Benefits of the Cyprus Tax Regime

Incorporating a company in Cyprus may generate a number of tax benefits, including the following:
  • Cyprus is the “lowest-tax EU Jurisdiction” that is not offshore. Currently, the standard corporate tax rate amounting to 12.5% (exemption for all direct taxes for shipping companies) is one of the lowest in the European Union;

  • 80% exemption applies of the net royalty income from owned intangible assets, as well as 80% of the net profit emanating from the disposal of intangible assets;

  • Trading in securities is essentially a tax-exempt activity as any profit from the disposal of any type of security, irrespective of whether this profit forms part of a company’s trading activity or is of a capital nature;

  • Foreign beneficial owners of Cyprus companies, branches and partnerships are not liable to additional tax on dividends or profits over and above the amount paid or payable by the respective legal entities.

  • The “out-of-Cyprus profits” of Cyprus Non-Resident Companies are not taxable - escape tax altogether in Cyprus - (Cyprus Companies with management & control exercised outside Cyprus) - in other words an “EU Offshore Vehicle”;

  • International trusts enjoy a very favourable tax regime;

  • Transfers of assets and liabilities between companies can, subject to conditions, be effected without tax consequences within the framework of a reorganisation and tax losses can be carried forward by the receiving entity;

  • Shipping companies are fully exempt from all direct taxes and are subject to taxation under the tonnage tax regime;

  • Investor-friendly Tax Authorities being keen and willing to assist foreign investors;

  • Thin spreads of profit are acceptable, hence it is possible that a lot of legal tax-planning strategies can be effectively and easily employed in order to lower Cyprus Tax, even at levels significantly lower than 12.5 %;

  • Benefits derived from the possibility to obtain Advance Tax Rulings from the Tax Authorities;

  • Absence of strict transfer pricing rules;

  • Added commercial value arising from the ability to register for EU VAT in Cyprus;

  • Low personal tax rates that reach a maximum of 35% for income over 19.500 EURO and substantial relief for overseas employment and for non-residents taking up employment in Cyprus for the first time;

  • Low social insurance contributions (7.8% of gross salary) - total employer contributions to various funds amount to 11.5% of gross salary and total employee contributions to 7.8 %;

  • No capital gains tax or net worth taxes are imposed, with the exemption of real estate situate in Cyprus;

  • Advantages derived from the implementation of a wide variety of EU Directives, transposed into the Cyprus Tax Legislation;

  • A wide Double Tax Treaty Network between Cyprus and a great number of other countries;

  • Attractive permanent establishment (“PE”) rules and generous PE provisions available in the DTT Network;

  • Unilateral tax-relief is granted to all Cyprus companies for foreign tax incurred, irrespective of the presence of a double tax treaty;

  • Tax losses are carried forward indefinitely and can also be surrendered as group relief;

  • Interest deduction for borrowing costs is provided; and

  • Relatively low duties and levies are imposed on the establishment and maintenance of companies in Cyprus, as compared to the rest of the EU countries.