General business reasons
Cyprus is a small country located in the junction of three continents: Europe-Asia-Africa. Despite its size, Cyprus is and has traditionally been an important business centre.
The availability of highly qualified, trained professionals and service advisors coupled with the fact that Cyprus has been in the EU since May 2004 and the Eurozone since January 2008, make Cyprus an attractive business and financial destination.
The extensive DTT network (currently over 60 countries), the favourable legal and tax environment, the well-developed service infrastructure (telecommunications, energy, transport), lower set-up and operational costs (compared to most EU jurisdictions) give Cyprus the extra notch necessary for international businesses to effect their inbound and/or outbound holding and/or financing structures using Cyprus. Furthermore, this favourable business environment has led multinational companies to re-domicile their headquarters from their home country to Cyprus.
Last but not least, the fact that Cyprus has been placed on the oil and gas energy map during the past few years, with multinational companies already in the process of drilling, gives an extra reason for international businesses to either structure through or even operate in Cyprus.
Cyprus tax system
Cyprus’ tax system can be summarised as follows:
- Low corporate tax rate of 12,5% - Nonetheless, effective tax rate could be much lower due to:
- No tax on disposal of securities (titles) – unconditional
- Exemption system on foreign dividend income/profits with easily met conditions
- Notional Interest Deduction (NID) rules.
- Expenses deductibility
- Extensive treaty network
- No withholding tax on outward payments of dividends, interest and on all but Cyprus sourced royalties
- Profits from qualifying foreign permanent establishment are tax exempt
- Flexible reorganisation rules and group relief provisions
- No restriction on foreign ownership
- Applicability of EU tax Directives: Reorganisations, Parent/Subsidiary, Interest/Royalties
- No stamp duty on contracts relating to matters outside Cyprus
- Most international transactions are free of Cyprus VAT
- Favourable merchant shipping law
- Favourable intellectual property law
- Tax free trust structures
- OECD approved / EU compliant system
- Tax incentives offered to executives of multinational companies working in Cyprus