The use of a Cyprus company in international tax planning
Advantages of Cyprus
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.
- 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.
- 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.