Create a company in Cyprus — or move your company from United States

Almost every other country in this series stops taxing you the day you leave. The United States does not. It taxes citizenship rather than residence, so an American who moves to Cyprus still files a US return on worldwide income — for life, unless she renounces. Relocation therefore delivers far less to an American founder than the marketing on competing pages suggests.

That is the honest headline, and putting it anywhere other than the first screen would be selling you something. What follows is the full shape of the decision: what the United States keeps taxing after you go, what a Cyprus company genuinely does and does not do for a US owner, and what the real case for Cyprus looks like once the tax fantasy is cleared away. Updated for 2026 Cyprus tax law and regulations.

One partner for the Cyprus half of an American move, from incorporation to the first filing

Sumly is the fully digitalized, one-stop way to start a company in Cyprus and run your business here from the United States — formation, books from day zero, every Cyprus return prepared box by box, and the tax residency and non-dom application, all in one dashboard at prices published upfront. We make the Cyprus side effortless, so the only complicated part left is the part your American adviser is actually paid for.

This is Sumly — and what we actually do for you

Sumly is the fully digital provider for founders moving a company to Cyprus. You do not need to learn Cypriot company law, find a local auditor, or work out which form goes where. You get in touch, and we do the rest.

And we stay with you on both sides of the move. The Cyprus side we own outright. For the side you are leaving, we put you straight in front of an adviser or lawyer from our network who works on exactly your problem — company law, exit taxation, inheritance, employment — and we hold the thread between them and us. One point of contact for the whole move, however many specialisms your case turns out to touch. If your case is simple, we do all of it for a fixed price.

Part 1: What leaving actually costs you

Your home country does not let go the moment the plane does. What still runs after you have left, and in which order it has to be handled.

Does moving to Cyprus end your US tax return?

No. Not after a year, not after ten, not after establishing residency anywhere. This is the first thing an American founder has to internalise, because every other page in this category was written for readers whose home country releases them at the border.

The statute is short and unconditional. Gross income means all income from whatever source derived, and section 1 imposes it on the taxable income of married individuals, heads of household and unmarried individuals alike, with no residence condition anywhere in it. The IRS says the same thing to citizens abroad in plain words: you are subject to tax on worldwide income from all sources and must report all taxable income under the Internal Revenue Code.

There are small mercies. A citizen living abroad gets an automatic 2-month extension to June 15 without asking, and Form 4868 takes it to October 15. The IRS is equally plain that interest still runs on anything unpaid after the regular due date, so the extension buys filing time and not payment time.

Everything else in this guide is measured against that baseline. Any Cyprus saving you read about is a saving against the Cyprus bill, sitting on top of a US floor that does not move.

Does the Foreign Earned Income Exclusion cover a founder's Cyprus dividends?

No, and this is the crux of the whole page. Section 911 is the relief every relocation blog leads with, and for a founder taking profit out of a company it is close to useless.

The mechanics first. The exclusion is capped at $132,900 for 2026, against a housing cost limitation of $39,870. To use it your tax home must be in a foreign country, and you must pass either the bona fide residence test — a full uninterrupted taxable year as a bona fide resident abroad — or the physical presence test, at least 330 full days in a foreign country in any 12 consecutive months.

Now the part that decides your outcome. Section 911 excludes foreign earned income. The IRS lists what qualifies — salaries and wages, commissions, bonuses, professional fees, tips, business profits — and lists separately, as income that never qualifies, dividends, interest, capital gains, pensions and annuities.

There is a second trap sitting behind the first. Section 911(d)(6) denies any deduction, exclusion or credit properly allocable to amounts excluded from gross income, including the credit for foreign taxes paid. You cannot exclude income under section 911 and also credit the Cyprus tax on that same income. The IRS warns that a wrong claim here can result in one or both elections being treated as revoked — which is an expensive way to find out.

Is your Cyprus company a controlled foreign corporation for a US owner?

Yes, in practically every case a founder actually builds. There is no threshold small enough to hide under while you still control the business, so this is a fact to design around rather than a risk to manage.

A foreign corporation is a CFC where US shareholders own more than 50 percent of total combined voting power or total value of the stock, and a "United States shareholder" is any US person holding 10 percent or more of voting power or value. An American who owns all of a Cyprus limited company satisfies both on the day of incorporation. Two American co-founders at 50/50 do too.

What follows from CFC status is current taxation. Subpart F pulls a defined list into your return whether or not a cent is distributed, including insurance income, foreign base company income, international boycott income and illegal bribes or kickbacks. The category that catches ordinary founders is foreign base company income, whose largest component is foreign personal holding company income — dividends, interest, royalties, rents and annuities, plus passive-property gains, currency and commodity gains and certain personal service contracts. A trading company selling software or services is mostly outside FPHCI; a Cyprus holding vehicle that collects royalties and interest sits inside it.

There is a statutory escape hatch, and it is worth doing the arithmetic on rather than repeating what other pages assert. Section 954(b)(4) excludes income subject to an effective foreign rate greater than 90 percent of the maximum rate of tax specified in section 11. Section 11 imposes 21 percent of taxable income. Ninety percent of 21% is 18.9%, so the test asks for an effective foreign rate above 18.9%.

