The Cyprus Tax System

Cyprus has developed an exceptionally advantageous tax system and is one of the most favoured jurisdictions in Europe to conduct international business from.

Cyprus is now a premier holding, finance, royalty and trading company jurisdiction and it is also utilized in other types of tax structures e.g. employment structures, shipping structures and foreign permanent establishment structures.


Cyprus Tax incentives

Details of the tax incentives offered by the Cypriot jurisdiction are as follows:
1. A standard uniform corporate tax rate of 12.5% is applicable to all companies. This is among the lowest corporate tax rate in Europe. No distinction is made between local companies and IBC's.

2. Dividend income (participation) exemption subject to non-stringent conditions.

3. No withholding taxes on payments of dividends, interest and royalties irrespective of the recipient and the existence of a Double Tax Treaty.

4. No taxation on profits from the sale of securities (no minimum holding period, percentage etc).

5. No tax on profits from the operation or management of a Cyprus-registered vessel.

6. 4,25% Corporation Tax if the vessel is not registered under the Cyprus flag.

7. International business branches which are managed and controlled from abroad and international business partnerships are totally exempt from corporation or income tax.

8. No taxation on profits of permanent establishments.

9. No taxation on the liquidation of a Cypriot company.

10. No debt-equity and thin capitalization rules.

11. A fully EU and OECD compliant tax system. Cyprus is a respectable EU, non-offshore, non-tax haven jurisdiction.

12. Investor-friendly Tax Authorities.

13. Access to EU Directives which have been enacted into Cyprus Law.

14. Access to a wide and in many cases particularly beneficial double tax treaty network.

15. No capital gains tax or net worth taxes except with respect to real estate situated in Cyprus.

16. No stamp duties on normal trading activities.

17. No specific substance requirements and an absence of strict transfer pricing rules.

18. Foreign beneficiaries are not liable to pay additional tax on dividends or profits over and above the amount paid or payable by the respective legal entities.

19. Low personal tax rates and low social insurance contributions.

20. Mergers, Takeovers and other Re-Organizations can take place within groups without tax consequence.

21. Unilateral tax-relief for foreign tax suffered is granted to all Cypriot companies.

22. Tax losses can be carried forward indefinitely and can also be surrendered as group relief.

23. Interest deduction for borrowing costs provided.

24. Added commercial value and monetary benefits due to the ability to register for EU VAT in Cyprus.

25. Foreign employees resident in Cyprus will be taxed the same way as the local employees. If employed outside Cyprus, the salaries are tax exempt provided they are remitted through Cyprus.


Cyprus non-tax Incentives

1. Strategic location and time zone, excellent air and sea connections and telecommunications.

2. An excellent infrastructure allowing clients to create substance to their tax planning in the form of setting up fully-flexed offices and operations.

3. Very low expense level for financial and professional service provision and operational costs in general, compared to other EU Jurisdictions.

4. English is the most widely used business language.

5. The Cyprus Legal System is based upon English Common Law.

6. Modern and efficient multilingual banking & financial services sector.

7. Professional, friendly and efficient Government services and Tax Authorities and a mature professional services sector.

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