Paradise beaches, trendy cocktail bars, luxury yachts... And porn sites by the dozen. In the space of a decade, Cyprus has established itself as a central player in the global porn industry, as detailed in the documents of the Cyprus Confidential project, coordinated by the International Consortium of Investigative Journalists, of which Le Monde is a member.

Unlike the Czech Republic in the United States, Cyprus has no studios. However, some of the world's biggest "adult site" companies have made it their base in Europe, including Aylo (formerly MindGeek, which owns Pornhub, YouPorn and several studios in the US) and Wisebits, the parent company of Stripchat and xHamster, one of the world's most visited free video sites. The Cyprus Confidential documents show that dozens of other companies in the sector have set up their headquarters or subsidiaries here, as have marketing and advertising companies that agree to work with porn sites, like CrakRevenue.

But why? In the aisles of the Webmaster Access Affiliate Conference marketing trade show, held in Limassol in the south of the island in mid-September and attended by numerous companies linked to the world of porn, everyone agreed on one answer: taxes. "There are a lot of special provisions that make it very attractive to set up," explained an employee of Stripchat, a "cam" website headquartered in Limassol but whose "models" − in fact, sex workers − operate as freelancers all over the world. In addition to an effective tax rate that can be as low as 2.5% through a few arrangements, Cyprus imposes virtually no tax on dividends and royalties.

A group of branches

These features make it an ideal location for an industry in which large groups generally move money between several companies. Their underlying aim is to achieve low profits in order to pay as little tax as possible. The parent company therefore invoices its subsidiaries for copyright royalties (which aren't heavily taxed in Cyprus), for content, or for the use of its IT platforms. In the jargon of tax optimization, this is known as an "IP box."

The documents that Le Monde and its partners have been able to consult show how MG Freesites, an Aylo branch concentrating a large proportion of the group's revenues, paid just €2 million in taxes in 2019, on sales of €248 million. And for good reason: By paying out over €220 million to other group subsidiaries for various services, including €84 million in royalties, the company ultimately posted a modest profit. The documents suggest that the bulk of the group's profits pass through Cyprus before being transferred to other subsidiaries in Ireland and Luxembourg.

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