Legal entity

A favourable tax framework was introduced for companies registered in Cyprus, especially those with foreign interest (non-resident shareholders):

  • Corporation tax rate currently at only 12.5% on the taxable income of the business; being one of the lowest corporate tax rates in Europe.
  • Wide network of Double Tax Treaties
  • No withholding tax on dividends distribution regarding ‘non-resident’ shareholders.
  • No tax imposed on dividend income.
  • No tax imposed on profits from the disposal of securities. Securities means shares, debentures, government bonds, founder’s shares or other shares of companies or legal entities, which have been incorporated in the Republic of Cyprus or abroad.
  • Exemption from tax on interest income (other than interest income deriving in the ordinary course of business).
  • Exemption from tax on business profits from non-resident companies
  • Exemption from tax on gains from the disposal of subsidiaries
  • Exemption from tax on group reorganizations
  • Group losses relief available
  • Full harmonization with certain EU Directives:
    • Parent-Subsidiary Directive
    • Mergers Directive
    • Directive on Mutual Assistance and Cooperation
    • Royalty and Interest Directive

In the context of all the above and in combination with other tax incentives elsewhere in other jurisdictions the use of a Cyprus legal entity in International tax planning has the capacity  to mitigate or eliminate completely the overall tax liability which may  arise from an international activity by:

  • Reducing or eliminating the withholding tax on ‘foreign’ earned income transferred out of the relevant country
  • Reducing or deferring the tax burden to the ultimate shareholder of the tax planning structure
  • Reducing the overall tax burden of an international activity, increasing in this way the overall return on the investment of the project.
  • Reducing in general the tax burden in the relevant country in which the income is generated

 

Non-Resident individual

‘Non-resident’ individuals are taxed on the income which is received or derived from sources in the Republic of Cyprus only, and yet again with the following important exemptions:

  • No tax imposed on dividend income.
  • No tax imposed on profits from the disposal of securities.
  • No tax on the whole of interest income (other than interest income deriving in the ordinary course of business).

An individual may be considered as ‘Resident in Cyprus’ only if he is present in the Republic for period which exceeds 183 days in total in a tax year.