Non-EU/EEA foundations and Cyprus residency
- Thread starter Onassis
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Can you explain firstly if your question about treatment relates to tax? Secondly please provide the example.
Maybe @CyprusLawyer101 can help here.
Maybe @CyprusLawyer101 can help here.
You mean in terms of distributions from the foundations? Maybe if you could elaborate further , better feedback can be provided.
Here's the example:
Let's say that a person (who is at the time not a tax resident of Cyprus) sets up an irrevocable discretionary foundation in Panama and endows it with cash that the professional councillor uses to invest in stocks and ETFs.
The founder then moves to Cyprus and becomes a non-dom tax resident. The broker is informed and the brokerage account gets reported to Cyprus as it is a passive NFE.
Scenario #1: The founder does not receive any distributions but the Cypriot tax authorities are aware of the account due to CRS. Would they ask any questions?
Scenario #2: The founder at some︀ point receives one or more distributions from the foundation. How would these be taxed?
Thank you
Let's say that a person (who is at the time not a tax resident of Cyprus) sets up an irrevocable discretionary foundation in Panama and endows it with cash that the professional councillor uses to invest in stocks and ETFs.
The founder then moves to Cyprus and becomes a non-dom tax resident. The broker is informed and the brokerage account gets reported to Cyprus as it is a passive NFE.
Scenario #1: The founder does not receive any distributions but the Cypriot tax authorities are aware of the account due to CRS. Would they ask any questions?
Scenario #2: The founder at some︀ point receives one or more distributions from the foundation. How would these be taxed?
Thank you
1. No unprovoked questions are expected to be︂ asked;
2. These should either be recognized as dividend distributions or capital distributions. As a︃ non dom in either case no SDC tax is expected to apply, however prior to︄ final conclusion the treatment of the foundation as an investment vehicle both from the point︅ of view of the set up country( as withholding tax may apply ) as well︆ as from the point of Cyprus should be looked at ( maybe it could be︇ treated as a transparent vehicle, although again tax treatment should be the same even if︈ income is recognized as dividend or interest. All in all it appears that you get︉ it clean with taxes, but probably you will have to pay national health insurance in︊ the event you get a dividend characterization.
2. These should either be recognized as dividend distributions or capital distributions. As a︃ non dom in either case no SDC tax is expected to apply, however prior to︄ final conclusion the treatment of the foundation as an investment vehicle both from the point︅ of view of the set up country( as withholding tax may apply ) as well︆ as from the point of Cyprus should be looked at ( maybe it could be︇ treated as a transparent vehicle, although again tax treatment should be the same even if︈ income is recognized as dividend or interest. All in all it appears that you get︉ it clean with taxes, but probably you will have to pay national health insurance in︊ the event you get a dividend characterization.
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