City Forum
11 Florinis Street, Office 601, 6th Floor
Nicosia 1065, Cyprus

P.O.Box 22573, Nicosia 1522, Cyprus

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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 Investment Programme 

 
 

The Cyprus Investment Programme, offers to investors the opportunity to enjoy all the benefits of an EU national, with a relatively low investment amount of €2,5 million which includes the acquisition of a residence amounting to at least €500,000.  There is also a requirement for donation of at least €75.000 to the Research and Innovation Foundation as well as a donation of at least €75.000 to the Cyprus Land Development Corporation. It is significant to note that there is no requirement for residing in Cyprus, before, during or after the Investment application.  The Cyprus Investment Programme gives the investor the opportunity to enjoy all the rights of an EU Citizen, including the right to reside, work and study in any EU member state as well as Norway, Iceland, Switzerland and Liechtenstein. Cyprus permits dual citizenship.

 

Cyprus Tax Residency – Legislation on Non-domiciled individuals

On 16 July 2015 Cyprus has enacted a law which provides the exemption from taxation of personal investment income (dividends, interest and rent) earned by non-Cyprus domiciled individuals. Prior to this amendment, Cyprus tax resident individuals earning the aforementioned types of income from Cyprus or foreign sources, were subject to Special Defence Contribution (SDC) tax, at the rate of 17% on dividends, 30% on interest and 3% on the 75% of rental income, irrespective of their domicile status. That is, Cyprus non-domiciled tax residents, are now exempted from any tax on dividends and passive interest. Rental incomes, whether Cyprus or foreign sourced, are subject only to income tax, when received by Cyprus tax resident individuals who have non-dom status.  The exemption to non-Cyprus domiciled individuals is granted for a period of 17 years from the date they become Cyprus tax residents. 

 

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.

Tonnage Tax Regime

 

The Cyprus Tonnage Tax law which has been enforced in 2010 is very beneficial to ship management companies which decide to relocate to Cyprus, provided that they meet certain criteria.  The main highlights of the Tonnage tax law are:

  • EU approved -fully compliant with Guidelines on State Aid to Maritime Transport 

  • In force up to 2019 and extendable for a further 10 years with the decision of Council of Ministers (following European Commission approval) 

  • Tonnage tax is based purely on net tonnage-no profits link 

  • Full exemption from all income taxes 

  • Exemption from stamp duty on MOAs, ship mortgage deeds or other security documents

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.