How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Anne_C Your Own Question

Anne_C
Anne_C, Tax Attorney
Category: Tax
Satisfied Customers: 2302
Experience:  Attorney, JD awarded with Certification in Tax Law
7775950
Type Your Tax Question Here...
Anne_C is online now
A new question is answered every 9 seconds

Need tax adviser who can explain, based on the US-Cyprus court

Customer Question

Need tax adviser who can explain, based on the US-Cyprus court and IRS practice, how much precisely is "substantial part". See http://www.irs.gov/pub/irs-trty/cyprus.pdf , ARTICLE 26, (1), (b) ... the gross income of such person is not used in substantial part, directly or indirectly, to meet liabilities (including liabilities for interest or royalties) to persons who are residents of a State other than a Contracting State and who are not citizens of the United States.
Submitted: 3 years ago.
Category: Tax
Expert:  Anne_C replied 3 years ago.

Good Evening -

I'm sorry, but your question is really fact-specific and, if answered in the abstract, is likely to be completely inapplicable to your situation.

However, here are US Tax Court case decisions referencing Cyprus (although my brief review shows most of the decisions aren't relevant): http://scholar.google.com/scholar?hl=en&q=cyprus&as_sdt=4%2C55%2C192&as_ylo=&as_vis=0

More importantly, though, here are US Tax Court decisions (287) construing "substantial part" and "gross income": http://scholar.google.com/scholar?hl=en&q=%22substantial+part%22+%22gross+income%22+liabilities&as_sdt=4%2C55%2C192&as_ylo=&as_vis=0

I'm not sure what your background is and where this question is originating from, but please let me know if you need an explanation of why US Tax Court law decisions are relevant to your situation.

Anne_C, Tax Attorney
Category: Tax
Satisfied Customers: 2302
Experience: Attorney, JD awarded with Certification in Tax Law
Anne_C and 7 other Tax Specialists are ready to help you
Customer: replied 3 years ago.
sorry,.. I just need more time to re-form my original question to make it more case specific... (i am looking to add some $ value to question for taking your time)
Customer: replied 3 years ago.
Taxes are not my specialty. The question came from my overseas Internet-guys. They have situation as follow:

Singapore company (game developer) owns intellectual property. Singapore Co is about to license Cyprus Company (Promoter) on all of its Apps for 70% of gross revenue. Cyprus Co will post these Apps at the Apple AppStore (US jurisdiction). Apple will pay Cyprus Co on the monthly basis (70% must go to Singapore Co).

 

There is US-Cyprus Double Tax Treaty. In general, Cyprus Co has no problem with the income generated within US, since it pays "home."

 

However, what guys are afraid of is that according to the Article 26 (I quoted before) there might be exemtion from the treaty relief. US jurisdiction may consider 70% of royalties payment as a "substantial part;" and thus transaction to be taxable in US as well. Note, that tax rate on royalties is higher in US then in Cyprus. Please also note, that Cyprus Co is not "pass-way" country in this transaction. It is good developer, which is doing really usefull part.

 

That is what the guy whant to find out. Which part of royalties payment is considered "substantial" according to the Article 26. How about 30%, 40%? Is it still substantial?

Customer: replied 3 years ago.

Anna,.. my question got closed; and I have not received reply. Anyway way, let me start anew with the furtherance of the previous question:
Taxes are not my specialty. The question came from my overseas Internet-guys. They have situation as follow:
Singapore company (game developer) owns intellectual property. Singapore Co is about to license Cyprus Company (Promoter) on all of its Apps for 70% of gross revenue. Cyprus Co will post these Apps at the Apple AppStore (US jurisdiction). Apple will pay Cyprus Co on the monthly basis (70% must go to Singapore Co).

 

There is US-Cyprus Double Tax Treaty. In general, Cyprus Co has no problem with the income generated within US, since it pays "home."

 

However, what guys are afraid of is that according to the Article 26 (I quoted before) there might be exemtion from the treaty relief. US jurisdiction may consider 70% of royalties payment as a "substantial part;" and thus transaction to be taxable in US as well. Note, that tax rate on royalties is higher in US then in Cyprus. Please also note, that Cyprus Co is not "pass-way" country in this transaction. It is good developer, which is doing really usefull part.

 

That is what the guy whant to find out. Which part of royalties payment is considered "substantial" according to the Article 26. How about 30%, 40%? Is it still substantial?

Customer: replied 3 years ago.
(I will add more via Bonus option)

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.