Under the current tax legislation, Cyprus has one of the lowest tax regimes in Europe and its role as an international financial centre is greatly enhanced.
The principal tax and other fiscal incentives may be outlined as follows (see also Cyprus Tax Overview):
- A Cyprus company will pay a tax of 12.5% on its net profits if it is a Cyprus resident. A company is resident if its management and control is in Cyprus. Management and control is usually determined by the place of residence of the majority of the directors and the place where board meetings take place. Full advantage of the Cyprus double-tax treaty network can be obtained by resident companies.
- A tax resident company can obtain a European VAT number which is essential for intra-European trading.
- An company will pay zero tax if it is not considered to be resident in Cyprus. This will be the case when its management and control is outside Cyprus.
- A non-resident company will not be able to obtain a Cyprus Tax residence certificate and therefore cannot utilise the double-tax treaty network.
- There is no withholding tax on payment of dividends, interest and royalties by a Cyprus company to non-resident individuals or companies.
- Dividend income received in Cyprus by a Cyprus registered company is wholly exempt from tax in Cyprus.
- Profits earned from a permanent establishment abroad are fully exempt from corporation tax.
- Profits from the disposal of shares are not taxable for all Cyprus tax residents.
- 100% of interest received is exempted unless the interest arises in the ordinary course of business (e.g. interest on overdue debtor balances).
- Tax losses,can be carried forward and be set-off against future profits for a period of 5 years.
- Group relief is available whereby losses from a company can be set off against taxable profits of other companies in the same group.
- Reorganisations, amalgamations, mergers and acquisitions of companies can be effected without any tax implications.
- Exemption from capital gains tax (except on sale of immoveable property situated in Cyprus).
- No exchange control restrictions – a Cyprus company can open a bank account in any currency in Cyprus and abroad.
- Cyprus has 35 Double Tax Treaty agreements which apply to 45 countries and which can be exploited to minimise tax.
- Confidentiality and anonymity of beneficial owners is safeguarded (true identity is only disclosed to local banks, if a local account is opened) and information is not disclosed to any third party or to other countries, except in the case of properly authorized criminal investigation (drugs, terrorism, e.t.c.).