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Cypriot system

08 June 2010
Issue: 4258 / Categories: Forum & Feedback , Income Tax , VAT
Could a client set up a company in Cyprus to invoice his UK company for his services, with the aim of saving UK tax and National Insurance contributions?

My client runs a successful UK company. Someone suggested that he should set up a company in Cyprus that would invoice the UK company for his services saving tax and National Insurance. Could such a scheme work?

I understand that a Cypriot company would pay tax there at something like 5% and there would be the cost of setting up and administering the Cypriot company; but it seems that it could work provided everything is drawn up properly. However the following points occur to me.

First if my client brings back some or all of the money from Cyprus this will be subject to UK income tax. Also if any money is paid out of the Cypriot company but not brought back this will also need to be declared on his UK tax return.

Therefore there will only be a tax saving on any money...

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