| Description of the activity | IT company, development of mobile and web casual games. We are developing new unique games on our own and plan to use the IP Box mode in Cyprus. | | --- | --- | | Shareholders, owners | The final composition of the founders of the new enterprise is planned to be as follows:

• 55% individual, non-resident of Cyprus.
• 30% a Cypriot legal entity
• 15% an individual, resident of Cyprus.

1. *Will the new company be able to get a substance in Cyprus and will it be considered that the company's decision-making center is actually in Cyprus, if:

• 1 of the non-majority founders ( 15% of shares) is already a resident of Cyprus and actually lives and plans to live in Cyprus ?
• we will employ this non-majoritarian founder of a resident of Cyprus in a company which senior Business partner , COO , or even director* ?

2*. Can the founders be founders in other companies in Cyprus or other countries? Can such a fact impose any additional restrictions on a new entity?* | | Cash-in the studio. | We want to do it through authorized capital. We create a legal entity with the agreed shares of the founders with minimum contributions - 1 euro each. Then, we issue additional shares and sell them to one of a shareholder at the amount of cash-in. When additional shares are sold, the initial shares of the company's participants are not redistributed. | | IP | The owners started developing the game approximately 6 months ago. Now the game is ready to be released on the sites and stores, and the owners decided to release the game on behalf of the new company, that’s why we are opening a new legal entity. Game is developed on our own. It’s a new unique game.

Can we immediately after the creation of the company create an asset on balance within a month (as it is already created by the owners), not showing the previous costs on creating an asset (since the asset was created by the owners themselves) and is already ready? And can we after creating a game-asset on balance start receiving income for this asset to the bank accounts within the next month or two? | | Asset value of the IP | The costs on creating an IP (salary and contractors) initially creates the balance value of the game-asset. But for how long?

Can the salary and payments to contractors can be considered as ordinary costs (not the cost creating the balance value of the game-asset) ,when the game is created and will continue to be supported?

The goal here is not to inflate the balance asset-value of the IP. | | Income | We plan to receive income from :

• Income from In-apps
• Income from advertisements inside our games (in invoices it can also be identified like ”audience network ” and “facebook activity”).
• Income from transfer of licenses for our game to other companies.

Are we required to pay any additional tax, besides corporate tax, on these types of income listed above? | | Stores we plan to release the game on | Google Store, Microsoft, Apple Store, Facebook, Yahoo (WizQ), Youtube, Samsung, WeChat (China), PlayDeck, AppBazar , Poki, CrazyGames, Yandex, Mai.ru. Detailed description of the sites and stores (with the links to terms and conditions, and the legal addresses of the Vendors) you can find by the link in the table. What will be the taxes (VAT , etc.) ? | | License / royalty | Is it possible to transfer the license for your IP to other companies in other jurisdictions? For example, could I give the right to publishing to an Armenian or Serbian company? What taxes can occur for such an income ? Will there be an additional royalty (license) tax? | | Corporate tax | Rate - 12.5%

*Is corporate tax (12.5%) charged on net profit ? How the net profit is calculated (revenue minus expenses)? Are the following costs considered to be the expenses while calculating the net profit:

• costs for purchasing the game-assets from other companies,
• costs for services from related companies (HG Point LTD, located in Cyprus, will be the related party),
• marketing expenses (for instance, buying marketing trafic on Facebook),
• costs for accounting, auditing, and legal services.* | | Expenses of previous periods | The company does not start to make a net profit immediately, but it collects costs from the moment the company is created. Is it possible, when the company reaches a net profit, to reduce taxable profit on the value of expenses of previous periods ? Is it possible to use such an approach in IP Box mode? | | Tax Benefits/ IP Box | The game-asset is created once (it can proceed being creating for years), and then it just continues to be supported by the company. *1) So, how long can a company can use IP Box ? Will the company be able to use the IP Box for a long period (5-10 years), also in case if the asset game is supported by the company?

2. The costs on creating a game-asset: Counted in the IP BOX

• costs for employed workers
• costs for contractors (individuals, sole proprietors in Europe, Armenia, Serbia)
• costs for software licenses that are used while creating the game.

Not counted in the IP BOX

• services provided by affiliated companies;
• costs for purchasing the game-asset.* | | Salary payment, income tax | We plan to hire 2 employees, non-residents of Cyprus, citizens of Russian Federaton. They will earn the minimum salary - 2500 eur. What will be the taxes (income tax, social contributions, insurance and others) from company’s and worker’s side? Is there a possibility to pay only income tax rate without other social contributions, insurance and others? | | Contractors | Do we pay any taxes in Cyprus when paying foreign contractors ((Sole proprietors in Serbia, individuals in Armenia)? Do we need to provide the certificates of residency of such contractors to avoid double taxation? | | VAT import of services | Part of the works on the creation and supporting of the game (software development, design services) will be carried out by a company from Netherlands. We plan to work with them on a monthly basis. Is there VAT to be paid ? |

Создание ООО на Кипре

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