Comment by c2h5oh | Hacker News Reader

Comment by c2h5oh | Hacker News Reader

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A while back there was a simple scheme available that allowed you to avoid taxes on the first few hundred thousand / million of taxes.

- 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.

isn't this similar to what Apple and others are doing in Ireland?

It is a similar mechanism, but there were major differences:

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.

I don’t think this is possible under the latest rules, especially in the EU. But a small firm could easily get bad advice and think it’s outsmarting the system. Right now in the EU, it’s either pay or leave completely.

It definitely is no longer possible, which is why I used past tense.

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.

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