Is It Time to Invest?
With 2012 seeing the start of an economic crisis in Cyprus, many have the predisposed opinion that Cyprus should not be first on their list when considering international business development. But with 2015 seeing the end to the crisis, we bring to surface whether Cyprus is ready to welcome new investment. This month, we speak with Angelo Aristodimou who discusses how Cyprus is a financial centre for business and the tax regulations involved, which makes it an appealing jurisdiction for international companies.
“Cyprus is a long established reputable international financial centre”
How is Cyprus a reputable financial centre for international businesses?
Cyprus is a long established reputable international financial centre, it has continued to expand in both size and expertise, and its proven fluctuating global economic trends has underlined the country’s strength and status as an important EU jurisdiction for top-quality services at low rates.
An EU member state since May 2004, Cyprus offers a unique experience to investors and trading partners, attracting international companies as a preferred headquartering location. It has one of the lowest corporate tax rates in Europe at 12.5%, which can be 0% depending on the type of business activity and with proper tax structuring.
Language barriers are not a problem in Cyprus since most professionals speak English and are educated internationally and have created a global outlook in the local industry to best serve their clients worldwide.
Existing international companies in Cyprus include international business structures such as holding and finance companies, trading companies, shipping companies, forex and investment firms, trusts and investment funds. The most dominant advantages and common reasons behind using Cyprus as a holding and finance company jurisdiction are due to the numerous tax benefits provided under Cypriot law, and the wide network of double tax treaties providing zero or low withholding tax rates on interest, dividends and royalties.
What are the intimal steps that need to be taken [by an international company] in order to set up a company in Cyprus?
The Client needs to outline what the business activities of the Cyprus International company will be and thus provide us with a company business name, a copy of his/her passport, and the rest will be done by our team of advisers. It’s really that simple. The time frame to set up a company in Cyprus is between 8-12 working days.
“The time frame to set up a company in Cyprus is between 8-12 working days.”
Tax: what makes Cyprus a competitive country in relation to tax costs?
Regarding tax incentives, the main advantages are:
1. Corporation tax on net profits is only 12.5%.
2. Dividend income is tax exempt.
3. Profits realised on disposal of securities/shares in subsidiaries, bonds, derivatives, stocks etc., are not subject to taxation in Cyprus. This applies to all gains including capital gains and gains from trading in securities.
4. A notional interest deduction (NID) is allowed on paid, newly introduced capital.
5. Being a European Union (EU) jurisdiction.
6. Cyprus has a wide network of double tax treaties providing zero or low withholding tax rates on interest, dividends and royalties.
7. There is no withholding tax on dividend, interest and royalties paid to non-resident individuals and corporations.
8. Interest paid to non-resident group companies is tax deductible.
9. Intellectual Property (IP) including copyrights, patented inventions and trademarks has an exemption of 80% of the overall profit derived from the qualifying intangible asset; the following rule applies for intellectual property assets developed after 30 June 2016.
10. There are no general transfer pricing rules but transactions between related parties should be at “arm’s length”.
11. Losses are offset against other sources of income, are carried forward for five years and can be set off against profits of another company of the same Group (Group of Cyprus tax-resident companies).
12. Capital gains are not taxable in Cyprus except for the 20 % tax on gains on immovable property that is located in Cyprus.
“Our company ensures top quality services with a quick response to its client’s requirements in order to build strong and long-lasting professional relationships.”
What are international connections currently like, which can help companies to trade outside of Cyprus?
The list of countries with which Cyprus maintains Double Tax Treaties currently stands at over 60, which is a significant number for such a small island like Cyprus.
The following countries are among those which have double-tax treaties with Cyprus, although not all are in effect at the time of writing:
Armenia, Austria, Bahrain, Barbados, Belarus, Belgium, Bulgaria, Canada, China (PRC), Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hungary, Iceland, India, Iran, Ireland, Italy, Jersey, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, Malta, Mauritius, Moldova, Montenegro, Norway, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tajikistan, Thailand, Ukraine, UAE, UK, USA, Uzbekistan.
About McMillan Woods Cyprus
Central offices are located in Nicosia Strovolos, Piraeus Street 36.