Cyprus Tax Guide for Investors Invest in Cyprus Invest in Us
CONTENTS
Cyprus: An international business 2 & investment center
Tax highlights 4
Other related useful information 10 CYPRUS: AN INTERNATIONAL BUSINESS & INVESTMENT CENTER
Cyprus has a number of comparative • Steady/pleasant business environment advantages that have contributed towards accompanied with simple administrative the country becoming an important procedures international business and investment • Low setup and operating costs center: • Advanced transport and telecommunications network • EU and European Monetary Union • Renowned international shipping centre member state • Enviable quality of life • Business-friendly Tax and Legal System • Stable political environment • Strategic location • Well developed socio-economic Having considered the numerous challenges infrastructure arising from increased competition, • Broad range of international financial globalization and the recent global and business services - legal, tax, financial crisis, the Government of Cyprus accounting, investment and brokerage is promoting numerous measures and • Advanced banking and financial services initiatives to further establish the country’s sector to suit all financial needs appeal as an investment destination. A • An emerging and attractive domicile for number of measures related to “Better the registration and management of Regulation” are being implemented to Investment Funds facilitate the elimination of unnecessary • An active Stock Exchange and robust red tape. Efforts are also being made to Securities and Exchange Commission remove regulatory barriers for enterprises’ • Market-oriented economy establishment. • Highly educated, qualified and multilingual talent
2 3 1. One of the lowest corporate tax rates Capital Gains Tax is only imposed on the in the EU sale of immovable property situated in All trading profits of a Cyprus company are Cyprus as well as on the sale of shares in taxed at the flat rate of 12.5%, following companies (other than quoted shares) in the deduction of related expenses entirely which the underlying asset is immovable incurred in the production of income. property situated in Cyprus. Capital gains tax is imposed at a flat rate of 20% after 2. A generous participation exemption allowing for indexation. regime 4. No dividend, interest or royalty Foreign dividends received by a Cyprus withholding tax on outgoing payments company are not subject to income tax and may also be exempt from Special Cyprus does not impose withholding taxes Defence Contribution, should the following on payments to non-tax resident persons conditions are met: (companies or individuals) in respect of dividends, interest and royalties used A. The paying company must not directly outside Cyprus, irrespective of whether the or indirectly engage more than 50% into recipient of the payments resides in a treaty activities which lead to passive income country or not. (non-trading income) or; This provides excellent profit repatriation B. The foreign tax burden on the opportunities combined with tailor made TAX HIGHLIGHTS income of the company paying the financing structures. These are implemented dividend is not substantially lower than through the use of Cyprus companies and the tax burden in Cyprus (a tax rate of the novel IP regime which allow Cyprus to pose as an ideal holding jurisdiction, The Cyprus tax, legal and regulatory Cyprus Tax Highlights 5% or more in the country paying the system provides excellent (operational) dividend satisfies this condition). minimizing withholding tax exposure for • One of the lowest corporate tax opportunities for international businesses. international businesses and multinational rates in the EU at 12.5% Cyprus’ (inclusion of a) 12.5% corporate C. No holding threshold is required and groups. • A generous participation exemption tax rate and tax exempt status of gains, the Cyprus participation exemption regime produced from the sale of overseas securities regime can be described as one of the 5. Trading in Securities • Foreign capital gains exemption and dividends, underpins its advantageous most generous amongst the available A unique feature of the Cyprus tax system • No dividend, interest or royalty position in the EU. When these benefits are ones. This is witnessed by the