Peter Scott lives in Belgium. He is a furniture manufacturer and supplies the furniture to Belgian, Austrian and German retailers.
Mr. Scott would like to structure his business in the most tax-effective manner by using an offshore company.
Mr. Scott establishes an offshore Company. He chooses to use a Cyprus Trading Company and opens a corporate bank account.
Cyprus Trading Company becomes the hub of the furnishing business’ financial activities. The money from European countries flow to and from Cyprus.
Since there are double-taxation treaties Cyprus-Austria, Cyprus-Belgium and Cyprus-Germany, the Cypriot company will pay only 10% on the profit margin after deducting all the expenses resulted in the production of this income.
Profits may be reinvested by the Cyprus company or distributed as a dividend.
There is no withholding tax in Cyprus on dividends paid form a Cypriot company to non-residents.
In Belgium Mr. Scott pays tax only on the amount that he declares as profit of his furnishing business.
NOTE: Although the goods will be transferred from Belgium to Austria or Germany without passing through Cyprus, the Cyprus company will still need to register for VAT and VIES.
Disclaimer: This scenario is intended only as a general guide and is not to be relied upon as the basis for any decision or outcome on the subject matter.
This is purely an indicative scenario. Professional advice and consultation by tax advisors in all countries involved should be sought before taking action.