Cyprus is considered the most attractive European tax regime by major business organisations across Europe.
Cyprus International Business Companies (IBC) can enjoy some of the following major fiscal advantages:
¨As from 1 January 2003 there is no distinction between local companies and IBC. Net profits of IBC and international branches managed and controlled from Cyprus are taxed at the corporate income tax rate of 10%, the lowest rate in the European Union.
¨International business branches and international business partnerships which are managed and controlled from abroad are totally exempt from corporation or income tax.
¨Profits earned from a permanent establishment abroad are fully exempt from tax in Cyprus.
¨Dividend income is exempt from tax provided that at least 1% holding is maintained in the company paying the dividend. This exemption will not apply if more than 50% of the paying company’s activities result directly or indirectly in investment income and the foreign tax burden is substantially lower than that in Cyprus.
¨No withholding tax on dividends paid to non-resident shareholders and on payments of interest and royalties outside Cyprus, irrespective of the existence of a double tax treaty.
¨Profit from the disposal of securities is exempt from Cyprus Tax irrespective of whether this profit forms part of a company’s trading activity or is of a capital nature.
¨Cyprus has an extensive network of Double Taxation Treaties, currently with 40 countries. Most treaties provide for reduced or nil rates of withholding tax on dividends, interest and royalties paid out of the treaty country and the avoidance of double taxation in the case where a resident in one of the treaty countries derives income from the other treaty country.
¨Tax credit for any taxes paid abroad is given unilaterally irrespective of the existence of a double tax treaty.
¨Benefit from the EU parent subsidiary directive that provides for no withholding tax on dividends paid between associated enterprises (a holding of at least 15% currently and will fall to 10% in Jan-2009) that are both situated in the EU.
¨No capital gains tax on disposal of real estate or other assets situated outside Cyprus.
¨No capital gains tax or income tax on the liquidation of the IBC or of participations held.
¨No time restrictions on carrying forward tax losses and existence of group relief for utilization of tax losses.
¨The standard VAT rate is 15% the lowest in EU and depending on the IBC’s activities, VAT suffered can be recovered.
¨No inheritance, estate or other taxes on shares held in a Cypriot company. No capital taxes or wealth taxes and no significant capital and stamp duties.