Set that against the Cyprus rate. A Cyprus limited company pays 15% from tax year 2026 — below the statutory threshold on the headline rate, and further below it for income qualifying under the IP Box at 3% from tax year 2026. The low Cyprus rate that makes the structure attractive is the same low rate that keeps the high-tax exception out of reach. That is an uncomfortable sentence for a Cyprus provider to write, and it is the sentence an American founder most needs to read.

One point we will not resolve for you. Whether the regulatory high-tax election for the GILTI basket survives the 2025 rewrite in its familiar form is not something we could confirm from a primary source, so we are not going to assert an answer. The statutory Subpart F test above is settled law; the post-2025 status and mechanics of the regulatory election are a question for a US international tax adviser, and anyone telling you otherwise on a marketing page has not checked either.

What did P.L. 119-21 change about GILTI for an American's 2026 year?

Enough that most of what you will read on this topic is now describing a regime that no longer exists. The changes are effective for tax years beginning after 31 December 2025, which means they are live for the year you are reading this in.

Section 951A now requires a US shareholder to include net CFC tested income — the excess of the aggregate pro rata share of tested income over tested loss. Four things moved:

The QBAI removal deserves a sentence of honesty: for a software or services founder the old 10% routine return on tangible assets was worth close to nothing anyway, because there were no tangible assets to compute it on. What changed is certainty. There is now no routine-return carve-out at all, and tested income is gross income less the deductions properly allocable to it. Every euro of Cyprus profit is in scope.

The deduction fell at the same time. Section 250 now gives 40% for net CFC tested income and 33.34% for foreign-derived deduction eligible income, replacing 50% and 37.5%, and the further cuts that had been scheduled were struck out rather than deferred. The IRS states the same transition in its own form instructions, noting that for tax years beginning before January 2026 the deductions were 37.5% of FDII plus 50% of GILTI, and thereafter 33.34% and 40% respectively. Going the other way, the deemed-paid credit rose: a domestic corporation is now treated as having paid 90 percent of the foreign taxes attributable to the inclusion, up from 80.

Read that last one carefully, because it is where individual founders get hurt. Section 960(d) is written for a domestic corporation. An individual American holding Cyprus shares in her own name does not get it. The inclusion lands on her personal return at ordinary rates with no deemed-paid credit for the Cyprus corporate tax underneath.

The route out of that is a section 962 election, which lets an individual elect that the tax on section 951(a) inclusions be computed as if the amounts were received by a domestic corporation, at the section 11 rate and with access to deemed-paid credits. The price is written into the same section: when those previously taxed earnings are actually distributed, they are included in gross income to the extent they exceed the tax already paid. It is a real tool and a genuinely double-edged one, it is elected year by year on facts, and it is exactly the kind of decision that belongs with a US international tax adviser rather than with us.

The reporting side is Form 8992, required of any US shareholder who owned stock in the foreign corporation on the last day of its tax year in which it was a CFC. One caution worth stating plainly, because it explains why so much of what you will read is wrong. The amendments above live in the 2025 Act itself, and the consolidated editions of the US Code have not yet absorbed them: at the time of writing, the official published text of sections 951A, 250 and 960 still shows global intangible low-taxed income, the QBAI routine return, a 50% deduction and an 80% deemed-paid credit. Several IRS forms and instructions still describe that framework too. That is why we cite the Act rather than a Code section for these four points, and it is the reason to distrust any page quoting the old regime without a date on it. For a 2026 tax year the Act governs, and the old vocabulary of "GILTI", "QBAI" and "the 50% deduction" maps onto the new net CFC tested income and 40%.

Can the foreign tax credit stop you being taxed twice?

Largely, but not entirely, and the gaps are specific enough to plan around. The credit is the reason an American in Cyprus is not simply taxed twice on the same profit, and it is the one part of this system that genuinely works in the reader's favour.

Section 901 allows a citizen a credit for income, war profits and excess profits taxes paid or accrued to any foreign country, subject to the section 904 limitation. Only income taxes qualify — the IRS is explicit that generally, only income, war profits and excess profits taxes qualify for the credit — and individuals claim it on Form 1116. Cyprus social contributions are not income taxes and do not go in this box.

Then the limits, and there are four that matter here:

• The overall cap. The credit cannot exceed the same proportion of the US tax as foreign-source taxable income bears to entire taxable income. Foreign tax cannot shelter US-source income.
• Baskets. The limitation is computed separately for the section 951A category, foreign branch income, passive category income and general category income. High tax in one basket does not rescue another.
• Carryover, except where you need it most. Excess credits carry back one year and forward ten — but that subsection expressly does not apply to the section 951A basket. A credit arising on your CFC inclusion is use-it-or-lose-it in the year it arises.
• The surcharge it cannot reach. The Net Investment Income Tax runs at 3.8% above $250,000 for joint filers, $200,000 for single filers and $125,000 married filing separately, and those thresholds are fixed in the statute rather than indexed. Section 1411 sits in a different chapter from the section 901 credit, so Cyprus tax does not offset it. Treat the 3.8% as unrelievable.

