# Question about taxes



## Torto (Jan 4, 2014)

I will work as a freelancer and i will make my money online.
Let's say that i will make 30k per year.
What will be my taxes if:
1)self employed
-19 % vat(everyone(company/self employed) who is making over 15 600(if i remember correct) is obligated to register to VAT
-14.6 %(self employed)
-tax 1631 euro(using Cyprus ta calculator)
So around 35 % of my income(if i make more money,the taxes will increase)
2)Company
-19 % VAT
-14.6 % self employed but i can make social insurance on minimal level(383 euro per week) or 1,433.95 annually
-12.5 % tax on income(if i pay all my profit to me as dividend, i will pay only the divident)
-17.5 % Dividend
-Some special contributions tax
So around 41 % tax of income,before counting a expanses which will reduce the total tax
3)Are my calculations generally right before i consult with accounter ?
4)Are the VAT is mandatory to self employed even if your income is not happen in Cyprus ?
5)Any general advice that you can give me ?


----------



## PeteandSylv (Sep 24, 2008)

I'm no taxation expert but the principle of the way VAT works means that when you register for VAT you charge VAT on any invoices raised. That amount is paid to the government. You also deduct any VAT you have paid on purchase invoices. So VAT is "isolated" from any calculations of profit for taxation regardless of whether you are self-employed or a limited company.

Pete


----------



## Torto (Jan 4, 2014)

PeteandSylv said:


> I'm no taxation expert but the principle of the way VAT works means that when you register for VAT you charge VAT on any invoices raised. That amount is paid to the government. You also deduct any VAT you have paid on purchase invoices. So VAT is "isolated" from any calculations of profit for taxation regardless of whether you are self-employed or a limited company.
> 
> Pete


In theory may be,but in practice is a little different.
For example if i take a project that is for example 1000 euro,no body will care is this with or without vat-he is interested on quality and final price.The majority of the projects are on fixed price-if I said 1000 euro without vat and 1190 with vat.....I will lose the project and this 19 % is direct tax on me(without counting socials,taxes on income and special contributions).


----------



## PeteandSylv (Sep 24, 2008)

Torto said:


> In theory may be,but in practice is a little different.
> For example if i take a project that is for example 1000 euro,no body will care is this with or without vat-he is interested on quality and final price.The majority of the projects are on fixed price-if I said 1000 euro without vat and 1190 with vat.....I will lose the project and this 19 % is direct tax on me(without counting socials,taxes on income and special contributions).


What I described is not only theory but practice and the requirement of the law.

Your original post seemed to suggest that you would have to pay the VAT from your personal earnings and this is not correct.

As for your project, providing your customer is VAT registered he can reclaim the VAT element of your invoiced charges so it would make no difference to him. That is why trade prices are usually quoted as a figure plus VAT.

There is also a marketing aspect that suggests if a company is not VAT registered it must be very low turnover and therefore considered less serious.

Pete


----------



## Torto (Jan 4, 2014)

PeteandSylv said:


> What I described is not only theory but practice and the requirement of the law.
> 
> Your original post seemed to suggest that you would have to pay the VAT from your personal earnings and this is not correct.
> 
> ...


I will be not some big company,but freelancer-even i don't think that i will need to incorporate a company(LLC) unless there are huge different in taxes(a lot of bureaucratic procedures when you have a company).
I made connections to different sites who are looking for someone to complete different project(mainly in US and some in UK and Europe).
As we know there is no VAT in USA(there is Sale tax in USA,but it is very different to VAT even that has some similarities).
So in practice,if i have project fro 1000 USD,it will be 810 for me,190 for the government(VAT) without counting other taxes.
Even that i make it online(not in Cyprus),is not proper excuse for the government and they will want their share of VAT.
P.S
The requirement for VAT is very small(15 600) if we compare it to other countries(EU),but this is other topic.


----------



## PeteandSylv (Sep 24, 2008)

Torto said:


> I will be not some big company,but freelancer-even i don't think that i will need to incorporate a company(LLC) unless there are huge different in taxes(a lot of bureaucratic procedures when you have a company).
> I made connections to different sites who are looking for someone to complete different project(mainly in US and some in UK and Europe).
> As we know there is no VAT in USA(there is Sale tax in USA,but it is very different to VAT even that has some similarities).
> So in practice,if i have project fro 1000 USD,it will be 810 for me,190 for the government(VAT) without counting other taxes.
> ...


Now you've introduced a new factor - that your work is for the US. It is probably worth checking the VAT laws in Cyprus because in the UK I believe that exports to a non-EU country is zero rated for VAT.

Pete


----------



## Torto (Jan 4, 2014)

PeteandSylv said:


> Torto said:
> 
> 
> > I will be not some big company,but freelancer-even i don't think that i will need to incorporate a company(LLC) unless there are huge different in taxes(a lot of bureaucratic procedures when you have a company).
> ...


I am not working for Usa-As a freelancer I will take projects from all around the world(yes may be the main countries will be usa and uk),but i am not employee there,I am paid on project.
When I complete the project I will take my payment by paypal.
My work is online,not in Usa,Uk or Cyprus.
Because I will be over 183 days here,I will be tax resident here.
As I see the vat will be requirement(there is a big chance that I will make over 15 600 euro).
Can you recommend me 2-3 reliable accounters here?


----------



## GSmith (Nov 9, 2015)

2)Company
-19 % VAT
-14.6 % self employed but i can make social insurance on minimal level(383 euro per week) or 1,433.95 annually
-12.5 % tax on income(if i pay all my profit to me as dividend, i will pay only the divident)
-17.5 % Dividend-Some special contributions tax

Dividend tax will not apply unless you have been resident in Cyprus for 17 of the last 20 years. Best way would be to pay a minimum salary to yourself and maximise dividends


----------



## Torto (Jan 4, 2014)

GSmith said:


> 2)Company
> -19 % VAT
> -14.6 % self employed but i can make social insurance on minimal level(383 euro per week) or 1,433.95 annually
> -12.5 % tax on income(if i pay all my profit to me as dividend, i will pay only the divident)
> ...


Are you sure-you are exempt if you pay the divident to other company or to someone who is not resident.If you are resident(live 183 days in Cyprus) you must pay
http://www.opencompanycyprus.com/dividend-tax-in-cyprus
Nothing mention to live 17 years in Cyprus to pay divident.


----------

