Heavenly beaches, trendy cocktail bars, luxury yachts… And dozens of pornographic sites. In a decade, Cyprus has established itself as a central cog in the porn industry on a global scale, as detailed in the documents of the “Cyprus Confidential” project, coordinated by the International Consortium of Investigative Journalists, which part The world.
Unlike the Czech Republic or the United States, Cyprus does not have film studios. Some of the world’s largest groups of “adult sites” have nevertheless made it their base in Europe, such as Aylo (formerly MindGeek, which owns Pornhub, YouPorn and several studios in the United States) or Wisebits, parent company of Stripchat and xHamster, one of the most visited “tubes” (free video sites) in the world. Documents from “Cyprus Confidential” show that dozens of other companies in the sector have established their headquarters or subsidiaries there, as have marketing or advertising companies that agree to work with X sites, like CrakRevenue.
Why ? In the aisles of the Webmaster Access Affiliate Conference marketing show, organized in Limassol (south of the island) and which brought together many companies linked to the world of porn in mid-September, one answer was unanimous: ” Taxes “. “There are a lot of special provisions that make the installation very interesting”, noted an employee of Stripchat, a “cam” site whose headquarters is in Limassol but whose “models” – including sex workers – work independently throughout the world. In addition to an effective tax rate which can go down to 2.5% with a few arrangements, Cyprus hardly taxes dividends and royalties.
The branch game
These particularities make it an ideal destination for an industry in which large groups generally pass money between several companies. Their underlying objective is to obtain low results in order to pay as little tax as possible. The parent company therefore charges its subsidiaries copyright royalties, the nature of which is lightly imposed in Cyprus, for the content or use of its IT platforms. In tax optimization jargon, we call this an “IP box”, an “intellectual property box”.
The documents that The world and its partners were able to consult thus show how MG Freesites, a branch of Aylo concentrating a large part of the group’s revenues, only paid 2 million euros in taxes in 2019, for a turnover of 248 millions of euros. And for good reason, by paying more than 220 million euros to other subsidiaries of the group for various services, including 84 million euros in copyright, the company ultimately posts a modest result. The documents suggest that most of the group’s profits pass through Cyprus before going to other subsidiaries in Ireland or Luxembourg.
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