Cypriot non-dom with UK Ltd

Hi everyone! I’m looking into moving to Cyprus as a sole trader with non-dom status and I’m currently working out the details. My sources of income are webdesign and trading cryptocurrency and I’m thinking about using an UK Ltd to receive my profits in dividends.

Since I have no experience with an Ltd, many questions arise! I hope you can answer some of them:

  • When I have a UK Ltd but live in Cyprus (non resident in UK) I don’t have to pay social security or corporate tax in the UK, correct?
  • When I have UK customers, I do have to pay tax on those profits, correct?
  • Can I pay ALL profits from the UK Ltd to myself in dividends or do I need to pay myself a wage too?
  • The full accounting for the Ltd would happen in the UK, correct?
  • I will also need an accountant in Cyprus for the amount I invoice the Ltd as a sole trader, correct?
  • The UK does not impose taxes on outgoing dividends, correct?

Thanks in advance!

Hello,
why don’t you set up a CY Ltd for your business?
You get aroung paying taxes and Soc Sec in the UK and of course VAT free transactions on corp site.

The only way to get my profits tax free is in dividends from a company abroad. If I had a CY Ltd, I would have to pay taxes there.

Consult a Cypriot accountant to be 100% sure do not rely on forums. Capital gains are not taxed in Cyprus so it is a good place to stay for traders. Regarding web design, with a local limited company, you will have to pay a corporate tax, which is 12.5%, one of the lower in the EU. Do not use a UK LTD because you will have to pay 20% of corporate tax! With a UK LLP, if the money is not UK sourced (not coming from UK customers), you will not pay taxes, it is like a Delaware LLC, it is a transparent entity for tax purposes. If your customers are from UK, you should use another jurisdiction, with 0% corporate tax, like Isle of Man, Gibraltar or others with a bad reputation like Seychelles.

Any dividend is taken out for the company is taxable in Cyrpus. You can take the money out and declare it as personal income or invoice as sole-trader. You will always need an accountant is Cyprus.

Remember that, your UK company will be controlled from Cyprus, and you should pay Cyprus corporate tax defeating the idea of having a UK company. To avoid to have a company controlled from Cyprus you will need another shareholder in another country, or just use a Cyprus company and be 100% compliant.

It is not as easy as you thought, sorry.

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I tried several times but it always ends up in one email with basic information and no reply to the second one. Maybe I should call or visit one to get the full details.

I just learned about the LLP yesterday, I’m still trying to grasp the concept. So if I understand you correctly, with a UK LTD I would pay 20% corporate tax, no matter if my clients are from the UK or not (they are not) and with a LLP I would be able to legally avoid that?

I think my confusion comes from this article which was written before CFC rules were implemented in Cyprus (January 1st, 2019)

However, according to Deloitte, CFC rules are not applied to foreign companies with profits under 750000€.


Source: https://www2.deloitte.com/content/dam/Deloitte/cy/Documents/tax/tax-alerts/CY_TaxAlerts_9_4_19EN_Noexp.pdf

Does this mean I could still manage a UK LTD from Cyprus, get a tax exempt status in the UK because I only have income generated outside the UK? Deloitte on UK corporate tax:


Source: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-unitedkingdomhighlights-2019.pdf

I’m pretty certain about the possibility to receive foreign dividends tax free as a non-dom resident of Cyprus, it’s what attracted me to Cyprus in the first place. Every website talking about the subject mentions this and Deloitte confirms it:

08
Source: https://www2.deloitte.com/content/dam/Deloitte/cy/Documents/tax/CY_Tax_TaxIncentivesIndividualsRelocatingtoCyprus_Noexp.pdf

So basically I need to find a country where I can get exempt from corporate tax and allows me to pay dividends without salary requirements to be filled first.

It’s 19% not 20%. Yes with LTD you always have to pay the UK corporate tax, no matter your customers or where you live. LLP does not have a corporate tax, every year companies earnings are payable by the shareholders in proportions to their shares. An LLP is a transparent entity, google that term, it means the company does not pay taxes, owners do.

With an LLP, for non-UK sourced income, UK does not care about taxes, in simple words. So in the UK you legally do not pay taxes. However, the issue is that LLP needs to shareholders (one could be a company you own) and you should still pay taxes in Cyprus. Plus, if the Cypriot tax man discovers that your company is tax resident in Cyprus, you have to pay everything like the company was incorporated in Cyprus. I think I read that article, the solution is not fully compliant, but you could get away with it especially if you have a small turnover and you do not tell the Cypriot tax man that you own a company in a fiscal paradise.

Think about the risks you are taking to save some money.

The only way to legally avoid to pay a corporate tax is to have a company in a jurisdiction where you are not living, share the company control with another person living in another country from the one where you live.

Example:
UK LLP with non-UK sourced income
owner 1 living in Cyrpus (you)
owner 2 not living in the UK, or in Cyprus
Corporation tax 0%
owner 1 pays dividends in Cyprus
owner 2 pays dividends where he/she lives

If you do the way of the article, Cyprus should not know about the LTD/LLP company you have in the UK. The solution he proposes is invoicing, which a way to do tax evasion. It was tax evasion before and after the CFC, with the difference that with CFC you are a bit more in danger. I am not sure if it has changed, but CFC works only for personal bank accounts.

This is a link regarding CFC rules in Cyprus https://www.ey.com/Publication/vwLUAssets/Cyprus_adopts_legislation_implementing_EU_Anti-Tax_Avoidance_Directive/$FILE/2019G_001559-19Gbl_Cyprus%20adopts%20legislation%20implementing%20EU%20ATAD.pdf

it seems if the company is controlled for more than 50% in Cyprus is tax resident in Cyprus.

Thanks for taking the time to help me understand this, I really appreciate it.

Unless it’s managed from abroad with a permanent establishment and I use a double tax treaty, but then the LTD would not be incorporated in the UK but in Cyprus, right?

Thanks for pointing out the solution in that article is tax evasion. I would prefer to keep it legal and if that’s not possible I might go dark all the way, but I’m certainly not looking for a semi-legal solution.

There’s a lot of companies (like this one) offering structures with 2 offshore nominees in tax havens like Belize for example. It looks like your example with the only difference being both owners are not me. If I understand this correctly the LLP’s profits would be diverted to these offshore companies which are shareholders , but since there is no income/corporate tax in those countries they can pay all profits to me in dividends, right?

When I’m a non-dom tax resident of Cyprus, do I still pay dividend tax on those overseas dividends and if so can you explain why? There are so many sites stating the opposite, like Deloitte in my last screenshot.

Unless it’s managed from abroad with a permanent establishment and I use a double tax treaty, but then the LTD would not be incorporated in the UK but in Cyprus, right?

I was talking about the UK but usually, it applies to every limited company in most jurisdictions. I know about that company, it looks a decent service. What they provide is a respectable UK company (LLP) where the shareholders are public, but in that case, shareholders are two companies registered in a jurisdiction which has a bad reputation and provide anonymity. So with that structure, you have a reputable company but you have anonymity via the Belize companies. However, if you are still the only shareholder for the two Belize company, you are controlling the whole structure from Cyprus, so you should pay corporate tax like a local Cyprus company, the main difference is that Cyprus-tax man will - probably - never know that. Another issue is that UK and Belize companies will need a bank account, so you will need nominees, they will cost money and they will be able to manage your money, I personally do not like to have strangers to manage my money.