1/ team told you not to post it because it looks a lot like tax evasion if the only purpose of the deal is lowering tax
2/ you compare DISTRIBUTION with REINVESTMENT tax wise, thats very different. Plenty of countries dont tax reinvestment, Latvia for example
3/ as was mentioned in comments, if a person ruling the company is uk resident and there is no substance in Cyprus - the company doesn’t enjoy Cypriot taxation
Not a financial recommendation
Big 4 firms charge 100.000€+ for this. Here it is for free:
It's called a share-for-share exchange.
You probably never heard about it & my team told me to not post it, but f*ck it.
This procedure allows company owners to transfer shares of an existing company to a new holding abroad. But instead of getting paid in cash (which would get taxed), the holding pays the owners with its own new shares.
The best part: It's 100% backed by law in almost every European country:
> UK🇬🇧: section 135 TCGA
> Ireland🇮🇪: section 586 TCA
> Germany🇩🇪: §21 UmwStG
> Netherlands🇳🇱: the "aandelenfusie"
> Rest of the EU🇪🇺: guaranteed by the Merger Directive
Let's take a UK company worth 3.500.000€ as an example:
First we approach HMRC upfront to confirm in writing that they won't challenge it. This is called advance clearance.
But to get a clearance, you need a whole set of documents. This requires multiple pages explaining the new structure & the business reasons behind it. The better you prepare, the fewer follow-up questions you get.
Once HMRC says yes, the swap gets executed:
> Value of the UK company: approx. 3.500.000€
> New holding shares issued: 1.000€
> Booked as "share premium": approx. 3.499.000€
> Tax on the share-swap: 0€
Nobody sells anything. The owners literally just "swap" their UK shares for CY holding shares.
Same owners, same value, just a new company on top. So there's nothing to tax.
The interesting part: On paper the holding only shows 1.000€ in share capital. The rest of the 3.500.000€ sits in the books as "share premium", which is completely normal for holding companies.
Sounds complex, but the most important part is the legal outcome:
> UK withholding tax on dividends paid to the holding: 0%
> Most EU countries: 0% too, because of the Parent-Subsidiary Directive
> Cyprus tax on dividends received by the holding: 0%
> Cyprus tax on selling the shares later: 0%
Fully legal btw.
So instead of paying 39.35% in UK dividend tax, you pay 0% on every euro you reinvest through the CY holding (real estate, new companies, stocks, etc).
That is very important if you're still tax resident in your current country, because a personal dividend distribution would mean local dividend tax.
However, the option of relocating to Cyprus later & applying for the Non-Dom status stays open.
This would then also reduce dividend tax to 0% (only 2.65% GESY applies, capped at 4.770€ annually).
Meaning, at any point in the future you could relocate to Cyprus & distribute cash to yourself as a natural person, completely tax-free as well.
But until then, the money gets reinvested & you accumulate wealth.
Now. All of this is a heavy bureaucratic process.
From first call to setting everything up, it can easily take a few months. Holding incorporation, business plan, bank accounts, registrations, valuations, HMRC clearance, share exchange agreements, board resolutions, etc.
The crazy part: Big 4 firms easily quote over 100.000€ for this, often with percentages of the company's value.
You just read the whole thing for free.