Cyprus

Access to and application of the benefits of all EU Directives, e.g. Parent-Subsidiary Directive.

Profits from overseas permanent establishments are exempt from corporation tax. Non-resident entities are only taxed on income sourced in Cyprus.

Company re-organisation rules are based on the EU Mergers Directive.

Dividends received by Cypriot tax resident companies are exempt from Cyprus tax (subject to minor exceptions). The extensive network of Double Tax Treaties (“DTTs”) allows beneficial treatment in respect of withholding taxes in the source country.

Dividends paid by a Cyprus tax resident company to its non-Cyprus resident shareholder/s are not subject to any withholding tax in Cyprus. Thus the non-Cyprus resident shareholder of a Cyprus tax resident company receives the dividends free of any WHT.

The disposal or transfer of titles is exempt from all taxes. Titles are described as shares, bonds, debentures and similar titles as well as rights thereon (options, futures etc). Cyprus is, therefore, the jurisdiction of choice in respect to M&A transactions.

0% Capital Gains Tax is paid in Cyprus on the transfer of immovable property owned by a Cyprus tax resident company outside Cyprus. Equally, there is no Capital Gains tax on the sale of securities.

0% Estate Duty is payable on the inheritance/transmission of shares in case of the death of a shareholder.

0% Inheritance Tax | Succession Tax | Net Wealth Tax | Property Tax | Luxury Tax.

0% Tax on Reduction of Capital & Reduction of Share Premium Account.

There are no WHTs on interest payments made by a Cyprus tax resident company. There is also no WHT on royalties arising from sources outside Cyprus.

Unilateral tax credits are granted on any tax paid abroad to any foreign country, irrespective of whether Cyprus has a DTT or not. In such a case the income is not taxed twice but only once.

Cyprus has an impressive and continually growing network of DTTs, a Cyprus company can benefit from the EU Directives to eliminate WHTs when collecting income from the EU. Unilateral tax credit on foreign taxes withheld at source is also available.

Anonymity is imperative to many investors, who do not wish to have their names appear on public record at the Registrar of Companies. In such instances it is possible to create a fiduciary relationship through the Firm, which will hold the shares on trust for the beneficial owner.

Setting off the loss of one company with the profit of another is allowed provided both companies of the group are tax resident in Cyprus.

There are no provisions in the Law requiring companies to maintain a particular debt to equity ratio. Consequently, a Cyprus holding company may be capitalised with loans without any risk that interest paid at arms’ length to the parent company will not be deductible.

Holding activities fall outside the scope of VAT in Cyprus and a Cyprus holding company engaged exclusively in holding activities is not obliged to register for VAT purposes.

A Cypriot holding company held by non-resident shareholders can cease operations in Cyprus and distribute assets to its shareholders in any form (dividends etc.) without any tax cost to the shareholders.

2.5% Corporation Tax under the “IP Box” regime where effectively a Cyprus company receives a deduction of up to 80% of the income received from qualifying assets.

In line with certainty created by Cyprus’ progressive and simple tax and legislative framework the tax authorities are investor friendly thereby allowing advance tax rulings.

This measure, which is fully aligned with EU Directives, supports the promotion of economic development by encouraging the introduction of new equity capital as an alternative to excessive debt financing thereby encouraging the creation of business substance by offering attractive advantages to individuals.

Tax Neutrality on foreign exchange differences unless they arise from trading in currencies or currency derivatives.

Tax Exemption on gains from trading in securities.