Cyprus and Deloitte, why am I not surprised to see those names mentioned together in connection with alleged tax evasion?
For those who don't know, Cyprus is widely regarded as one of Europe's tax havens. And, of cause, Deloitte has offices there.
For those who don't know, Cyprus is widely regarded as one of Europe's tax havens. And, of cause, Deloitte has offices there.
- You created an LLC in Cyprus and transferred some IP (usually a trademark) to it
- You licensed that IP to your LLC in an EU country for the amount that basically erased any profit that LLC made
- Cypriot LLCs were not taxed on non-Cyprus income
- Each of non-resident director (or board member, I don't remember) of a Cypriot LLC was not taxed on first 400k euro of income from those LLCs. Double taxation deals Cyprus had protected you from being taxed on that income back home.
I know this is no longer possible with Cyprus, but a variation of that is now happening with e.g. many EU clothing brands having their brand ownership transferred to Egyptian LLCs.
1. It was usable for small-medium companies, because the amount you avoided taxes on was 400k euro times number of people you involved in the scheme as board members.
2. It avoided taxation entirely and not just shifted tax burden to the country with lower rates.
3. It allowed the money to immediately return to the country where the profit originated in without any tax consequences. There is a reason why tech giants are sitting on a lot of cash.
This scheme was unique, because it was available to small fish allowing nullify taxes on the first 400k euro of income (or multiple if you got more people to help you).
Similar ones, available to large corporations, are very much still possible, but they are getting more and more pushback.
It hardly seems surprising (nor damning) to have one in Cyprus.
Various controversies relating to bailouts after the financial crisis, the rise of anti money laundering controls in the late 2010s, and the Ukraine invasion have severed many of the ties but Abramovich was just one of many to take advantage in the past.
https://www.politico.eu/article/cyprus-is-losing-its-russia-... has a reasonable summary of how the relationship developed.
Deloitte Cyprus is a separate legal entity from all the other (separate, legal) Deloitte entities precisely so any consequences of tax evasion resulting from the...em...lax oversight in Cyprus don't impact all the other things called 'Deloitte'.
"The member firms are primarily organised on an individual country or regional basis and each operates within the legal and regulatory framework of its particular jurisdiction(s). They are separate and independent firms that have come together to practise under a common brand and shared methodologies, client service standards and other professional protocols and guidelines."
https://www.deloitte.com/ce/en/about/governance/network-bran...
But it could be the case!
What I suspect happened with Deloitte specifically is they found a way to appear to expand globally without taking on a lot of the risk. More like brand franchising.
Which is all to say that I wouldn't doubt Deloitte Cyprus (or other branches) have shady stuff going on, but that this structure wasn't designed specifically for that purpose.