Put the pieces together and the practical top federal rate on a founder's qualified dividends and long-term gains above the thresholds is 20% plus 3.8%. Here is the 2026 rate schedule those percentages sit on, as published in the annual revenue procedure carried by Internal Revenue Bulletin 2025-45:

Short-term gains get none of that. Property held not more than 1 year produces short-term gain taxed at ordinary rates, topping at 37% above $640,600 single and $768,700 married filing jointly.

Which US filings does a Cyprus company put on your desk?

More than any formation page will tell you, and the penalty structure is the part that should decide whether you use a bookkeeper who keeps clean records or a shoebox. This is the section that costs American founders real money, and almost none of it appears in relocation marketing.

Form 5471 is the big one. Certain US citizens and residents who are officers, directors or shareholders in foreign corporations file it to satisfy the reporting requirements of sections 6038 and 6046. The categories that catch a founder are Category 3 in the year she acquires the stock, Category 4 for control of a foreign corporation — more than 50% of voting power or value, and Category 5a as a US shareholder of a CFC. A solo owner of a Cyprus company is typically two of those in the same year and three in the year of formation.

Missing it is expensive. Section 6038(b) imposes $10,000 for each annual accounting period, plus $10,000 for each 30-day period after 90 days from IRS notice, capped at $50,000 — a $60,000 ceiling per form per year. Section 6038(c) separately cuts your foreign tax credits by 10%, rising a further 5% for each three-month period the failure continues.

FBAR, FinCEN Form 114, is due where a US person's foreign financial accounts exceed $10,000 in aggregate at any time during the calendar year, filed by April 15 with an automatic extension to October 15. The point founders miss: the Cyprus company's bank account is reportable where you have a financial interest in it or signature authority over it. Civil penalties under 31 U.S.C. §5321 are capped at $10,000 for a non-willful violation, with relief for reasonable cause where the account was properly reported, and for a willful violation the greater of $100,000 or 50 percent of the balance. Those are the statutory amounts; the IRS notes the Title 31 maximums are adjusted annually for inflation, and we are not going to print an adjusted 2026 figure we could not verify from a published table.

Form 8938 is the FATCA report, triggered under section 6038D at a statutory $50,000 of specified foreign financial assets or such higher amount as prescribed. Living abroad raises the bar substantially, on the thresholds the IRS prescribes in its summary of FATCA reporting:

Penalties there run to a 40 percent penalty on an understatement of tax attributable to non-disclosed assets, on top of the $10,000 and $50,000 structure in the statute.

Why should an American in Cyprus be careful with European funds?

Because the PFIC regime is waiting, and it catches a specific, very common mistake: an American moves to Europe, opens a local brokerage account and buys the European funds and ETFs everyone around her owns.

A foreign corporation is a passive foreign investment company if 75 percent or more of its gross income is passive, or on average at least 50 percent of its assets produce or are held to produce passive income. A European UCITS fund meets that description comfortably. Under section 1291, an excess distribution or a gain on disposal is allocated ratably to each day in the holding period, each prior year's slice is taxed at the highest rate in force for that year, and an interest charge runs on top using the section 6621 underpayment rates. It is punitive by design, and it is a trap you walk into by accident.

The better news is for the operating company. Section 1297(d) provides that a corporation is not treated as a PFIC during the qualified portion of a shareholder's holding period — the period during which she is a US shareholder and the company is a CFC. A genuinely controlled, actively trading Cyprus limited company is therefore taxed under the CFC rules rather than the PFIC ones. Where PFIC risk returns is at the edges: a mostly-cash Cyprus holding vehicle that falls below CFC control, and the personal investment account.

Is there a US–Cyprus tax treaty, and what does it actually do for you?

There is, and correcting this is one of the more useful things this page does. You will find commercial pages asserting flatly that no US–Cyprus income tax treaty exists. That is false, and the primary document settles it.

Cyprus appears on the IRS's own list of US income tax treaty partners, with both a 1984 Income Tax Treaty and a 1984 Technical Explanation published at irs.gov. The Convention itself records that it was signed at Nicosia on 19 March 1984, entered into force on 31 December 1985, with a general effective date under Article 30 of 1 January 1986.

Now the part that matters more than its existence, and that nobody in this market quotes. Article 4(3) is a saving clause:

Read that against your own situation. A US citizen living in Cyprus is taxed by the United States as though the Convention did not exist. You cannot use Article 16 to exempt your gains from US tax. You cannot use Article 12 to cap US tax on your dividends. The treaty allocates source and limits Cyprus's claim on you; it does not shield you from the United States. The same paragraph extends the term "citizen" to a former citizen whose loss of citizenship had tax avoidance as one of its principal purposes, for ten years after the loss.

