The tax consequences of moving Envato to the United States. Cyprus Company and Form W-8BEN-E

January 1 has already come, and we continue to analyze the relocation of the Internet giant to the USA that has already taken place. After writing an article compiled by LAWBOOT Lawyers & Consultants , some of our readers asked to describe:



a) why the Cyprus company is suitable for working with Envato

b) why the US Royalty Withholding Tax (US RWHT) zero rate will be applied

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The facts below will help to understand this.



Fact number 1. Resident of Cyprus in terms of the Agreement on the avoidance of double taxation between the United States and Cyprus.



Source, Tax treaty between USA and Cyprus.

(1) In this Convention:

(a) The term "resident of Cyprus" means:

(i) A Cypriot Corporation ; and

(ii) I’m a It is subject to taxation.

Fact number 2. Beneficial Owner concept in the form of W-8BEN-E.



Cyprus companies submit to Envato W-8BEN-E Form , as they are legal entities.



In this form, the most interesting is the Part 3. Claim of Tax Treaty Benefits.

Cypriot companies are required to complete this part if they receive FDAP from the USA.

Royalties fall under the definition of FDAP ;



So, in box 14a it is written: “The tax treaty between the United States and that country.”



Beneficial Owner, in the understanding of this agreement, is a Cyprus company (neither as a founder, ultimate beneficiary, he is also a beneficiary in the usual sense of the word) - and this is logical, as in Part 1, in the box “Name of organization that is the beneficial owner ”indicates the name of the Cyprus company.



Opening the instructions for box 14a, we see the following:

If you are a tax collector, you must note that of that country. For treaty purposes, if you are a country under the terms of the treaty.

We return to Fact # 1 - and conclude that it is necessary to enter “reisdent of Cyprus ” in box 14a



By the way

Fact number 3. The status of "resident of Cyprus" in terms of local law.



Under Cyprus law, a company must be managed from the territory of Cyprus in order to be its resident. To register such a company, we recommend attracting specialists from LAWBOOT Lawyers & Consultants

According to the tax law (12.5% ​​corporation tax), it is subject to tax law. Thus it is necessary to This is achieved by 2 nominee directors in the board of directors.

Fact number 4. Cyprus Tax ID in the form of W-8BEN-E.

In field 9b of the form W-8BEN-E, a Cyprus company must indicate its Tax ID.

If a Cyprus company is registered with Fact No. 3, it must receive a tax residence certificate and it will contain a treasured Tax ID.

Line 9b. Tax identification number (TIN), enter it here. If you are providing a tax authority, you can provide a taxpayer identifying number (TIN) you are not subject to a TIN,

You can also get such a certificate with the help of local auditors:





Fact number 5. Signatory of the form W-8BEN-E.



The signatory of the form must be the person authorized to sign this form on behalf of the Cyprus Company.



Conclusion: For the purpose of optimizing US RWHT to 0% (using the provisions of the Double Taxation Avoidance Agreement between Cyprus and the USA), when working with Envato, a Cyprus company is suitable if it has the status of a resident company from the point of view of Cyprus legislation and has submitted the W-8BEN- form E.



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ps In the next article we will tell you about the Cyprus IP BOX, do not miss it!