Cyprus Companies
Cyprus benefits from a favourable tax regime and a wide network of double - taxation treaties. Since becoming a full member of EU in 2004, Cyprus enjoys the use of all the facilities established by EU directives for the operation of capital and payments of proceeds. As a result, Cyprus is an ideal place for exploiting the EU market.
In light of the 2003 tax reform combined with accession to the EU Cyprus has developed into a popular platform from where international investors and multinational companies hold and manage their trans-border investments. Having one of the lowest tax rates within Europe and in compliance with the OECD requirements against harmful tax practices, Cyprus is preferred by many investors and considered to be an ideal International Financial Centre.
We specialise in registration, incorporation and administration of Cyprus companies, a jurisdiction which currently operates one of the most attractive business environments in the EU. Due to our vast experience and expertise, we are capable of offering our clients assistance with all aspects of Cyprus company formation and administration.
There is a plethora of advantages surrounding the incorporation of a company in Cyprus. The island is situated at the crossroads of Europe, Asia and Africa as well as being a gateway to the oil-rich Arab states and the rest of the Middle East. The Island also has a state of the art telecommunication infrastructure, low operating costs, multilingual and highly skilled human capital, and excellent banking systems. As a holding company, a non-resident can benefit from the following tax advantages:
- A uniform 12.5% corporate tax rate is applicable to the worldwide income on all resident companies; one of the lowest corporate tax rates in the EU offering advantageous standard rate of corporation tax for Cyprus. The taxation status of a company is residence-based. A company is considered to be 'resident in Cyprus' if its business is centrally managed and controlled in Cyprus. Therefore, under the relevant rules, a resident corporation is taxable on its worldwide income accrued or arising from sources both within and outside Cyprus, if it is managed and controlled from Cyprus.
- There is no capital gains tax payable on the sale or transfer of securities and the gains are exempt from Income Tax. (This, however,does not apply when the Company owns real estate in Cyprus) Consequently, no tax arises on the disposal of participations held by the Cyprus Holding Company or the disposal of the shares of a Cyprus Holding company or the liquidation of the Cyprus Holding Company owned by non-residents.
- Dividends received from Cyprus or non-Cyprus companies are exempt unless more than 50% of the payer’s company’s activities are derived from investment income or the tax burden in the payer’s country is substantially lower than the Cyprus tax rate (less than 5%).
- Profits from a permanent establishment abroad are exempt from corporation tax, subject to exemptions.
- There are no withholding taxes on the distribution of profits by way of dividend payments to non-residents, irrespective of whether the recipient is a corporate body or an individual and irrespective of the country of residence or the existence of a double tax treaty.
- Corporate tax losses can be carried forward indefinitely or they can be set off against profits incurred from companies within the same group under group relief. (Companies are considered for group relief purposes, if one is a 75% subsidiary of another or if both are 75% subsidiaries of a third company).
- The Cyprus tax legislation has transposed the Merger Directive into the local income tax law and unlike the Directive itself, which provides only for cross-border reorganisations of companies within the EU and is restricted to income tax consequences, it has extended the tax benefits to domestic reorganisations, to cross-border reorganisations with EU member and non-EU member states and to reorganisations abroad with tax implications in Cyprus. In accordance with this legislation, no tax consequences arise in cases of reorganisation involving a Cyprus holding company.
- There are no debt /equity ratio requirements in the Cyprus tax legislation. A Cyprus company can be capitalized entirely with loans and any arms’ length interest paid to a parent will be fully deductible.
- Cypriot tax legislation does not contain thin capitalization provisions.
- There is an extensive double tax treaty network with over 40 countries and a further 25 treaties under negotiation.
Cyprus is a suitable place for locating an intermediary company due to the island’s combination of tax treaties and low-tax regime. Dividends can flow through the Cyprus company totally tax free and the company can be used to take advantage of the extensive network of double tax treaties.
Instructions for the formation of a Cypriot Company
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