Cyprus Advantages and Tax Regime

Advantages of Cyprus

Presently, there are more than 100,000 international business entities registered and operating out of Cyprus. An important number of these international business entities have fully fledged offices in Cyprus.

Cyprus and its tax regime offer clear advantages that attract both business entities and foreign private individuals that is why the use of Cyprus in international planning grows.

Tax advantages

The use of a Cyprus entity in International tax planning can diminish or eliminate completely the overall tax liability arising from an international activity. Particularly, the appropriate structuring of a Cyprus entity in an international tax plan can:

  • Reduce the tax burden in the country where the income is earned
  • Reduce the withholding tax on getting the money earned out of the country where the income is earned
  • Reduce or defer the tax burden of the ultimate shareholder of the tax planning structure
  • Reduce the overall tax burden of an international activity hence increasing overall return

In addition, the Cyprus tax policy positions Cyprus as an ideal jurisdiction for Holding companies. In summary, a Cyprus Holding Company offers the following tax advantages:

  • one of the lowest corporate tax rates in the European Union at 12.5%
  • low top statutory personal income tax rate at 30%
  • extensive double tax treaties network with over 55 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad
  • no withholding tax on dividend income received from subsidiary companies abroad under certain conditions
  • no withholding tax on dividends received from EU subsidiaries
  • no withholding tax on capital gains and income on the disposal of neither the shares of the subsidiary’s share capital nor the shares of the Cyprus holding company
  • no tax on capital gains or income on the liquidation of the Cyprus holding company
  • no withholding tax on distribution of profits
  • outward dividends by the Cyprus Holding Company to its non-resident shareholders are exempt from any withholding taxes
  • profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions
  • a diversified group of Cyprus companies belonging to a Cyprus holding company can set off Group relief for the utilisation of tax losses
  • no minimum holding period

Non-tax advantages

In addition to its Tax Advantages Cyprus offers a number of non-tax advantages. Cyprus offers the infrastructure for doing business internationally, which is of the highest professional standards, with significantly lower operating costs. The time zone of Cyprus gives the flexibility of any international business entity to operate via Cyprus their subsidiary in the East in the morning and communicate to head-offices in the West in the afternoon.

The non-tax advantages include:

  • Advantageous geographical location and time zone
  • English as a business language
  • Pleasant climate
  • European standard of living
  • Comparatively lower set-up and maintenance costs of international business entities
  • Highly developed and efficient accounting, legal and banking sectors
  • Strict confidentiality with the local authorities and the banks
  • Excellent transport and telecommunication facilities
  • Exemption from foreign exchange control
  • Possibility for acquisition of immovable property