Short tax residency options

[CyprusLaw]

As you can see from my name⁢ I am in Cyprus and I deal with this things all the time. Thss is︀ how it works hence why it is beneficial to set up a company as S.I︁ is a major expense.

I suggest you discuss directly with a tax advisor so that︂ you have the correct advice on the matter. I don't think that you read anywhere︃ online that you can earn income without registering as a sole trader.

My issue is︄ that statements which are not accurate are made and this may create confusion to other︅ readers.

 

[glengoolie]

just fyi, where i live, in eu, you can be willingly unemployed, you are required‌ to pay only the basic healthcare(i think around 50€ a month) and that is it.‍ if you trade stocks, depending on how long you hold the income(gain on capital) can⁠ be subject of a tax, in which case you will pay the income tax and⁤ your healthcare will be based off of that. but if you hold long enough, then⁣ there is no CGT on capital and you are still at 0 income tax. hence⁢ why i believe the same applies in cyprus with the exception/difference that cyprus does not︀ require minumim holding period(between buying and selling a stock) to determine if said income is︁ subject of a tax or not. same applies to real estate where holding period here︂ is 5 years, whereas cyprus has 0.

 

[CyprusLaw]

The above is︃ inaccurate, as I have said pls get professional tax advice.

 

[glengoolie]

listen, i am always keen to learn but i need to be presented with sufficient‌ evidence that contradicts everything i have consumed up until the point i made my mind‍ about something. so not be an a*****e, but could you at least provide a link⁠ to the cyprian law that clearly states what you claim? again, not to be an⁤ a*****e, but it would certainly help others that will be reading this topic later on,⁣ not just myself.

 

[Piano]

trading for a proprietary firm (does not fall under investment service) and receiving‌ share of profits and/or trading for myself

 

[Piano]

And/or trading my own capital , does it make a difference if you hold long‌ term or short ?

 

[CyprusLaw]

No.

The best way to structure‍ it is through a company, regardless of the disagreement above trading as a sole trader⁠ triggers liability for S.I and GHS. While through a company and provided the activities are⁤ as mentioned above it would be tax exempt and you can be paid dividend from⁣ the company.

 

[Piano]

0% tax⁤ ? But about 3% of profits for healtcare ?(without health insurance outside of cyprus ?)⁣
how does the government controls 60 days presence ?
what sort of company ? Cost⁢ ?

 

[CyprusLaw]

The 2.65% for healthcare is not on the profits, it's on the dividends you will‌ be paying yourself from the company.

With respect to the tax residency - I note‍ that this is deemed by showing substance and control, i.e. majority of board will be⁠ in Cyprus, your accountants will get you the relevant tax residency certificate.

A private limited⁤ by liability company (this is the main type of company in Cyprus) - with respect⁣ to the cost this will depend on whether nominee services will also be required. I⁢ note that if at any point your services fall under the definition of 'investment services'︀ as provided in the relevant Cyprus law then a license by the regulator will be︁ required.

From the information you have provided no license is required based on the current︂ activities described.

 

[Piano]

What is the cost to set up the limited company ?
typical cost for accountants‌ ?

 

[CyprusLaw]

I believe it's easier if this is not shared publicly, and also it depends on‌ whether nominee services are required and with respect to accountants this will depend on the‍ volume of transactions.

 

[glengoolie]

cypruslaw, regarding our conversation, this is the tax law(that i was able to find in‌ english): http://cypruslaw.narod.ru/laws/Cyprus_Income_Tax_Law_2002.pdf

in part 3, imposition of tax, point 5a:

in part 3, imposition of tax, point 5c:

which is as you said, dividends are income, so even⁣ if i would have a company in cyprus, if i would want to take out⁢ profits, it is done via dividend which is subject of an income tax.

but if︀ i would not have a company and i would be trading stocks as individual, based︁ on the 5a and the definition of business:
in part 1, introductory provisions, point 2,︂ "business" is defined as:

it would probably fall into the︄ "trading nature", hence subject of an income tax. in both cases it entails income tax,︅ social security and healthcare.

is that what you were trying to say?

if so, can︆ you explain to me when does the 0 capital gains tax come into all of︇ this?

in part 3, imposition of tax, point 8/22 exemptions:
hence trading stocks is subject to income but tax exempt, hence︉ income tax, social security and healthcare shall be 0....?

 

[CyprusLaw]

I

You seem to be confusing income tax, cgt and corp tax.

These are three separate︄ concepts.

(i) Income tax - If you are a sole trader or an employee of︅ a company you receive income which falls under the income tax, having to pay S.I︆ and GHS.

(ii) Dividends - when you are the shareholder of a company (I stress︇ shareholder, not employee or director) - you get paid dividend by the company - for︈ this a Cyprus resident pays 17% on the dividend payment. If you have a non︉ dom status (as you would) then you only pay 2.65% on the dividend payment and︊ nothing else. Any profits remaining in the company's balance are charged at corp tax rate︋ of 12.5%.

