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Modelled extensively on English Common Law, the Cypriot legal system is highly regarded for its transparency, consistency, and robustness. With a growing international reputation as a business-hub, international investors are flocking to soak up the benefits the Cypriot legal and financial systems have to offer.
Since admission to the European Union (EU) in 2004, Cyprus’s legislation has been synchronised to meet all EU and OECD requirements and regulations, enhancing stability and transparency at the core of its legal framework. The ratification of fundamental international treaties and conventions has also reinforced Cyprus’s stability as a globalised player in commercial and financial sectors. The Cypriot Government have taken effective measures to balance the enhancement of a market-orientated economy to encourage growth and attract foreign investment, with providing economic stability for all.
An advantageous geographical location places Cyprus as a strategic portal for investment between the EU and other influential economies. Cyprus’s alluringly favourable taxation system also offers attractive incentives and advantages, meaning it is an ideal place to headquarter businesses. With low set-up and operating costs, such as banking, administration, auditing, and legal management services, coupled with highly-skilled and professional human resources, foreign investors are astonished with the advantages Cyprus can offer. A highly-developed infrastructure, exceptional communications, a transparent regulatory environment, and world-class banking services, mean Cyprus is certainly a desirable hotspot for commercial activities.
The alluring taxation environment of Cyprus is an ideal setting for vibrant commercial activity and investment. Let us set the scene. Firstly, dividend income is totally tax exempt in Cyprus, and all production expenses incurred are deducted prior to taxation. There is a high-income tax threshold and Cyprus offers the lowest corporation tax rate within the EU at only 12.5%. Cyprus also holds double taxation agreements with multiple countries.
Dividends exchanged between Cyprus resident companies are exempt from all forms of taxation, and furthermore, all profits from Cypriot companies situated within other countries, are also tax exempt. Interest income resulting from a company’s main enterprise (or closely connected) is subject to corporation tax also at the appealing rate of only 12.5%, the same as any other active trading income.
Non-exempt dividend income for Cypriot residents is subject to a tax contribution at the rate of 17%, but tax credits are available for any taxes paid abroad. If that wasn’t enough, mergers, acquisitions and any other corporate reorganisation can be executed in Cyprus without incurring taxation.
However, any dividend, interest or royalty payments made to non-residents of Cyprus, may be made without tax deduction.
And, as if you still weren’t convinced, Cypriot tax legislation permits a Cypriot resident holding company to operate whilst primarily financed by debt; meaning that foreign subsidiaries are capitalized through loans, rather than through equity capital.
For personal and family matters, there are also benefits. There is no inheritance tax paid on the transfer of assets in Cyprus, and there are great advantages for retiring in Cyprus if you have a UK source pension income.
All of the taxation benefits described above create an ideal environment for commercial activities in Cyprus, and are totally cocooned by the supportive benefits Cyprus offers within its robust and transparent legal framework. The protection of your assets or business and the space and promise for growth are key, and Cyprus offers both.
Cyprus offers a favourable exit strategy for companies, meaning the payment of dividend, interest and royalties do not incur withholding tax before departure. Successful subsidiaries can be held in Cyprus and sold without any liability for capital gains tax, with the EU Parent-Subsidiary Directive offering other numerous tax planning opportunities. Cyprus’s commitment to protecting and promoting transparency within its legal and financial framework will only nurture further double-tax agreements, within an already comprehensive network.
For investment in Cyprus, there are never-ending possibilities. The Cypriot economy primarily depends on the services sector, which contributes to a large proportion of the GDP of the country. The shipping sector is also growing due to the EU’s revised legislation providing an attractive tax environment with regards to shipping, and is opening up large investment opportunities in Cyprus. The energy sector has also brought Cyprus to the attention of the global energy market. With abundant natural energy reserves and exceptional infrastructural capabilities, investment in this industry is on the rise. The health tourism, educational and development sectors are also expanding, and providing great opportunity for investment in Cyprus.