What does survive the saving clause is set out in Article 4(4), and it is not nothing: the relief-from-double-taxation article, non-discrimination, social security payments and the mutual agreement procedure. So you keep the double-tax relief machinery and the competent-authority route, and lose most of the substantive allocation rules.

Two further provisions are worth knowing about because they constrain aggressive planning and are absent from every competing page we found. Article 4(5) is a remittance-basis limitation: where one State reduces or exempts tax and the other taxes only remitted income, the reduction applies only to what is remitted or received in that year or the next. Article 4(6) is an anti-low-tax override — where the other State subjects income to a burden substantially less than would generally be imposed, the treaty reduction or exemption does not apply. A 1984 treaty with a built-in substantially-lower-tax guard, plus a limitation-on-benefits article at Article 26, is a real planning constraint, not a footnote.

Do you still pay US self-employment tax while living in Cyprus?

If you invoice under your own name rather than through the company, yes — in full, with no treaty relief available, and the Foreign Earned Income Exclusion does not touch it. This is the cleanest verifiable trap on the page.

The United States has bilateral totalization agreements with 30 countries. The SSA publishes the list, and it includes Australia, Canada, Germany, Greece, Ireland, Italy, the Netherlands, Poland, Spain, Sweden, the United Kingdom and nineteen others. Cyprus is not on it. Readers conflate Cyprus with Greece constantly, and here the difference is expensive.

Those agreements exist to eliminate dual coverage and to make sure Social Security taxes, self-employment tax included, are paid only to one country, evidenced by a certificate of coverage. With no US–Cyprus agreement, no certificate of coverage exists to obtain, and there is no treaty-based escape from the US charge.

The numbers are unforgiving. Self-employment tax is 12.4% for old-age, survivors and disability insurance plus 2.9% for hospital insurance — 15.3% combined — with an Additional Medicare Tax of 0.9% above $250,000 joint, $200,000 in most other cases. It applies from net earnings of $400 or more, the rules are the same abroad as at home, and the IRS states directly that you take all self-employment income into account even where some or all of the gross income was excluded under section 911.

The practical conclusion is a structural one, and it is where the Cyprus company earns its keep for an American: a founder freelancing personally from Limassol can exclude her income under section 911 and still pay 15.3% on all of it, while Cyprus contributions run in parallel with nothing to offset them. Operating through a properly run company is a different set of facts. Which set is better for you is a question for your US adviser — but the difference is real, and it is one of the few places where the structure genuinely changes the American answer.

Does leaving the United States end your state income tax?

Not by itself. Federal and state are two separate exits, and some states are markedly harder to leave than the country is. Founders who plan the federal side meticulously and forget this one get an assessment two years later.

California taxes residents upon the entire taxable income from all sources, and non-residents on income derived from sources within the state. The rate schedule as published in section 17041 reaches 9.3%, with a further 1 percent on the portion of taxable income in excess of one million dollars for mental health services, and additional brackets above the level shown in that schedule which we are not going to quote a number for without reading the rate table at its source. The point does not need the top rate anyway: California residency turns on domicile, not on a day count you can manage, and its only bright-line escape is a narrow employment-contract safe harbour. Keep a California home, California customers and California ties and you can remain a California resident while sitting in Limassol.

Texas is the other shape entirely: no personal income tax, and instead a franchise tax described by the Comptroller as a privilege tax on each taxable entity formed, organized or doing business in the state. For report year 2026 the no-tax-due revenue threshold is $2,650,000, with rates of 0.375% for retail and wholesale and 0.75% for other businesses. A founder leaving Texas is giving up a state that was already cheap; a founder leaving California is banking the single largest hard saving available to an American in this whole exercise — provided the severance is real.

That is the honest framing. For an American, relocation moves the state layer and the Cyprus layer. It barely moves the federal one.

What is US estate tax doing while you live in Cyprus?

Following you, on the same citizenship basis as the income tax — and here, at least, the news for 2026 is better than most older pages report.

The basic exclusion amount is $15,000,000 per person for 2026, against $13,990,000 for 2025 decedents, with an annual gift exclusion of $19,000. The top estate and gift rate remains 40 percent of the excess over $1,000,000 in the rate table.

The correction worth making: the doubled exclusion was previously scheduled to sunset after 2025 and fall back to roughly half. It did not happen. The 2025 Act rewrote section 2010(c)(3) to read $15,000,000, rebasing the inflation adjustment to calendar year 2025 for decedents dying after 2026. Here too the consolidated Code lags: its published text still shows the old $5,000,000 base with the doubling switched off after 2025, which is exactly the sunset that never arrived. There is no cliff in the law as enacted, and any page still telling you to act before a 2026 halving is working from a superseded text.

Cyprus, for its part, levies no inheritance tax and no annual net wealth tax at all. There is also no federal net wealth tax in the United States — the eleven subtitles of Title 26 contain estate and gift taxes, employment taxes and excises, but nothing that charges net worth annually. What an American does have as a wealth-style charge is a one-off, and it only arrives if she gives up citizenship.

What does section 877A expatriation actually involve?