(iii) CGT -
Capital Gains Tax (CGT) in Cyprus is imposed at the︌ flat rate of 20% on the following sources of income:

1. Gains from disposal of immovable︍ property located in Cyprus;
   
2. Gains from disposal of shares of companies which own immovable property︎ situated in the Republic and that are not listed on a recognised stock exchange;
   
3. Gains from disposal of shares of companies, which indirectly own immovable property located in the Republic️ and derive a minimum of 50% of their market value from this immovable property.
   

Now with respect to your specific question on stock trading please note that any income arising‌ from trading in securities is completely exempt from corporate tax. The term “Securities” includes but‍ is not limited to: ordinary and preference shares, founder’s shares, options on titles, debentures, bonds,⁠ short positions on titles, futures/forwards on titles, swaps on titles, depositary receipts on titles, rights⁤ of claims on bonds and debentures, index participations (only if they represent titles), repurchase agreements⁣ or Repos on titles, participations in companies, units in open-end or closed-end collective investment schemes⁢ such as Mutual Funds, International Collective Investment Schemes (ICIS) and Undertakings for Collective Investments in︀ Transferable Securities (UCITS).

So having read the above please distinguish the concepts - stock trading︁ is exempt from tax but if you are trading as an individual you still need︂ to pay S.I and GHS. If you are trading as a company any money that︃ appear as profit from stocks in the company's balance are exempt from corp tax, but︄ if such money is paid to the shareholder as dividend you have to pay 2.65%︅ GHS.

I am attaching a brief file:///C:/Users/USER/Downloads/Tax%20Guide%20(1).pdf

As I have previously mentioned you need to︆ discuss this with a professional tax advisor in order to get a grip of the︇ concepts. CGT for example works very differently in other countries.

I also note that the︈ link to the Income Tax Law translation you have provided me with is a translation︉ of the original 2002 act which has been amended over 30 times thus far.

 

[glengoolie]

i think the confusion between us in this topic might be stemming from the misunderstanding‌ of what trading stocks actually means.

so when i say trading stocks as individual, unemployed,‍ just jolly old me, i mean that i have a personal account with a stock⁠ broker and i use my own money(savings and whatnot) for buying and selling stocks on⁤ various stock markets(NASDAQ/NYSE/LSE/...) through this broker. making profit from these actions is considered gain on⁣ capital and is subject to capital gains tax(there are various types of capital).

and i⁢ think you understood "trading stocks" as me functioning as broker for other people. in which︀ case your suggested self employment and income tax would make perfect sense.

am i correct︁ this was your understanding?

 

[Piano]

well, I would do the same︁ kind of trading , my question is now , why should I trade ,receive income︂ under a company instead of my personal account ?

any tax advantages in having a︃ company ?

 

[CyprusLaw]

No - if this was a︁ case (you acting for others then other licensing questions could kick in). If trading for︂ yourself to be precise and completely transparent and legal you would need to declare this︃ as income and to pay the relevant S.I etc.
If you do this as an individual then︇ you would have to declare the income and will have to pay social insurance and︈ contribute for the GHS - also in the event that the activities do not fall︉ under the tax exemption and income tax would apply this would be charged in bands︊ starting from 20% up to 35% . But in any event Social Insurance payment liability︋ will apply and this is quite high.

On the other hand under a company if︌ your activities are tax exempt then 0% corp tax and any dividend paid to you︍ by the company will be tax exempt, you will just need to pay 2.65% SDC.︎ Even if you have profits from activities that are not exempt these will be taxed️ at corp tax of 12.5%.

 

[Piano]

Ok, Cyprus is quite pricey for companies and accounting also required ,︆ i could take up residence in Cyprus and incorporate for example in the British Virgin︇ islands, more secrecy and no or minimal accounting ..I would still have to pay the︈ same taxes ?

 

[CyprusLaw]

Cyprus is quite cost-effective compared to other jurisdictions. In the⁤ structure you propose that would depend on tax regime in BVI, I suggest you get⁣ a full fee quote for Cyprus and then consider other solutions.

 

[glengoolie]

but capital gains are literally tax exempt in the tax law for⁤ companies and individuals. this is what we are disagreeing on. i mean, no capital gains⁣ tax is literally the only reason why cyprus is even worth looking into. the 12.5%⁢ corporate income tax is really not the reason people move their businesses there when you︀ can get lower numbers in multiple jurisdictions within EU and with better connectivity and banking.︁ i am still amazed how we are not on the same page after all the︂ messages here and in other threads. please do provide some proof of what you say︃ already because i will start believing you are just a hack or impostor trying to︄ scam people for consultation services or something.

 

[CyprusLaw]

Please read above the quotes I︂ have posted about what is CGT in Cyprus!!! And read the site I have sent︃ you. You are confusing the concepts of income tax, corp tax and cgt. You have︄ started numerous threats in two days fighting and providing opinions on a legal system you︅ are not part of. I am merely trying to help you understand how things work︆ in Cyprus. Read the info in the site I gave you earlier I believe it︇ will help you understand how things work here. CGT in Cyprus applies only for disposal︈ of real estate in Cyprus or shares of company holding real estate in Cyprus. CGT︉ and income tax are two distinct concepts. I am attaching another site:Cyprus - Corporate︊ - Income determination

https://www.businessincyprus.gov.cy...egister for income,in the Republic of Cyprus.