining to CFC rules was ratified but at the moment captures only legal persons and not physical persons. We expect this to be changed though in the near future.
So for now, an individual incorporating both a Dubai and a Cyprus Company, from a Cyprus prespective the Dubai company would not be captured by the CFC legislation. Even if it did, there are certain exemptions as follows:
i) Accounting profits that do not exceed Euro 750 000 and non-trading income which︁ is not more than Eur75 000; or
ii) Accounting profits that do not exceed 10%︂ of its operating costs for the tax year.
Of course, careful planning is needed if︃ such a structure is pursued to avoid exposures.
I already posted this in other thread but please see below as well:
At the moment, on a Cyprus level we have a rather peculiar position regarding CFC rules. It seems the local legislation pertaining to CFC rules was ratified but at the moment captures only legal persons and not physical persons. We expect this to be changed though in the near future.
So for now, an individual incorporating both a Dubai and a Cyprus Company, from a Cyprus prespective the Dubai company would not be captured by the CFC legislation. Even if it did, there are certain exemptions as follows:
- De minimis exception
i) Accounting profits that do not exceed Euro 750 000 and non-trading income which︁ is not more than Eur75 000; or
ii) Accounting profits that do not exceed 10%︂ of its operating costs for the tax year.
Of course, careful planning is needed if︃ such a structure is pursued to avoid exposures.
i would assume the exemption would not be granted in this case as the legislation explicitly refers that both conditions be met.
I would assume it would depend on the jurisdicstion. In this case Cyprus does not actively challange CFC regulations especially if the basic corproation tax rate of the income receiving country is above the 50% threshold.
Thus, if a specific jurisdiction is above this threshold (thus not a CFC) but there is in place a tax incentive scheme which drives the corporation tax below 50% (this a CFC), from a Cyprus prespective, as the Law explicitly refers to corporation tax paid, then the default position would be that this would be considered a CFC.
All in all, any business setup needs to be thoroughly︀ analysed to avoid any exposures before embarking on a corporate structuring.
Thus, if a specific jurisdiction is above this threshold (thus not a CFC) but there is in place a tax incentive scheme which drives the corporation tax below 50% (this a CFC), from a Cyprus prespective, as the Law explicitly refers to corporation tax paid, then the default position would be that this would be considered a CFC.
All in all, any business setup needs to be thoroughly︀ analysed to avoid any exposures before embarking on a corporate structuring.
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