This is information, not advice, and we mean that more strictly here than anywhere else on the page. Renunciation is irreversible, it is a citizenship decision rather than a tax optimisation, and nobody should take a step toward it on the strength of a marketing page — including this one.

You are a covered expatriate if you meet any one of three tests: average annual net income tax for the five years ending before expatriation greater than $211,000 for 2026; net worth on the expatriation date of $2,000,000 or more, an amount that is not inflation-indexed; or failure to certify under penalty of perjury that he has met the requirements of this title for the 5 preceding taxable years. The IRS's own historical figures for the income test — $190,000 for 2023, $201,000 for 2024, $206,000 for 2025 — show the drift.

Note the circularity in that third test, because it catches modest people. A reader with unremarkable assets who has not filed cleanly for five years — a missing 5471 here, an unfiled FBAR there — becomes a covered expatriate on the compliance test alone, regardless of net worth.

For a covered expatriate, section 877A treats all property as sold on the day before the expatriation date for its fair market value. Gains are recognised in the departure year. The statutory exclusion is a base $600,000, inflation-adjusted, which stands at $910,000 for 2026 against $890,000 for 2025. Payment can be deferred until actual disposition, but only with adequate security and an irrevocable waiver of any right under any treaty that would limit assessment or collection. The filing is Form 8854, the Initial and Annual Expatriation Statement, and failing to file it when required carries its own $10,000 penalty.

One number changed in 2026 and almost every page still carries the old one. A Department of State final rule published 13 March 2026 and effective 13 April 2026 adjusts the consular schedule by reducing the fee for administrative processing of a request for a certificate of loss of nationality from $2,350 to $450. The rule's own history is neat: $450 when first implemented in 2010, raised to $2,350 in 2014, and now back where it started. If a page you are reading still quotes $2,350, it has not been updated this year.

A last detail, from the Department's summary of the roughly 740 comments it received: many commenters supporting the reduction argued the real problem was never the fee but the US system of worldwide taxation. That is the reader's grievance, published by the government, in the Federal Register.

Part 2: What Cyprus gives you

This is the straightforward half, and the half we build end to end. What you actually get on the other side.

What does the Cyprus side actually give an American founder?

A genuinely good corporate and personal system, an EU legal identity, and a Cyprus tax bill that is small. What it does not give is a lower US bill, and any page that adds the two together as one saving is misleading you.

A Cyprus limited company pays 15% from tax year 2026 on taxable profit — one flat rate, no bands. Qualifying intellectual property income can reach an effective 3% from tax year 2026 under the IP Box. On the personal side, a Cyprus tax resident who is not Cyprus-domiciled pays no Special Defence Contribution on dividends for 17 years of residence, against 5% on dividends from 2026 profits for a domiciled shareholder, and dividends sit outside personal income tax. What remains is GeSY at 2.65% on income up to €180,000 a year. Salaries are taxed on bands running 0% to €22,000 rising to 35% above €72,000. Cyprus levies no inheritance tax and no annual wealth tax.

For a non-American that combination is the whole story. For you it is the bottom layer, with the federal system sitting above it and the foreign tax credit doing the reconciling. Which is why the real argument for Cyprus, for an American, is not the rate at all:

• An EU-resident legal entity. European enterprise customers, public procurement and a good deal of regulated contracting want an EU counterparty. A Cyprus limited company is one, with an EU VAT number your buyers can verify in VIES, intra-EU business sales zero-rated and the one-stop shop for consumer sales across the bloc. A Delaware LLC is none of that.
• The single market as your home market. Selling into 27 member states from inside them rather than across a customs border changes your unit economics, not just your paperwork.
• Cost base. Salaries, office space and professional services against a US coastal metro is not a close comparison.
• Language and time zone. Cyprus runs business, banking and professional services in English, and the working day overlaps both Europe and the Middle East.
• The state layer, genuinely severed. For a founder leaving a high-rate domicile state, this is the one hard, quantifiable saving relocation actually delivers to an American.

That list is smaller than the one a European founder gets. It is also true, which is more than can be said for the "0% tax" headlines this audience is usually shown.

How does an American become Cyprus tax resident?

Through the 183-day route or the 60-day rule, and the 60-day rule became easier in 2026. Both are Cyprus-side questions with clean answers, which makes them a pleasant change from the rest of this page.

From tax year 2026 the 60-day rule has four conditions, after the old fifth — not being tax resident anywhere else — was removed from the 60-day rule: at least 60 days in Cyprus; no more than 183 days in any other single state; a business, employment or office in a Cyprus tax-resident person held through the year; and a permanent home in Cyprus that you own or rent. Dropping that fifth condition matters to Americans more than to most, because US citizenship-based taxation meant the old wording invited an argument nobody wanted to have.

A directorship of your own Cyprus company can be the office the third condition asks for, which is why forming the company and establishing residency are usually one project. The full mechanics are in our guides to the Cyprus 60-day rule and non-dom status.

