This is easy to overcome by hiring a Director which is not a resident in Cyprus. Is this correct or am I missing something here?
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Cyprus non dom + offshore company, most tax efficient setup?
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This is easy to overcome by hiring a Director which is not a resident in Cyprus. Is this correct or am I missing something here?
Yes, if the company is not tax resident in Cyprus, meaning for example that its real, genuine control is exercised somewhere else.
Company is tax resident in country with 0% corporate income tax and 0% withholding tax on dividend to any other country with genuine control there. And you are tax resident in country like Cyprus with 0% tax on dividends and you pay yourself 100% of compensation from company to yourself as dividend only. That way can be legally 0% corporate and personal tax?
Genuine control can be expensive to hire people there so is like a tax. If you making enough money to create genuine control for the company it is probably best way to do it so why is it not more common are there other disadvantages for doing that?
Yes.
Because the reality is that the vast majority of successful businesses aren't running after zero-tax jurisdictions. Why is it that high tax places like US, China, India, France, Germany, UK, Sweden, and Canada have the most unicorn companies? Why aren't there thousands of tech companies in BVI, Cayman Islands, and Vanuatu? Because to run a successful business, you need to hire good people. And you simply can't find enough of them in those places, immigration there is difficult, and even if you manage to secure work visas, most people don't actually want to move to a tiny island somewhere.
Many (most) of the biggest companies in the world make use of offshore jurisdictions. But they didn't start there.
That said, there are people who set up genuine substance somewhere for their offshore companies. But they're a minority.
It's quite simple: you rent a proper office somewhere, as they are relatively cheap nowadays unless you need it right in the middle of a capital city! Then, you sign up for electricity, water, and set up an internet connection. After that, you find someone you can possibly use for other tasks as well, but whom you hire in your company as a manager, preferably a director!
This can be done relatively cheaply, and then you just need to focus on figuring out if the costs you pay for the above are in harmony with what you save in taxes.
This can be done relatively cheaply, and then you just need to focus on figuring out if the costs you pay for the above are in harmony with what you save in taxes.
Offshore company that pay less than 6.25% income tax has to pay Cyprus tax. Is 0% tax not legal in Cyprus?
Can you have remote contractor in many countries without being tax resident there? If you have 10 contractor in 1 country that country would see you like tax resident. But 10 contractor in 5 countries you can't be tax resident in all of them so is it valid way to run it?
If the company is tax resident in Cyprus, it's supposed to pay the 12.50% corporate income tax. You might be able to claim the 6.25% already paid as tax credit, so you only pay 6.25% in Cyprus. There are hundreds of possible little things that can affect this, though, so it's best you speak with a lawyer.
Depends on the laws of the country where the contractors are. A company can be tax resident in multiple jurisdictions at the same time. However, even without fully being tax resident, you risk creating a Permanent Establishment (PE) which can be deemed taxable. As an oversimplified example, let's say your company makes 200,000 in profits have 10 contractors in 5 countries and they all do an equal amount of work. One of those countries decides you have established a PE and income attributable to the PE shall be taxed. You would have to pay whatever the local tax rate there is on 1/5 of your profit.
It's much more complicated in reality and can be both higher and lower. That's just an illustrative example. Pick locations carefully. In most cases, though, nothing will happen.
Should the offshore company, let's say the Hong Kong Company, be 100% owned by the Cyprus company or by an individual?
I don't understand the question in the context of the original post. Can you please clarify what you mean?
The question is, who should be the shareholder of the Hong Kong company? Should it be him as an individual or the Cyprus company 100% share and him as a manager?
I suppose it should be the Cyprus company; otherwise, how could it receive distributions?
I suppose it should be the Cyprus company; otherwise, how could it receive distributions?
Doesn't matter. The structure we're talking about is technically against the law in Cyprus. A law that Cyprus isn't currently enforcing. You can layer the cake however you want.
How to pick locations to have contractors or remote employees? If it is remote work that anyone can do after some training.
If Cyprus owner has company with genuine control in 0% tax country in theory is possible to have 0% tax but Cyprus doesn't allow it because of 6.25% rule. Lowest legal tax in Cyprus is not 0% is 6.25% or is there way to get lower?
Where do you have the 6.25% rule from?
The offshore company doesnt pay any tax in Cyprus as long as its not controlled from Cyprus. It doesnt matter where the shareholder is located!
Foreign Income: Cyprus - Corporate - Income determination
See the pwc page it says foreign profits not taxable if at least 6.25% was paid.
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