The use of a Cyprus company in international tax planning

Advantages of Cyprus

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Cyprus has become one of the most attractive business centres globally. Numerous factors, as stipulated below, have contributed to the growth of Cyprus as a base for tax planning for both business entities and international private individuals.

Tax Advantages:

• Reduction of the tax burden where the income is produced. In this way the return on investment of an operation is increased. 
• Reduce the withholding tax on expatriation of the funds earned.
• Provides confidentiality of the ultimate shareholder of the company.
• Use of the double tax treaties for the avoidance of double taxation. 
• Security of property rights.
• There are no exchange control limitations on international activities. 

There are a number of incentives which are given by the Cypriot legislation to the International Business Company and to the foreign employees, these are: 

• The valuable network of Double Tax Treaties (over 45 DTT);
• The lowest Corporate Tax in Europe – at a rate of 10%;
• Profits of sale of securities are tax exempt (the term securities includes shares, bonds, debentures etc);
• Exemption from withholding tax regarding payment of dividends, royalties and interest made from Cyprus to country abroad;
• Dividend income received by non-resident shareholders of the Cyprus company is not subject to any income tax in Cyprus (subject to conditions);
• Benefits from being a member of the European Union (EU Parent-Subsidiary Directive, EU Mergers Directive, EU Royalty and Interest Directive, EU Directive on Mutual Assistance and Cooperation);
• Profits which arise by Re-organisation reasons are exempt from corporation tax, capital gains tax and transfer fees; 
• Group losses relief;
• Tax free interest from bank deposits made by non-residents in Cyprus and more.

Non-Tax Advantages

• Favourable geographical location especially for clients within Europe and Middle East;
• Time Zone;
• Member of EU since 1st May 2004;
• Beautiful climate;
• English is the main spoken business language;
• Live up to European Standards;
• Low cost set-up and maintenance costs of International Business Companies (IBC);
• High standard and professional banking facilities, accounting, fiduciaries and legal sectors;
• Solemn confidentiality of ownership of Cyprus companies with local authorities and banks;
• Work and residence permits are easily obtained for foreign employees and their families;
• Immovable property can be bought by the IBC’s and emigrant employees;
• Import duty is not imposed on cars and certain equipment for use by IBC and it’s foreign employees;
• A legal entity or physical person of any nationality may act as director. Minimum of one director is required.