3016 Limassol, Cyprus
41, Misiaouli & Kavazoglou Street, 2nd Floor, Office 201
+357 25 87 14 14
41, Misiaouli & Kavazoglou Street, 2nd Floor, Office 201
+357 96 63 66 26
WhatsApp, Viber
International Tax Planning
The objective of our international tax services is to minimize tax liabilities in compliance with the relevant law.
We analyze and structure your cross-border transactions and investments, in order to take advantage of favorable tax regimes and any applicable double tax treaties.
We can assist you in solving technical tax problems, analyze and interpret double tax treaty provisions and identify and manage tax risks.
The 183 Days’ Rule
Cyprus has adopted a residency-based system of taxation, whereby physical presence in Cyprus exceeding 183 days in a tax year (1st January to 31st December) will constitute tax residency for individuals. Therefore, if an individual is physically present in Cyprus for more than 183 days in a tax year, s/he will be considered a tax resident of Cyprus in that tax year.Cyprus Tax Planning
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:
The corporate rate is 12.5%, one of the lowest in the European Union.
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).
Dividends of non-resident shareholders as well as of Non-Domiciled tax residents are exempt from withholding taxes.
Royalties in respect of intellectual property rights used outside of Cyprus are exempt from withholding taxes.
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
- Bonds
- Debentures
- 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.
Cyprus has concluded double taxation treaties with over fifty countries worldwide.
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.
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.
VAT is levied at 19%, which is one of the lowest rates in the European Union.
- 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 reorganizations 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 or Non-Domiciled tax residents.
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 corporate rate is 12.5%, one of the lowest in the European Union.
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).
Dividends of non-resident shareholders as well as of Non-Domiciled tax residents are exempt from withholding taxes.
Royalties in respect of intellectual property rights used outside of Cyprus are exempt from withholding taxes.
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
- Bonds
- Debentures
- 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.
Cyprus has concluded double taxation treaties with over fifty countries worldwide.
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.
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.
VAT is levied at 19%, which is one of the lowest rates in the European Union.
- 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 reorganizations 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 or Non-Domiciled tax residents.
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.
- Obtaining advance Tax and VAT rulings from the Cyprus Tax Department.
- Verification of the accuracy of tax accounting in the enterprise.
- Obtaining Tax Clearance Certificates.
- Obtaining Tax Residency Certificates.
- Advice on double tax treaties and EU Directives to eliminate double tax charge.
The 183 Days’ Rule
Cyprus has adopted a residency-based system of taxation, whereby physical presence in Cyprus exceeding 183 days in a tax year (1st January to 31st December) will constitute tax residency for individuals. Therefore, if an individual is physically present in Cyprus for more than 183 days in a tax year, s/he will be considered a tax resident of Cyprus in that tax year.Tax Residency For Individuals
The 60 Days’ Rule
As of 1st January 2017, the above tax residency rules have been amended to also provide that, an individual who does not stay in any other country, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in Cyprus in that tax year, if all of the following conditions are met:
The individual stays in Cyprus for at least 60 days in the tax year.
Exercises a business and/or is employed in Cyprus and/or holds an office with a Cyprus tax resident company at any time during the tax year.
Maintains (by owning or leasing) a permanent home in Cyprus.
Non – Domicile Status
As from 16th July 2015, Cyprus has introduced a special tax regime for new tax residents.
In brief, if you:
Are not of Cypriot origin
As well as not having resided in Cyprus for at least 17 out of the last 20 years
Then, after becoming a Cyprus tax resident, you shall be exempt from taxes on interest and dividend income, received both in Cyprus and/or abroad, for the next 17 years.
What taxes are not applicable in Cyprus?
Becoming a Cyprus tax resident is also beneficial since a number of major taxes are not applicable on the island, including:
- Property tax
- Tax from income derived sales of securities
- Gift tax
- Inheritance tax
Need More Information?
Please feel free to contact us for a personalized consultation on local and/or international tax planning
