Cyprus Company Formation for UK Founders After Brexit

It depends on where central management and control sits, and if you are the sole director living in the UK the honest starting assumption is that it sits with you. HMRC's guidance states that a company is resident in the UK if it is incorporated in the UK, with certain exceptions, or if the central management and control of its business is in the UK — the second limb applies regardless of where the company was registered. Meanwhile Article 2 of the Cyprus Income Tax Law makes a company incorporated in Cyprus under the Companies Law a Cyprus tax resident unless a double taxation convention provides otherwise, so both countries have a claim. Whether the treaty resolves it is a separate question with an uncomfortable answer — see the question below on the tie-breaker. Take UK advice on the central management and control analysis specifically; it turns on facts about board decisions, not on paperwork.

For companies, no — not automatically. Article 4(4) of the 2018 UK–Cyprus Convention as amended by the 2018 Protocol provides that where a person other than an individual is a resident of both states, the competent authorities shall endeavour to determine its residence by mutual agreement, having regard to place of effective management, place of incorporation and any other relevant factors, and that in the absence of such agreement the person is not to be considered a resident of either state for the purposes of claiming Convention benefits, except those in Articles 22, 24 and 25. So the outcome depends on two tax authorities reaching agreement, and the fallback is no treaty relief rather than a default answer. Follow that to its end, because it is the opposite of what most readers assume: section 18 of the Corporation Tax Act 2009 only displaces UK residence where the company is treated, for treaty purposes, as resident in a territory outside the United Kingdom. If the fallback applies the company is resident of neither state, that condition fails, section 18 never engages — so the company stays UK resident on central management and control and loses the treaty as well. For individuals the position is different: Article 4(3) sets out the familiar sequence of permanent home, centre of vital interests, habitual abode and nationality.

Only if a UK resident company holds an interest in it. Section 371AA(1) of the Taxation (International and Other Provisions) Act 2010 charges the CFC charge on UK resident companies which have certain interests in CFCs, and section 371BC provides at Step 1 that if none of the persons with relevant interests is a company meeting the UK residence condition, the charge is not made and no further steps are taken. If you as a UK-resident individual hold the shares personally, the CFC code is not the provision to worry about. Two others may be. Section 720 of the Income Tax Act 2007 charges income treated as arising to a UK resident individual under the transfer of assets abroad code, with exemptions in sections 736 to 742 for cases with no tax avoidance purpose or genuine commercial transactions. And section 3 of the Taxation of Chargeable Gains Act 1992 can apportion gains of a non-UK resident close company to UK resident participators, subject to an avoidance condition and a 25% de minimis. Put your facts to a UK tax adviser.

Where the treaty applies, the relevant articles are generous, and that is precisely why treaty residence matters so much. Article 11(1) provides that interest arising in one state and beneficially owned by a resident of the other is taxable only in that other state. Article 12(1) says the same for royalties, and the Article 12(2) definition is broad — payments for the use of, or the right to use, any copyright of literary, artistic or scientific work, any patent, trade mark, design or model, plan, secret formula or process, or information concerning industrial, commercial or scientific experience. Article 10(2)(a) generally exempts dividends from tax in the state of the paying company, with a carve-out at 10(2)(b) for certain distributions of property-derived income by investment vehicles. All of this is conditional on your company being a treaty resident and on beneficial ownership, and Article 23's principal purpose test sits over the top of it. The domestic UK withholding rules and the mechanics of claiming relief are UK tax questions for a UK adviser.

Article 15 of the Convention provides that directors' fees and other similar payments derived by a resident of one state in his capacity as a member of the board of directors of a company which is a resident of the other state may be taxed in that other state. So Cyprus may tax fees paid to you as a director of a Cyprus-resident company, notwithstanding that you live in the UK — "may be taxed" allocates a taxing right rather than exempting anything, and relief for double taxation then comes through Article 22, which gives a credit in each direction rather than an exemption — Cyprus tax credited against UK tax on the same profits, income or gains, and UK tax credited against Cyprus tax on income derived from the United Kingdom, limited to the Cyprus tax appropriate to that income. Note the interaction with the residency point running through this page: a directorship held by someone permanently in the UK is also a fact bearing on where central management and control sits, so the arrangement has consequences beyond the fee itself. How the fee is taxed in each country, and how relief is claimed, is a question for a UK tax adviser and a licensed Cyprus tax advisor between them.

Usually not — though coordination does still exist, under the Protocol on Social Security Coordination to the EU–UK Trade and Cooperation Agreement rather than the old EU Regulation. Its Article SSC.10(1) puts you under the legislation of a single State only and Article SSC.10(3)(a) makes that the State where the activity is pursued, with derogations in Articles SSC.11 and SSC.12. HMRC's guidance states that you will usually pay social security contributions in the country you are working in, and that you only need to pay National Insurance in the UK if HMRC has issued you with a certificate of coverage, also called a PDA1. The routes to one are specific: employed in the UK by an employer who normally carries out their activities in the UK and sent to work temporarily in an EU country for up to two years; self-employed in the UK and carrying out a similar activity temporarily in an EU country for up to two years; or working in the UK and one or more EU countries at the same time. The Withdrawal Agreement route is limited to people already in a cross-border situation before 1 January 2021. A founder genuinely relocating to run a Cyprus company will normally be contributing in Cyprus instead. Confirm your case with HMRC and the Cyprus Social Insurance Services.

It is not automatically fatal, and it is not something to be coy about either. Article 23(1) of the Convention denies a treaty benefit in respect of an item of income or a capital gain if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of an arrangement or transaction that resulted in it — unless it is established that granting the benefit would accord with the object and purpose of the relevant provisions. "One of the principal purposes" is a low bar to trip, which is why substance matters more than intention. Article 23(2) preserves a discretionary route: the competent authority may still grant the benefit on request if it determines the benefit would have been granted in the absence of the arrangement. What follows practically is that the commercial reasons need to be real and evidenced contemporaneously. This is exactly the territory where you want a UK tax adviser's written view, not a landing page's reassurance.

The company and the compliance, not the cross-border opinion. Our licensed Cyprus corporate services partner registers the company with the Registrar and can provide nominee director and company secretary services through licensed Cyprus fiduciaries where a genuine governance need exists. Our ICPAC-registered accounting partner handles bookkeeping, VAT registration and returns, prepares the accounts and coordinates the audit or review, and a licensed tax advisor or auditor files the corporate income tax return — never CyPRO One. Our partner law firm advises on Cyprus legal questions under its own engagement. We help you prepare the Revolut Business application file, though we are not affiliated with Revolut and approval is entirely their decision. What we do not do is give UK tax advice, give Cyprus tax advice, or tell you that a nominee director makes a company Cyprus-managed. On the questions this page is about, our value is coordinating the people who can answer them and keeping the record straight.