fact that relates to the taxation of gains or profits withholding tax on outgoing coupled with affordable costs for high-level virtually all cases are exempt from any arising from the trading of a wide range of payments professional services, Cyprus stands out taxation in Cyprus, as the criteria listed securities. • Gains from trading in a wide range of as an attractive investment destination for above are easy to satisfy. securities are tax exempt investors across the world. Any income arising from trading in securities • A competitive and new IP Regime 3. Foreign capital gains are exempt is completely exempt from corporate • Foreign PE profits are tax exempt Cyprus continues to emerge as a reputable tax. The term ‘Securities’ includes but is • Access to an extensive network As Cyprus tax legislation applies clear and accredited onshore primary location not limited to: ordinary and preference of Double Tax Treaties and EU Tax separation between income and capital, for the business activities of multinational shares, founders shares, options on titles, Directives capital gains are not included in the ordinary companies. debentures, bonds, short positions on • Individual tax regime attractive to trading profits of a business but instead are titles, futures/forwards on titles, swaps on international professionals taxed separately under the Capital Gains titles, depositary receipts on titles, rights • Tailor made provisions for the Tax Law (CGT). investment fund industry
4 5 of claims on bonds and debentures, index Taken in conjunction with the availability as construction and trading) to organize the world, the countries include the United participations (only if they represent titles), of an extensive network of double tax their operations under Cyprus companies States, India, Canada and numerous European repurchase agreements or Repos on titles, treaties, international businesses are able to by optimizing their commercial and tax countries such as Germany, Denmark, Sweden participations in companies, units in open- arrange their IP operations in the most tax strategies. and the UK. Evidence demonstrates that most end or closed-end collective investment efficient manner. investment into Central and Eastern Europe schemes such as Mutual Funds, International 8. Access to an extensive network of (including Russia and Ukraine) is routed Collective Investment Schemes (ICIS) and 7. Foreign PE profits are tax exempt Double Tax Treaties and EU Tax Directives through Cyprus in line with the advantageous Undertakings for Collective Investments in Subject to the criteria listed below, any Over the years, Cyprus has developed an tax treaty network and local tax provisions. Transferable Securities (UCITS). foreign PE profit of a Cyprus company is extensive network of Double Tax Treaties Cyprus has signed more than 50 double exempt from corporate tax in Cyprus: which facilitate international investment to taxation agreements to facilitate international 6. A competitive new IP Regime and from Cyprus. Cyprus has managed to business. Negotiations are currently taking Added to the above, the beneficial A. The PE must not directly or indirectly maintain and complete a number of treaties place for over 30 additional agreements, due provisions of the new IP regime provide engage more than 50% into activities with exemplary beneficial provisions that for completion soon. an 80% notional deduction on IP related which lead to passive income provide an invaluable tool for international income and capital gains from the disposal or businesses in combination with favourable - Full Access to EU Tax Directives of IP rights and competitive amortization B. The foreign tax burden imposed aspects of the Cyprus tax system. provisions. on the PE must not be substantially Cyprus tax laws have been amended to lower than in Cyprus. incorporate all EU directives. These include The new regime provides very attractive In the last three decades, multinational the Interest and Royalty directive, the directive opportunities for structuring the This allows international businesses companies have used Cyprus extensively on mergers and the directive on Savings and exploitation of IP rights through Cyprus. operating in a broad scope of sectors (such for international tax planning. Spanning Interest payments.
