Case Study - Discussion about Company Set up, Expenses, Non Dom, Fees etc

CYAUSE Response - in red colour

Company structure

1. The new CY company will be invoicing the UK and US businesses for IT services, excluding VAT
   • The CY company will not be VAT registered unless it receives EU invoices for goods and services in which case we will need become VAT Register and apply reverse change

1. The new CY company will be issuing dividends to shareholders/directors and will not have any employees during this tax year - ok

1. • The dividend issued to shareholders will be tax-free in Cyprus, while shareholders will be obliged to pay taxes in the country of residence - correct

1. Since both directors/shareholders are EU citizens, we can manage the company outright (no need for nominee director service) - Wrong - If you do not use Nominee then the Company will not be considered as managed and controlled from Cyprus thus be taxed at 12.5%. 

1. • We will require the registered office & secretarial services - OK We will invoice you accordingly.

1. The application for non-dom status for directors/shareholders is put off until 2023

1. • That is until we purchase the residential property in CY or rent something for the “long term.” - No problem, still no tax on dividends as you are not Cyprus Tax Residents

Expenses

1. We will be able to expense 1/3 of the running expenses of the residential property owned in CY (once purchased)  - Yes
2. We will be able to expense the travel costs in and out of CY
   • The flights, car rental, short-term rental, meals, etc., regardless of the number of trips per tax year - Yes

1. We will be able to expense 1/3 of the running expenses of the residential property we work from in the UK (once CY property is purchased, this will be discontinued)

1. • Until then, the expenses will include electricity, gas, property tax (rates), mortgage payments (capital and interest), and internet; how to log those expenses? - As long as it makes sense and not too excessive

1. Mobile phone contract in the name of the director; until migrated to a company name -ok common issue
2. Cover some entertainment expenses, like a dinner, short trip, or a company day out… up to 1% of revenue - ok
3. Cover pre-incorporation expenses such as laptops or electronics necessary to perform business activities

1. • It is understood that fixed assets will not bring down the tax but would still be regarded as the director’s expense  Yes

Would you please share some more info regarding your accounting software so I can get familiar with it? How will I track expenses, declare dividends, etc?  We will be doing everything and if you want we can be sending you the detailed ledgers which show the transactions or the income statement and balance sheet items. We can chat about this as well. The software we use you can not have access to it but you can request all activity etc at your convinience.

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CYAUSE Response

Good morning dear Client,

• Company Corporation Tax is always 12.5%.
• Dividend Tax - as explained does not apply if you are a non dom or you are not living in Cyprus
• Nominee Services (directors etc)

All UBOs (like yourself) who choose not to live in Cyprus must appoint local directors so that the Management and Control is performed in Cyprus and thus the 12.5% can not be challenged by overseas authorities. 

So the answer to your question is essentially that you need the nominee services to safeguard the 12.5%. 

This is a standardised procedure for all Cyprus companies.

Kyriakos Tramountanellis | BSc, FCA, Director

About CYAUSE Audit Services

CYAUSE Audit Services is an Audit & Assurance firm with offices in Nicosia and Limassol in Cyprus. The firm has been awarded in 2 instances by its local regulators ICPAC and the ACCA for the Quality of our Audit Services and our Office Procedures.

Our Partnership with  BKR International  (No 10 Global Accounting Network) and ACCACE Circle (European Network) ensures that we are wired and closely connect in all jurisdictions getting the latest corporate and tax news ensuring our tax planning is accurate and validated before finalisation. Being part of international networks gives us fast access to accurate information for payroll, accounting tax and incorporation.

Our senior management day to day work is assisting overseas companies and HNWIs (High Net Worth Individuals) relocate or set up structures including Cyprus but not only in order to achieve their objectives.

Information about the director of CYAUSE Audit Services.

Contact Information: kt@cyprusaccountants.com.cy | +357 22 336 321