The role of Cyprus in the international business world has increased dramatically due to the numerous benefits it has to offer; Cyprus is now considered one of the most favored jurisdictions in Europe from which to conduct international business.

Cyprus attracts investors and entrepreneurs from around the globe who aim to develop their companies, and run their international commercial and financial operations through Cyprus. These investors are involved in sectors such as high technology, research and development, tourism, commerce, real estate and business related services.

The admission of Cyprus to the European Union as full member in 2004, established Cyprus as a prestigious, stable and attractive jurisdiction. In 2008, Cyprus joined the European Monetary Union, further confirming its economic stability.
Cyprus features a stable economic environment and enjoys a quick and stable GDP, which is characterized by its low inflation and low unemployment rates.

Cyprus has comprehensive double taxation agreements in force with over 40 countries and enjoys the lowest of corporation tax rates in the EU at 12,5%.

Although Cyprus is a low tax jurisdiction, is not a "tax haven", and due to its favorable tax regime and the wide network of tax treaties it has attracted businesses from around the globe to establish International Business Companies with the purpose of carrying and monitoring their international business operations.

In Cyprus, professional business services are rendered at the highest standards. The results are high quality, cost effective consultancy services and continuous support to professionals worldwide. Therefore, many companies have chosen Cyprus as a jurisdiction to establish their business internationally.

  • 0% tax on Dividends received

    Dividends received by a Cyprus Company, on certain conditions, are free of tax making Cyprus the most competitive jurisdiction for holding companies.

  • 0% withholding tax on Dividend payments

    Dividends payable by a Cyprus resident company to its foreign shareholders (whether a company or individual) are not subject to any withholding tax in Cyprus.

    In effect, Cyprus provides full tax exception on the payment of dividends to its nonresident shareholders and has a real advantage over the other traditional holding jurisdictions.

  • Companies engaged in the trading of titles
    Trading companies in shares and other securities as identified in the law may be formed with 0% taxation on profits from this trading. No capital gains tax is payable on the sale or transfer of shares.
  • 12,5% Taxation for tax resident companies
    Resident trading companies, subject to certain exceptions for holding companies, and companies trading in shares / securities pay one of the lowest taxation in Europe (12,5%) on their net profits.
  • 0% taxation on profits from foreign establishment
    A resident company is not taxed on profits received from its overseas establishment, subject to certain conditions.
  • Unilateral Tax Credit Relief
    Unilateral tax credits are granted on any tax paid abroad to any foreign country, irrespective of whether Cyprus has a Double Taxation Treaty or not. In such a case the income is not taxed twice but only once.
  • Trusts
    International Cyprus Trusts may be established holding the shares or to be used as a vehicle for a tax structure – International trusts do not pay any taxation on their profits.
  • Double Tax Treaties / International Tax planning
    Access to a wide and, in many cases, particularly beneficial double tax treaty network.
  • Re-organizations
    Mergers, Takeovers and other Re-Organizations can take place within groups without tax consequence.
  • Losses
    Companies will be able to carry forward tax losses incurred over the next five years from the end of the tax year in which they were incurred, to be offset against taxable income.
  • Group relief
    Group relief (set off of the loss of one company with the profit of another) is allowed provided both companies of the group are tax resident in Cyprus.
  • Controlled Foreign Company (CFC) Legislation
    Cyprus does not have Controlled Foreign Company (CFC) legislation.
  • Thin Capitalization Rules
    Cyprus tax legislation does not contain Thin Capitalization provisions, namely there are no provisions in the Law requiring the companies to maintain a particular debt to equity (particular) ratio.
  • Re-domiciliation
    Cyprus law allows re-domiciliation of foreign companies in Cyprus and Cyprus Companies to be re-domiciled abroad.
    This possibility gives tremendous flexibility to foreign holding companies which are currently using particular holding jurisdictions, which are not suitable, to move their holding companies in Cyprus without disturbing their overall structure.
  • Holding Company Financing its Group of Companies
    A holding company acting as the financing vehicle of its group of companies is considered that the interest income it receives from financing the group, is closely related to its ordinary activities and this interest income will be taxed only with income tax and not Special Defence Contribution Tax.
  • Financial Assistance
    Financial Assistance to its shareholders to purchase its own shares is now possible.
  • Withholding Taxes on Interest and Royalties

    There are no withholding taxes on payments of interest to non-residents. Any interest due to non-residents is paid free of withholding taxes from Cyprus.

    There are also no withholding taxes on royalties arising from sources outside Cyprus.

    Royalties arising from the use of an asset in Cyprus are subject to 10% withholding tax.

  • Liquidation
    If a Cyprus holding company is liquidated and distributes its assets to its shareholders, in the case that the shareholders are non-residents of Cyprus then the distribution is done without any taxation on the non-resident shareholders.

CFA Auditors - Cyprus Audit Tax Advisory © 2017