On immigration, we will be precise rather than optimistic. The Yellow Slip is a registration certificate for EU citizens exercising free movement rights, so it is not the American route and we promise nothing about it — that is EU law, not a Sumly limitation. Americans come in as third-country nationals, on the permit categories that apply to non-EU nationals, and we handle that paperwork and bring in immigration specialists where a file needs them. The Cyprus tax residency and non-dom registration is a separate matter from the immigration permission, and it is the part we sell as a fixed-price tax residency service.

Can a US e-commerce brand run through a Cyprus company?

Yes, and for an American seller the single-market question usually matters more than the tax question. Selling into the European Union from outside it means import VAT, customs formalities and a registration regime that treats you as a third-country trader on every consignment.

A Cyprus company sits inside the EU VAT system. It registers for VAT — the threshold is €15,600 and the standard rate is 19% — gets an EU VAT number that buyers can check in VIES, zero-rates intra-EU business sales and files consumer sales across the bloc through the one-stop shop. The store stops being an importer and starts being a European seller.

The failure point is always bookkeeping, because a store produces thousands of small transactions in several currencies with a VAT treatment that changes by customer type and destination. Sumly's Shopify and WooCommerce plugins pull orders, refunds, fees and payouts into the books with the right VAT codes, so the return is assembled from the sales rather than reconstructed from a CSV at quarter end. For an American owner there is a second benefit: those same books are what your CPA needs to compute tested income for the CFC filings, and they exist already instead of being rebuilt every spring.

Why do people choose Cyprus over other tax havens?

Because it is a place people want to live in, which is not true of most of the alternatives, and because for an American the non-tax reasons are the only honest ones left standing.

On violent crime the island records some of the lowest rates found anywhere in the Union. Cyprus runs in English in every way a business cares about — banking, contracts, professional services, courts — which for an American removes the friction that makes most EU destinations a two-year adjustment. People from everywhere are already here, so nobody arrives as the only foreigner in the room. Business and real estate are both booming, and the state stays friendly and open to people who want to trade without wrapping it in regulation. Groceries — meat, fruit, vegetables — are noticeably cheaper than in a US coastal city. And the beaches are not decoration: in a Cyprus winter you can still go to the beach, and the summers are what people fly across the world for.

The push side is where we differ from every competing page, because for an American the push is not a tax grievance at all. Your federal position barely improves. What genuinely pushes American founders here is the shape of the business: European customers who need an EU counterparty, a cost base that lets a small team run for years on the same capital, a state income tax you can actually leave, and a working life that costs less and looks better. The founders who come for the first list are usually disappointed; the founders who come for the second stay.

We are also not going to quote you a figure for how many Americans renounce citizenship each year, or how many move to Cyprus. Neither number is published in a form we could verify from an official source, and this is not a page that needs decoration.

Two worked examples

A consultancy distributing €200,000 of Cyprus profit. The Cyprus side is straightforward: the company pays 15% and a non-dom shareholder distributing the rest meets only GeSY at 2.65%, capped by the €180,000 ceiling. The US side is where an American differs from every other reader of this cluster. The profit is pulled into her return as earned under the CFC rules, the foreign tax credit relieves the Cyprus corporate tax within its basket limits, and section 911 does nothing for the distribution because it is not earned income. Her net result is better than a US-only structure mostly because of what she left behind at state level, not because of what Cyprus charges.

A SaaS company at €500,000 of profit with qualifying IP. The IP Box can bring the effective Cyprus rate on qualifying income to 3%, which is a large number on the Cyprus side and a small one on the US side — because a lower foreign rate means less foreign tax to credit against the US inclusion, not less US inclusion. This is the profile where the section 962 election and the basket arithmetic actually change the answer, and where an American founder should be paying a US international tax adviser rather than reading pages like this one. The Cyprus half — the company, the IP Box tracking, the books that prove the nexus — is ours.

Both examples assume full distribution and headline rates, and neither is a computation of your position. The calculator at the top of this page shows the shape of the Cyprus side; your US layer sits underneath it and is a question for your own adviser.

Part 3: How the move runs

From the decision to the first invoice out of the Cyprus company: the order, the mistakes people make before you, and two calculations worked through in full.

What does the move look like, month by month?

Timelines depend on your own facts, so read this as sequence rather than schedule.

• Before you go — and this is where we start. We put you in front of a US CPA or tax attorney from our network who works on CFCs, not a general preparer. Together with them we settle how you will hold the shares and whether a section 962 election is in play. They advise on severing state residency — earlier than feels necessary if you are leaving a domicile state, and we will raise it early rather than late.
• Month 1. We form the Cyprus company, with your books open the day you order, and start the immigration and residence paperwork for you as a third-country national.
• Months 1–3. We register for VAT and, where relevant, social insurance, employees and UBO, and get banking and EU payments moving. You take up the directorship that anchors the 60-day rule. We tell your US adviser the incorporation date ourselves — the first Form 5471 year has started, and that is not a message to leave to chance.
• Months 3–6. You rent or buy the permanent home the 60-day rule requires, and we tell you what qualifies. You move real decision-making to Cyprus and we minute it here. Your American adviser closes or repoints the US-facing entity on their own timetable.
• Month 12 onward. We apply for the Cyprus tax residency certificate and the non-dom registration. Your US adviser files the first return covering the Cyprus company — 1040, 5471, 8992, 1116, 8938 and FinCEN 114 as applicable — and keeps filing them, on time, every year, working from books we keep current for exactly that purpose.

