Сyprus, being a low tax jurisdiction, is one of the most popular choices for international tax planning. Its favorable tax regime, together with its extensive network of double tax treaties and its excellent infrastructure, offers invaluable tools for efficient tax planning and a reputable base for your international business.
Cyprus Tax Benefits
Cyprus is a tax efficient jurisdiction for the commercial and financial sector. Its competitive advantage is presented by the following taxation indicators:
1. Corporate tax rate:
The corporate rate is 12.5%, one of the lowest in the European Union.
2. Exemption from tax on dividend income:
Income from dividends is exempt from tax regardless of its source. Exemption to the general rule is when:
– The company paying the dividend engages in more than 50% of its activities in producing investment income, and
– The foreign tax burden on the company paying the dividend is substantially lower than that in Cyprus (Substantially lower meaning less than 50% of the applicable corporation tax rates in Cyprus).
3. No withholding taxes for corporate or individuals:
Non – resident shareholders’ dividends are exempt from withholding taxes.
Royalties in respect of intellectual property rights used outside of Cyprus are exempt from withholding taxes.
4. No tax on disposal of titles:
Income or capital gains tax is not imposed on profits and gains, which results from the disposal of titles.
According to article 8(22) of the Income Tax Law N118(I)/2002, any gain arising from disposal of titles is exempt from Income Tax.
The definition of titles incorporates the following:
– Ordinary shares
– Preference shares
– Founder’s shares
– Options on titles
– Short position on titles
– Futures/Forwards on titles
– Swaps on titles
– Depositary receipts on titles e.g.
– ADRs and GDRs
– Rights of claim on bonds and debentures
– Index participation only if they represent titles
– Repurchase agreements /REPOS on titles
– Participation in companies, e.g. Russian OOO and NAO, and American LLC provided that there is no double tax exemption of the income.
5. A wide network of tax treaties:
Cyprus has concluded double taxation treaties with over fifty countries worldwide.
6. Capital gains and income tax exemption for real estate:
Real estate or other assets can be held in a Cypriot company and are exempt from capital gains tax provided that the above are outside the territory of the Republic of Cyprus.
7. Permanent establishment abroad:
Profits earned in Cyprus from a permanent establishment abroad are exempt from tax.
8. Unilateral foreign tax credit relief:
If the respective income is subject to Cyprus tax, relief for taxes paid abroad is offered in the form of a tax credit. The relief is given unilaterally irrespective of the existence of a double tax treaty. Where a double tax treaty exists, the treaty provisions apply if more beneficial.
9. Value added tax:
VAT is levied at 19%, which is one of the lowest rates in the European Union.
Most international transactions are free of VAT.
10. Substantial Tax Relief for non-residents taking up employment in Cyprus, during the first years of their employment:
– The lower of: 20% of income or €8.550 annually, on remuneration from any office or employment exercised in Cyprus by an individual who was not a Cyprus tax resident before the commencement of his/her employment, for a period of 5 years commencing from 1st January following the year of commencement of the employment. This exemption applies for employment started during or after 2012 and will be available until the year 2020.
– Deduction 50% on remuneration from any office or employment exercised in Cyprus by an individual who was not a Cyprus tax resident before the commencement of his/her employment, for a period of 10 years if the annual remuneration exceeds €100.000.
Cyprus has adopted the EC Merger Directive; therefore there is no corporate income tax, capital gains tax, stamp duties and property transfer fee on reorgansations such as mergers, divisions/ part-divisions, the transfer of assets or exchange of shares.
No tax is imposed on the liquidation of a Cypriot company owned by non-resident shareholders.
13. Adoption of the EU Directives
Full adoption of the EU Directives beneficial to Cyprus Holding Companies
M. Target Group can assist both businesses and individuals, on all aspects of Cyprus direct and indirect taxes.
We further obtain Tax rulings from the Tax Authorities and provide opinions on interpretations of provisions in Double Tax Treaties, and on indirect tax matters including EU VAT matters through analysis and application of the VAT Directives.
The Cyprus Tax Planning services include the following:
– Registration with the Inland Revenue Department
– Preparation and submission of personal and corporation tax returns
– Verbal and written consultation on Cyprus Tax Law
– Effective planning of tax payments
– Advice on double tax treaties and EU Directives to eliminate double tax charge
– Verification of the accuracy of tax accounting in the enterprise
– Obtaining Tax Clearance Certificates
– Obtaining Tax Residency Certificates