The issue

Our client is the owner of a multinational restaurant franchise with licensing arrangements and activities in more than 19 countries.

He decided to expand the franchise activities to the US and he needed our help to assist in structuring the business expansion.

The solution

By taking into account the future expansion plans of the group, we structured the expansion in the US via Cypriot entities.

Together with US Counsel, we took into account the litigious environment in the US, the provisions of the applicable Cyprus-US Double Tax Treaty as well as State tax provisions regarding Franchise Royalties.

Result

The result is a tax-efficient franchise structure, flexible enough to accommodate future growth and protect the interests of our client.

  • The structure fulfills the conditions of the Cyprus-US Treaty resulting to a zero (0%) US royalty withholding tax on outbound payments to Cyprus (down from 30%);
  • The potential US state tax on franchise royalties (where applicable) is taken into account, thereby effectively reducing the Cypriot tax liability;
  • In addition, the Cypriot tax liability is further managed to appropriate levels by structuring the Cypriot entities accordingly and by taking into account the Notional Interest Deduction provisions;
  • Our client can extract the profits from the Cypriot entities without any Cyprus tax or other implication;

Contact us

Should your circumstances resemble the above, we are at your disposal to assist you and discuss your own circumstances.

Constantinos Markou
Director
Head of Tax Services
markou@atca.com.cy
+357 25661717