What mistakes do American founders actually make?

They are consistent, and none of them is exotic.

Believing a relocation page that promised 0% tax and reading the words "US citizen" nowhere in it. Assuming the Foreign Earned Income Exclusion covers a dividend. Taking a salary of exactly the exclusion amount and forgetting self-employment tax entirely. Freelancing personally from Limassol with no company and no certificate of coverage, because none exists. Missing a Form 5471 in the formation year and leaving the whole tax year open under section 6501(c)(8). Opening a European brokerage account and buying UCITS funds that are PFICs. Repeating the claim that there is no US–Cyprus treaty, or relying on the one that exists without reading Article 4(3). Planning around a QBAI carve-out that the 2025 statute deleted. And moving out of California without severing domicile, then discovering three years later that California never agreed they had left.

Almost all of them come from reading advice written for someone whose passport releases them.

Part 4: Who does the work

You can do all of this yourself. Below is what that costs in time and in money, against what it costs to let us do it.

Do it yourself — or have Sumly do it

Both are real routes. Doing it yourself means the Registrar's forms and fees, a registered office you arrange, VAT and VIES registration, provisional tax twice a year, annual statements and books that survive an audit — while you are also managing an international move and a US filing obligation that just got more complicated. Sumly's route has three published prices: formation from €950 one-time, the software from €39 a month, and a Sumly certified bookkeeper at €390 a month, with books open from day zero and every return prepared box by box.

The software runs the company on its own from €39/mo: invoicing, AI double-entry bookkeeping that books your documents itself, live open-banking feeds, every VAT, VIES, provisional and corporate return prepared box by box, live reports, a document inbox with its own email address, mobile receipt capture that books itself, multi-currency invoicing, team roles and the AI assistant — plus payroll at €15 per employee per month, IP Box tracking at €50 a month, Projects at €10 a month, and the e-commerce plugins.

Everything else in the catalogue is offered to every client and priced in the meeting: the virtual address with PO box, including digital scanning of your post into your dashboard wherever you are; nominee director and secretary where a structure calls for them; the registrations bundle — VAT, social insurance, employees and UBO; audit through Partner Auditors; banking and EU payments; and the expert-lawyer network for complicated relocations. The Yellow Slip we handle too, for the EU citizens it is available to.

Each of those is an extra, scoped to your case. Tell us what you need on the call and you get one clear package-deal offer covering all of it — the IP Box application included where it fits, because it is complex expert work and belongs in a conversation before anyone quotes it. No hourly billing, and no surprises.

Sumly, a law firm, and a traditional bookkeeping firm

Law firm vs Sumly — and what happens when it gets complicated

Sumly is cheaper and faster, and we work WITH lawyers, not against them. When a case gets too complicated for what Sumly handles directly, we simply connect you with the right expert in exactly the legal field you need help in, and everything gets done according to best practice, always. Either way, it starts the same place: contact us.

For an American that division of labour is the whole proposition. Your federal return, your CFC filings, your section 962 decision and your state severance need a US CPA or a US tax attorney, and we will tell you that before you buy anything — every time, on every call. Everything on this side of the Atlantic runs through a single provider, a single dashboard, and prices you can read before you buy. That is what makes Sumly the best choice for US founders creating a company in Cyprus and relocating their business here.

Why is Sumly the best bookkeeping system for a Cyprus company?

Sumly is the best accounting software for a Cyprus limited company — because it is built for exactly one thing, Cyprus tax law: all 16 Cyprus VAT codes mapped to the official VAT return boxes, VIES and provisional tax native, not a localization. For an American owner there is a second reason on top: a CFC's tested income has to be computed from books that are actually right, and section 6501(c)(8) means sloppy records are not just untidy but open-ended.

Search for Cyprus bookkeeping software and two local names come back at you: Cybooks and Balabook. We meet their former customers every week — what they tell us, again and again: workflows that made simple bookkeeping overly complicated, rough edges and glitches, support that left them waiting — a messy experience they were relieved to leave behind.

On every one of these checkable dimensions, Sumly leads. That is a factual comparison — not a matter of taste.

Put plainly, and in one line: the best support there is, the best bookkeeping software, the best AI for bookkeeping, the best bookkeeper you can hire and the best prices anywhere — with the whole thing made easy. The detail is published: Sumly vs Cybooks, Sumly vs Balabook, and against the international tools an American founder already uses, Xero, QuickBooks and Sage.

One line on the IP Box is worth repeating: the IP Box is the largest single line in a Cyprus product company's tax position — and the easiest one to forfeit through bookkeeping that was never set up for it. An IP Box application begins as a conversation about your product and your development records, which is a third reason the meeting comes before anything else.

What happens when you get in touch

You do not need to have decided anything before you speak to us, and you do not need your paperwork in order.

