Cyprus

CYPRUS

Under the current tax legislation, Cyprus has the lowest tax regime in Europe and its role as an international financial centre is greatly enhanced. There is no longer a differentiation in the tax treatment of local companies and International Business Companies as a single corporation tax rate is applicable for all companies. Cyprus clearly stands as a prestigious tax – incentive EU country and is be free from suspicions usually associated with “tax-havens” which have zero tax.

There are two options of forming a company in Cyprus:

1.Company with management outside Cyprus – tax non-resident
Director of the company has to be private person or company which are not the residents of Cyprus and the ownership (either private person or company) has to be foreign (outside of Cyprus). Business activity and source of income has to be outside of Cyprus, local borrowings to the Cypriot companies are not allowed and all local payments must be registered and reported. Annual invoices and reports must be reported to the Central bank. Tax non-resident company does not have to pay taxes on net profits (12,5%) but has to pay all other expenses and liabilities. This company is ideal if you wish your company to have an EU status but are not interested in the benefits that tax resident company from Cyprus bring.

2.Company with management in Cyprus – tax resident
Director of the company has to be a private person or the company which are the residents of Cyprus, while the shareholder can be either domestic (Cypriot) or foreign (private person or company). We can offer you the service of nominee director from Cyprus in order for your company to be tax resident. Resident Cypriot companies have full status of an EU company, they can register for a VAT number as well as for other
numbers (EORI). Companies with management from Cyprus can benefit from Tax treaties that Cyprus has signed with 45 countries.

 

Cyprus Tax Treatment of Offshore Operations:

Under the current tax legislation, Cyprus has the lowest tax regime in Europe and its role as an international financial centre is greatly enhanced. There is no longer a differentiation in the tax treatment of local companies and International Business Companies as a single corporation tax rate is applicable for all companies. Cyprus clearly stands as a prestigious tax – incentive EU country and is be free from suspicions usually associated with “tax-havens” which have zero tax.

 

The principal tax and other fiscal incentives may be outlined as follows (see also Cyprus Tax Reform):

  • An International Business Company (IBC) will pay a tax of 12,5% on its net profits if it is a Cyprus resident. An IBC is resident if its management and control are in Cyprus. Management and control are usually determined by the place of residence of the majority of the directors and the place where board meetings take place. Full advantage of the Cyprus double-tax treaty network can be obtained by resident IBCs
    An IBC will pay zero tax if it is not considered to be resident in Cyprus. This will be the case when its management and control is outside Cyprus.
  • A non-resident IBC will not be able to obtain a Cyprus Tax residence certificate and therefore cannot utilize the double-tax treaty network.
  • There is no withholding tax on payment of dividends, interest and royalties by an IBC to non-resident individuals or companies.
  • Dividend income received in Cyprus by an IBC is wholly exempt from tax in Cyprus (under certain conditions).
  • Profits earned from a permanent establishment abroad are fully exempt from corporation tax.
  • Profits from the disposal of shares are not taxable for all Cyprus tax residents.
  • 50% of interest received is exempted unless the interest arises in the ordinary course of business (e.g. interest on overdue debtor balances).
  • There is no restriction on the carry-forward of tax losses. They can be carried forward indefinitely to be set-off against future profits.
  • Group relief is available whereby losses from a company can be set off against taxable profits of other companies in the same group.
  • Reorganisation, amalgamations, mergers and acquisitions of companies can be effected without any tax implications.
  • Exemption from capital gains tax (except on sale of immoveable property situated in Cyprus).
  • No exchange control restrictions – an IBC can open a bank account in any currency in Cyprus and abroad.
  • Cyprus has 50+ Double Tax Treaty agreements which apply to 40+ countries and which can be exploited to minimise tax.
  • Confidentiality and anonymity of beneficial owners is safeguarded (true identity is only disclosed to local banks, if a local account is opened and the information is not disclosed to any third party or to other countries, except in the case of properly authorized criminal investigation (drugs, terrorism, e.t.c.) or by a court order.

 

In order to start the company opening procedure, please submit the following:

  • Name of the company (2-3 names)
  • Copy of the passport (certified with Apostille) – Original
  • Utility bill as proof of address (electricity, telephone, etc.) – Original
  • Reference letter from the bank – Original
  • The opening procedure is approximately 3 weeks (it depends on Cyprus Registry where the company docs will be certified, + 7days).