Cyprus– An Ideal Place for Relocation and Investments
Cyprus is the third largest island in the Mediterranean Sea, after the Italian islands of Sicily and Sardinia, located at the Eastern Mediterannean. The strategic and distinctive location of Cyprus, at the crossroads of the three continents of Europe, Asia and Africa has been a major factor which renders Cyprus one of the main transit trade centres in the region and one of the most attractive international business centres. Because of its unique location, Cyprus attracted various conquerors, who managed to control the main trade routes by having the island under their rule. Cyprus finally gained its independence in 1960 and was declared an independent State.
Cyprus is a republic with a Presidential system of Government. The President appoints the Council of Ministers and together they exercise executive power. Legislative power is exercised by the House of Representatives. The Cypriot legal system is mainly based on common law, but some areas are based on the civil law system.
Cyprus is a member of the European Union since 1 May of 2004. It also joined the Economic and Monetary Union at that date, and adopted the euro as its national currency on 1 January of 2008.
The population of island is estimated to be 800,000 and it does not include Turkish settlers illegally residing in the Turkish-occupied part of Cyprus. The capital of the island is Nicosia. It is situated roughly in the centre of the island and is the seat of government as well as the main business centre. The 1974 Turkish invasion and occupation of 36% of the island’s territory literally cut the capital in half. After the fall of the Berlin Wall, Nicosia remains the only militarily divided capital in Europe.
The second largest town is Limassol. It is Cyprus’ main commercial port and an important tourist resort. Larnaca, in the south-east of the island, is the island’s second commercial port and an important tourist resort. The main International Airport is situated in Larnaca. Paphos in the south-west is a fast developing tourist resort and has the island’s second international airport.
- 32nd among 139 countries for Best Countries for Business 2016 – Forbes Magazine.
- 5th country for relocation in the Global Lifestyle Review – Knight Frank.
- 45th among 190 countries in the ease of doing business (Doing Business Report 2017 – IFC and the World Bank).
- 47th among 176 countries in the transparency and fighting of corruption index (Corruption Perceptions Index 2016 – Transparency International).
- 32nd among 188 countries in the quality of life (2015 Human Development Index – United Nations Development Programme).
- 83rd among 138 countries in the Global Competitiveness Report 2016-2017 – World Economic Forum
- 42nd among 178 countries in the 2016 Index of Economic Freedom – the Heritage Foundation and the Wall Street Journal
Among the many attractive advantages that Cyprus has to offer as an international business centre are the following:
FAVORABLE TAX REGIME
Cyprus has been included in the Organisation for Economic Cooperation and Development’s white list (April 2009) for having substantially implemented internationally the highest of internationally agreed standards on harmful tax practices. This development had further strengthened even more Cyprus’ position as one of the strongest and most reputable international financial centres in the world.
1. Corporation Tax:
- Corporate income is taxed at the rate of 12,5%, which is one of the lowest in European Union. All companies tax resident of Cyprus are taxed on all their income accrued or derived from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.
|A company is considered as a tax resident company, if its management and control are exercised in Cyprus. Some of the factors that are taken into account to establish whether the management and control of a company are exercised in Cyprus are the residence of the Company’s Board of Directors, the place where the major decisions are taken and the place where the major contracts are signed.|
No taxes on payments to foreign shareholders of the holding company:
- Dividends received by a Cyprus tax resident company are exempt from corporate tax. Also there are no other withholding taxes for dividends paid to foreign shareholders (irrespective of whether the recipient is a body corporate or individual, the country of residence or the existence of a double tax treaty).
- Profit from the sale of securities. No income or capital gains tax on the profits and gains derived from the disposal of securities (shares, bonds, debentures, founder’s shares and other securities of companies or other legal persons and options over such securities).
- Proceeds from liquidation or capital reductions. No capital gains tax, income tax or any other taxes arise on the liquidation of a Cypriot company owned by non-resident shareholders, irrespective of the method of liquidation.
Sources of income which are exempt from corporate taxation:
- Profit from the sale of securities
- Interest income is exempt from corporate tax unless the interest income arising in the ordinary course of business including interest closely connected with the carrying on of the business, and interest earned by open-ended or close-ended collective investment schemes. Interest income not arising however in the ordinary course of business is subject to defence tax of 30%.
- Profits received by a Cyprus company having one or more permanent establishments abroad are fully exempt from taxation. The exemption does not apply if: 1) the permanent establishment directly or indirectly has more than 50% of its income from investments and 2) the foreign tax burden on the income of the permanent establishment is substantially lower than the tax burden of the resident company controlling the permanent establishment.
All expenses incurred wholly and exclusively in earning the income of the company are deducted from tax. Also companies are able to carry forward tax losses incurred in a year over the next five years from the end of the tax year in which they were incurred and such losses can be offset against any taxable income.
2. Double Taxation Treaties:
Cyprus has an extensive network of Double Taxation Treaties which enables considerable tax advantages. As a result foreign withholding taxes on cross border payments are reduced or eliminated and profits are not taxed Namely, the same income is not taxed in more than one country.
|Cyprus, lying at the crossroads of the three continents of Europe, Asia and Africa is therefore an exceptional location for holding companies. The favourable tax regime and the other advantages described above render Cyprus companies ideal vehicles and useful tools for foreign investors (especially for non-EU investors) in international tax planning and in investments within or outside the European Union. Foreign investors will gain competitive advantage by operating in a European country with such an attractive tax regime. Cyprus has high standards of corporate governance, transparency and integrity. These fundamentals are helping Cyprus to effectively overcome the current economic challenges that have emerged as a result of the global economic crisis. Cyprus remains one of the most attractive jurisdictions for holding companies in the world.|