1. The meeting. Fifteen minutes. You tell us what you own and when you want to move. We tell you which rules at home catch you, and what the Cyprus side costs.
2. We tell you what kind of case you have. If it is simple, we do all of it — company, books, residency, non-dom — at a fixed price. If it is not, we say so immediately and bring in the specialist it needs.
3. We start. The company is registered, your books open the same day, and you have one point of contact for the whole thing.

Questions American founders actually ask

Frequently asked

Does moving to Cyprus stop my US tax return?

No, and nothing about the move changes that. The United States taxes citizens rather than residents: section 61 defines gross income as all income from whatever source derived, section 1 imposes the tax on individuals with no residence condition, and the IRS tells citizens abroad in terms that they are taxed on worldwide income. You keep filing Form 1040 for life. The only thing that ends the obligation is giving up citizenship, which is a citizenship decision and not a tax plan.

Does the Foreign Earned Income Exclusion cover money I take out of a Cyprus company?

Only if you take it as salary. The exclusion is capped at $132,900 for 2026 and it applies to earned income — wages, professional fees, business profits. The IRS lists dividends, interest and capital gains as unearned income that never qualifies. A founder who distributes profit from a Cyprus limited company receives exactly that, so the exclusion is worth nothing on it. This single distinction is where most American relocation plans go wrong.

Is my Cyprus company a controlled foreign corporation?

Almost certainly. A foreign company is a CFC where US shareholders own more than 50% of voting power or value, and a US shareholder is anyone owning 10% or more. A solo American owner of a Cyprus limited company clears both tests on day one. There is no ownership level small enough to plan under while you still control the company, which is why the CFC question is settled before you incorporate rather than after.

What changed about GILTI for tax year 2026?

More than most pages have caught up with. Public Law 119-21 rewrote the regime for tax years beginning after 31 December 2025. The inclusion is now called net CFC tested income, the routine return on tangible assets was removed entirely, the section 250 deduction fell from 50% to 40%, and the deemed-paid credit under section 960(d) rose from 80% to 90%. Anything still describing QBAI and a 50% deduction is describing the old regime.

Is there a US–Cyprus double tax treaty?

Yes. Several commercial pages say there is not, and they are wrong. The Convention was signed at Nicosia on 19 March 1984, entered into force on 31 December 1985 and has a general effective date of 1 January 1986. But read Article 4(3) before relying on it: the saving clause lets the United States tax its own citizens as if the Convention had not come into effect, which switches off the dividend and gains articles for an American. What survives is the relief-from-double-taxation article and the competent authority procedure.

Do I still pay US self-employment tax while living in Cyprus?

If you work under your own name rather than through a company, yes. The United States has totalization agreements with 30 countries and Cyprus is not one of them, so no certificate of coverage exists to point at. Self-employment tax runs at 15.3% on net earnings of $400 or more, and the Foreign Earned Income Exclusion does not reduce it — the IRS is explicit that you count self-employment income in full even where the income was excluded.

Does leaving the country end my state income tax?

Not automatically, and not everywhere. State residency is a second exit that has to be made on its own terms. California taxes residents on their entire taxable income, and residency there turns on domicile rather than on where you slept — a founder who keeps a California home and California ties can stay a California resident while living in Limassol. Sever the state before you assume the state is gone.

What does renouncing US citizenship involve?

Information, not advice, and it is irreversible. You are a covered expatriate if your average annual net income tax for the five years before expatriation exceeds $211,000 for 2026, or your net worth is $2,000,000 or more, or you cannot certify five years of tax compliance. A covered expatriate is treated as selling all property the day before expatriation, with $910,000 of gain excluded for 2026, and files Form 8854. The State Department fee for a certificate of loss of nationality fell from $2,350 to $450 in a final rule effective 13 April 2026. Anyone considering this needs a US international tax attorney, not a blog.

Does Sumly handle the US side of the move?

No, and we say so every time. Sumly builds and runs the Cyprus side: the company, the books from day zero, Cyprus VAT, VIES, provisional and corporate returns, and the tax residency and non-dom application. Your federal return, your CFC filings and your state position need a US CPA or a US tax attorney, and we will tell you that before you buy anything. Where a case needs specialist legal work we connect you with expert lawyers from our network. Either way the first step is a meeting.

Keep reading

• Every country's route to Cyprus — the departure guide for wherever you are now
• Cyprus company formation for non-residents — the route that applies to US founders
• How to register a company in Cyprus and what it costs
• Cyprus non-dom status and the 60-day rule
• Cyprus tax benefits for foreigners and what changed in the 2026 reform
• The Cyprus IP Box — the regime, and what qualifying income has to prove

The calculator on this page uses headline rates, an assumed annual return and full distribution of profit, so it shows the shape of a Cyprus position rather than your outcome — and for a US citizen it does not model the federal layer that sits underneath it. US figures are stated for tax year 2026; Cyprus figures apply from tax year 2026. All Sumly prices exclude VAT, and government expenses on a formation are invoiced separately once your application is approved.