CYPRUS FOR BUSINESS

Cyprus

 

Cyprus is an attractive proposition for foreign investors since it has a reliable commercial and legal infrastructure; excellent professional services and a straight forward, transparent and well-structured tax system. International investors can use Cyprus as their Gateway to the rest of the world, as it offers the ability to penetrate new markets in a tax efficient way and most importantly to exit tax free from investments in a number of countries. In addition, through Cyprus, companies are able to repatriate their profits with very low or even zero withholding tax.  We set below a summary of the general benefits of utilizing a Cyprus company as part of an international tax structure.

 

In summary, the benefits accruing to using a Cyprus company as an efficient tax vehicle are:

 

  • One of the lowest corporation tax rates in Europe at 12,5%.

  • Dividend income is exempt from corporation tax. Zero or very low withholding tax when pulling profits from foreign subsidiaries.

  • No capital gain tax on the disposal of shares in companies (foreign and local) or property situated outside Cyprus. 

  • No withholding tax on payments to non-residents (dividends, royalties and interest).

  • Ability to use trusts for wealth protection, financial planning and inheritance purposes.

  • Financial connection routes between countries through tax planning due to the favorable tax treaties with the most important countries of the financial world.

  • Cyprus entities may open and operate bank accounts in any currency and in any jurisdiction abroad.

  • EU VAT registration number for VAT “free” business transactions within the EU.

Due to its large network of double tax treaties, Cyprus is utilized as a financial connection route for outbound/inbound investment to/from a number of countries.  For example, the double tax treaty between Cyprus and Russia is one of the most favorable treaties that Russia maintains.  Therefore, foreign investment in Russia is usually directed through Cyprus via a Cyprus entity so as to enjoy the full treaty benefits.  The benefits include a very low dividend withholding tax of 5% when it comes to the extraction of profits from the Russian investment and no further taxation in Cyprus.  Also, any capital gains arising from the sale of the Russian investment are not taxable in Cyprus as capital gains are tax exempt.

 

There are plenty of examples where inbound/outbound investment from/to various countries is done through Cyprus.  Countries with which Cyprus maintains tax treaties with very favorable terms include Austria, Czech Republic, Denmark, Germany, Finland, Greece, Ireland, Iran, Italy, Norway, Poland, Russia, Qatar, Singapore, South Africa, Switzerland, Ukraine, United Kingdom, United States of America.

Double Tax Treaty Network benefits

 
 

The Cyprus Stock Exchange – Emerging Companies Market (ECM)

The Cyprus Emerging Companies Market (ECM) was launched by the Cyprus Stock Exchange as an alternative to the main market.  The ECM is specially designed for the needs of small and emerging companies, benefiting as it does from a simplified regulatory environment.  As such, it has become the vehicle of choice for:

  • International smaller entrepreneurial companies looking to raise funds from investors in a simpler, cost effective way through a recognized EU secondary market

  • International companies looking to promote their reputation through a listing

  • More experienced investors looking to invest in higher risk businesses

  • Existing public companies looking for a cheaper and less burdensome IPO

 

The Cyprus ECM is an ideal way to achieve a cost effective and less burdensome EU listing and gain access to secondary investors.  In particular, a private listing on the ECM is subject to minimal levels of regulation and cost.

Re-domiciliation of foreign companies into Cyprus

 

Cyprus allows re-domiciliation of foreign companies into its companies’ registry.  As a result, a lot of opportunities are created for international businesses in the sense that they can re-domicile their foreign companies to Cyprus and thus take advantage of the favorable features of the Cyprus tax system.  The procedure is fairly straight forward and there are three prerequisites for a foreign company to re-domicile to Cyprus.

  • The legislation of the country of origin must allow the re-domiciliation to other countries

  • The Memorandum and Articles of Association of the specific company must provide for the re-domiciliation to other countries

  • The company has to appoint a local, approved representative who will deal with the re-domiciliation process.

 

Cyprus Film Scheme

The government of the Republic of Cyprus introduced a package of incentives encouraging international producers to choose the island of Cyprus for filming in order to develop and boost the film sector.

 

Our firm has served as the external advisor of the Cyprus government agency Invest Cyprus regarding the Film incentive scheme for the period from 1st September 2020 to March 2022. Among others, our firm's responsibility was to assist in the preapproval and final approval procedure of the productions eligible for cash rebate and provide consulting support to the film committee on a number of issues. Following the lapse of the contract, APC has been offering consulting services to film productions interested in participating in the Cyprus Film Incentive scheme.
 

Incentives for film producers
 

The scheme consists of a combination of grants for the approved applicants:

  • Cash rebate (up to 25% above the line and up to 40% below the line)

  • Tax Credit

  • Tax Deduction for Investments in Infrastructure and equipment

  • Return of VAT on expenditure

 

Eligible production categories
 

  • Cinematograph Films – Long Films

  • Television films (drama)

  • Television Series or mini-series

  • Digital and/or analogue animation

  • Creative Documentary

  • Reality programmes which directly or indirectly promote the Republic of Cyprus and its culture