Cyprus: Europe’s Optimal Tax Regime. The synergy created by Cyprus’ modern, simple and attractive tax regime coupled with its advanced and adaptable English Common Law legal system have created the EU’s most efficient and effective tax regime in tax planning and asset protection. Why:
0% Tax on Dividends received – 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 (“WHTs”) in the source country.
0% Withholding tax on Dividend payments – 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.
0% Tax on trading/sale of titles or shares – 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 abroad (outside Cyprus).
0% Estate Duty is payable on the inheritance of shares in case of the death of a shareholder.
0% Inheritance Tax
0% Net Wealth Tax
0% Property Tax
0% Tax on Reduction of Capital & Reduction of Share Premium Account
0% Withholding Taxes on Interest and Royalties – 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.
Lowest uniform corporate tax rate in the EU – 12.5%
International Cyprus Trusts (CIT) may be established to hold the shares of Cyprus companies or simply used as an effective means of asset protection – CITs do not pay any taxation on their profits. Amendments to Cyprus’ Trust Law have restored the CIT as one of the most effective instruments available today.
Unilateral Tax Credit Relief – 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.
Double Tax Treaties – 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 of the beneficial owner – 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 appoint a shareholder provided by LSTS, who will hold the shares on trust for the beneficial owner.
Losses can be carried forward and set off against future profits for the next five years.
Group relief – 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.
No Thin Capitalisation Rules – 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.
0% VAT for Holding Companies – holding activities fall outside the scope of the VAT in Cyprus and the Cyprus holding company engaged exclusively in holding activities is not entitled or obliged to register for VAT purposes.
0% Tax on Liquidation – 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.
Non-Domicile Cyprus Tax Resident – Foreign nationals relocating to Cyprus (minimum 183 days) will obtain the status of a Non Domiciled individual, with significant tax benefits:
- 0% Tax on dividends received by the individual in Cyprus
- 0% Tax on interest in fixed deposits in Cyprus
- Individual will only be taxed in Cyprus on their worldwide income
- Reduced tax on rental income
HOW LSTS CAN ASSIST YOU
LSTS may assist in:
- Assessment of your current business to determine income flows, intentions and ultimately to optimise tax gains and eliminate tax leaks.
- The establishment of a suitable Cypriot structure for minimising tax losses/leaks.
- Tax / Legal / Audit / Compliance / Fiduciary / Trust / Banking Services
- Assistance in availing you of the numerous tax advantages of Cypriot tax legislation.
- Keep you updated on all developments in Cypriot legislation.