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Cyprus has become a favored location for international commerce as well as for reputable multinationals seeking a legitimate tax efficient jurisdiction – raising Cyprus to a new level of international business. Cyprus boasts an extensive network of tax treaties, currently with more than 45 countries, including countries in North America, Western and Eastern Europe as well as China, India and Russia.
Cyprus has all the tax attributes expected from an international financial centre.
Cyprus has a corporate income tax rate of 10% which is the lowest corporate tax rate in European Union.
The Cyprus tax legislation and its regulation is predictable and straight forward.
The top Cypriot VAT rate is 18%, the second lowest in the European Union.
Depending on its activity, a company registered in Cyprus is able to register for VAT in Cyprus and recover any VAT suffered.
Cyprus does not have any net worth taxes or annual capital taxes and there are no stamp duties or significant capitals.
Cypriot companies are permitted to deregister from the Cypriot Register and become domiciled in another jurisdiction and on the other hand, Non-Cypriot Companies which are allowed by their own jurisdiction of their incorporation to deregister in that jurisdiction and register elsewhere are also able to become domiciled in Cyprus.
If you are a non-resident and want to reside in Cyprus and be employed, you will be given a 20% tax-agree allowance on employment income for the three years after the year you have become resident in Cyprus.
If an Individual is physically present in Cyprus for less than 184 days in a calendar year, they will be taxable in Cyprus only on the income derived from sources within, and employment exercised in Cyprus.
Exemption from tax on dividend income
Dividend income is exempt from tax irrespective of its source provided that the company paying the dividend either engages directly or indirectly in more than 50% of the activities that give rise to non-investment income or the tax burden on the dividend paying company’s income which is now lower than 5%.
Dividends are not considered to be sourced from investment income if they are derived directly or indirectly from trading subsidiaries.
The Following are exempt from income Tax:
Repayment from life insurance provident funds or life insurance schemes
Repayment received as retiring gratuity
Widow’s pension granted under the Social Insurance Law approved under regulations
No withholding taxes:
Dividends which are paid to non-resident shareholders are exempt from withholding tax in Cyprus.
There is no withholding tax on interest paid from Cyprus as well as on royalties paid from Cyprus in respect of intellectual property exploited outside Cyprus. The nil withholding tax rate applies irrespectively of whether the recipient is a body corporate or an individual, the country of residence of the recipient, or whether a relevant tax treaty exists.
Capital Gains and Income tax Exemption for Securities:
Cyprus does not impose income or capital gains tax on the profits and gains derived from the disposal of securities, irrespective of whether the profits and gains are considered to be of a revenue or capital nature.
Securities as defined in the law, include, shares, bonds, debentures, founder’s shares and other securities of companies or other legal persons and options over such securities.
Capital Gains and income tax exemption for real estate:
Real Estate can be held by Cypriot companies or other assets outside Cyprus with no Cypriot capital gains tax implications on disposal of the assets, as capital gains tax only applies to gains on the disposal of immovable property which is situated in Cyprus, or any unlisted shares in a company which owns immovable property situated in Cyprus.
Permanent establishment abroad:
Any profits gained from a permanent establishment maintained abroad are generally exempt from tax in Cyprus.