Cyprus is a member of the European Union and is situated in the Eastern Mediterranean, lying at the hub of three continents and close to the busy trade routes linking Western Europe with the Middle East, Africa and the Far East. The legal system is based on the English common law. The national currency is the Euro (EUR). The official languages are Greek and Turkish, while English is widely used within the business environment.
Cyprus limited liability company is a practical vehicle for tapping the international tax planning advantages offered by this jurisdiction which has the lowest corporate tax in the European Union. There are currently a great number of Cyprus limited liability companies registered and operating out of Cyprus.
The growth of the use of Cyprus in international tax planning indicates the existence of clear advantages that attract both business entities and foreign private individuals.
Tax advantages
The use of a Cyprus limited liability company in international tax planning can mitigate or eliminate completely the overall tax liability arising from an international activity. Specifically, proper structuring of a Cyprus limited liability company in an international tax plan can:
- Reduce the tax burden in the country where the income is earned
- Reduce the withholding tax on getting the money earned out of the country where the income is earned
- Reduce or defer the tax burden of the ultimate shareholder of the tax planning structure
- Reduce the overall tax burden of an international activity increasing in this way the overall return on investment of the project.
The Cyprus fiscal legislation offers a number of incentives that give rise to these advantages. The incentives include:
- Introduction of the concept of tax Resident and Non-Resident companies
- Taxation of worldwide income for tax Residents and Cyprus sourced income for non-Residents
- Lowest corporate tax rate in the Europe union of 10%
- Tax-exempt business profits of Non-Resident companies
- Tax-exempt gains on the trading and disposal of securities
- Tax-exempt gains on the disposal of subsidiaries
- Tax-exempt dividend income (subject to applicable criteria)
- Tax-neutral group reorganisations
- Tax-relief for group losses
- Full adoption of the EU Parent-Subsidiary Directive
- Full adoption of the EU Mergers Directive
- Full adoption of the EU Directive on Mutual Assistance and Cooperation
- Full adoption of the EU Royalty and Interest Directive
The wide network of double tax treaties of Cyprus offers numerous opportunities for sophisticated tax planning structures.
Non-Tax advantages
The non-tax advantages of Cyprus offer the infrastructure for doing business internationally, of the highest professional standards, with significantly lower operating costs. The time zone of Cyprus allows an investor to operate via Cyprus their subsidiary in the East in the morning and report back to head-offices in the West in the afternoon.
The non-tax advantages include:
- Advantageous geographical location and time zone
- English as a business language
- Pleasant climate
- European standard of living
- Comparatively lower set-up and maintenance costs
- Highly developed and efficient accounting, legal and banking sectors
- Strict confidentiality with the local authorities and the banks
- Excellent transport and telecommunication facilities
- Exemption from foreign exchange control
- Possibility for acquisition of immovable property
The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.