6 7 CYPRUS DOUBLE TAX TREATY NETWORK to their commencement of employment and management of mutual funds” that in the country. This deduction applies would benefit from this VAT exemption. Armenia Mauritius when income exceeds €100,000 p.a. and To this end, “fund management services” Austria Montenegro is allowed for a period of five (5) years, that are offered to mutual funds include commencing from the date of employment. the following main categories of services: Belarus Moldova investment management, administration, Belgium Norway The tax benefits available under the Cyprus and promotion/marketing. Bulgaria Poland income tax law for expatriates include a Canada Portugal tax exemption of €8,550 or (20%), or the Cyprus tax laws have accommodated the lower of the two, of the gross emoluments tax needs of investment funds (both UCITS China Qatar of an individual who was not a tax resident and alternatives) by offering a wide range Czech Republic Romania of Cyprus prior to the commencement of of incentives for their set up and operation: Denmark Russia employment in Cyprus. This exemption Egypt San Marino applies for a period of three years, • Exemption from tax on any income commencing on the tax year following the arising from trading in securities Estonia Serbia year of taking up employment in Cyprus and participations in companies more Finland Seychelles (starting the tax year after the first year of specifically ended or closed-ended France Singapore employment in Cyprus). collective investment schemes, Germany Slovak Republic such as Mutual Funds, International 10. Tailor made provisions for the fund Collective Investment Schemes (ICIS)/ Greece Slovenia industry Alternative Investment Funds (AIFs) and Guernsey* South Africa As above, the combination of corporate Undertakings for Collective Investments Hungary Spain* and individual tax beneficial provisions in Transferable Securities (UCITS); India Sweden finds clear application in the funds industry. • Interest received by regulated investment funds will be considered Ireland Switzerland* Cyprus is developing into a selected ‘active’ interest income and taxed at Italy Syria destination for fund managers and fund management companies. Individual fund only 12.5% corporate income tax; Kuwait Tajikistan managers enjoy the low income tax rates • No minimum participation threshold Kyrgysztan Thailand and the readily available concessions, while for exemption on inbound dividends; • Liquidation of investment funds are Lebanon Ukraine fund management companies enjoy the low not taxable if the unit holders are not Lithuania* U.A.E corporate income tax rates, exemptions and the absence of any withholding tax Cyprus tax residents. Malta United Kingdom on dividends and interest to non-resident Iceland United States shareholders. Furthermore, they enjoy * Not yet in force significantly lower operating costs without compromising the quality of service delivery. 9. An attractive individual tax regime for A 35% cap is applied to personal income international professionals over EUR 60.000. It should be noted that the revenues of Cyprus has developed an attractive fund management companies in Cyprus are From January 1st, 2012, changes were individual tax regime with low income generally exempt from VAT. The Cyprus made to allow 50% of gross emoluments tax rates and appropriate concessions for VAT Legislation provides specific guidance to be deducted from taxable income for international and mobile professionals. with respect to the meaning of “funds individuals not resident to Cyprus prior
8 9 OTHER RELATED USEFULL INFORMATION
Steps for business registration in Cyprus: of Cyprus as soon as possible. Law requires The first step is to send an application to such registration to occur within 30 days of the Registrar of Companies for approval of a business’s inclusion. This can take place the company name. The business’s relevant through the submission of relevant forms documents are then sent to the Registrar to the Income Tax District Offices. The of Companies. Business registration company will subsequently receive the documents such as articles of association relevant Cyprus Tax Identification Number can be submitted following verification from (T.I.N). a member of the Cyprus Bar Association i.e. a registered Lawyer/Advocate. Items such VAT registration as articles of association may be submitted With regards to VAT, anyone that is: in any European language alongside with supplying goods, providing services; a sworn statement confirming that it is an involved in intra-community acquisitions or accurate translation of the Greek original. distance selling in Cyprus must enrol for the Following these steps, the company can be VAT Register by submitting the relevant fully registered (in Cyprus). application to the appropriate VAT District Office for the business. Other registrations required by Law for any business operating in Cyprus: Business Insurance Social insurance registration Every company that employs personnel Any company employing one or more in Cyprus is compelled by Cyprus Law persons must be registered under the to maintain Employer’s Liability Insurance. Cyprus National Insurance Scheme. Depending on the activities of the business, Applications for Social Insurance special purposes insurances may also registration must be submitted to National be required to cohere to Cypriot Law. Insurance District Offices or Citizen Service These insurances may include: Professional Centres in the district in which the business Negligence Insurance, Contractors All Risk is established within one month of a new Insurance, Public Liability Insurance, Medical employee’s recruitment. Payments to the Insurance, Marine Insurance (for ship- Social Insurance System are carried out at owning companies) etc. the end of the month following proof of labour.
Tax registration CONTACT US TODAY Any company or person operating in Cyprus must register with the Taxpayers Register of the Inland Revenue Department
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