Rafael L.C.V.G

Tax System a major plus

Corporate Tax

Cyprus offers a range of alternative tax advantages to foreign companies conducting business on the island. Such advantages derive from the country's favourable legislation as well as from the wide network of double taxation treaties. In brief, the main provisions of corporate taxation are:

• Uniform corporate tax rate of 10%
   
• No tax on dividends
   
• Favourable tax treatment of losses
   
• No tax on profits from permanent establishment outside Cyprus,
  subject to conditions
   
• Double taxation treaties with over 40 countries
   
• No tax on capital gains from disposal of securities listed on a
  recognised Stock Exchange
   
• No tax on profits from reorganisations
   
• Tax free repatriation of profits and capital

A detailed description of the prevailing tax system is provided in the document "Corporate Tax" provided below. Please note that the current publication intends to simply present the basic provisions of the Cyprus tax policy. A full description of the tax system is not the aim of this publication, nor could it be covered in such document. Accordingly, this publication should only be seen as a source of general information and cannot substitute professional advice.

for further info: Corporate Tax
www.mof.gov.cy/ird

Cyprus offers an advantageous tax system for international business. The uniform corporate tax rate of 10% is the lowest in the EU

Personal Income Tax

Individual tax resident of Cyprus is an individual who stays in the Republic for 183 days in the year of assessment. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. In contrast, non-tax residents are taxed on income earned only from Cyprus sources.

The following income tax provisions apply to individuals:

• Low income tax
• No tax on dividends and interest, subject to certain conditions
• No tax on profits of a permanent establishment abroad and
  on salary earned abroad, under certain conditions
• Profits gained from the sale of securities are exempt from tax
• Loss of current year and previous years are deducted from the
  taxable income, subject to certain conditions
• Income received in the form of retiring gratuity, compensation
  for death or injuries, provident fund, pension fund, or other
  approved funds, is exempt from tax

for further info: Personal Income Tax
www.mof.gov.cy/ird

"We are very happy to have selected Cyprus as a base and aspire to maintain, lead and expand our operations from the island." - Nest Investments Holdings Cyprus Ltd.

Special Tax Treatments

• International Trusts: Cyprus international trusts enjoy important tax advantages, providing significant tax planning possibilities:
  
  • Income and gains of a Cyprus international trust, derived from sources outside Cyprus are exempt from any tax imposed in Cyprus.
  • Dividends, interest or other income received by a trust from a Cyprus international business company are not subject to tax nor are they subject to withholding tax
  • No capital gains tax is charged on the disposal of assets of an international trust
  • Exemption from taxation in the case of an alien who creates an international trust in Cyprus and retires in the country, on condition that all the property settled and the income earned is abroad, even if the individual is a beneficiary
     
• Taxation of Shipping Companies⁷: Profits from the operation of Cypriot registered vessels or on dividends received from a ship-owning company, are subject to zero corporation tax. Ship and crew management businesses have the option of being taxed either at the rate of 4,25% on their profits or at a rate equal to 25% of tonnage tax rates of vessels under management. The tonnage tax is not levied in respect of ships under the Cypriot flag for which a tonnage tax has already been paid.

for further info: www.shipping.gov.cy

Cyprus is a tax incentive country offering substantial benefits to locally based enterprises. The most important advantages relate to the corporate and personal taxation

Value Added Tax

The standard rate of VAT is set to 15%; the lowest rate permitted in the EU. Reduced VAT rates of 8% and 5% also apply, as well as the zero-rate of VAT on specific goods and services. Visitors from non-EU countries can claim a refund of VAT paid on their purchases of goods in Cyprus upon their departure from the country, provided that the purchased goods are transported outside Cyprus (and the EU) in their personal luggage.

for further info: Value Added Tax
www.mof.gov.cy/ce

Holding Companies

A Cyprus holding company can be effectively utilised for international tax planning purposes, and at the same time enjoy the status of being located at a reputable business centre. In summary, a Cyprus holding company offers the following advantages in relation to the major tax considerations:

• No withholding tax on dividend income received from subsidiary companies abroad⁸
• Double tax treaties with over 40 countries, enabling lower withholding tax rates on dividend or other income received from subsidiaries abroad
• Being an EU member state, holding companies registered in Cyprus may also enjoy no withholding tax on dividends received from EU subsidiaries
• No withholding tax on capital gains and income on the disposal of neither the shares of the subsidiary's share capital nor the shares of the Cyprus holding company
• No tax on capital gains or income on the liquidation of the Cyprus holding company
• No withholding tax on distribution of profits, subject to conditions
• Outward dividends by the Cyprus holding company to its non-resident shareholders are exempt from any withholding taxes
• Profits earned from a permanent establishment abroad are fully exempt from Cypriot tax, subject to certain conditions
• A diversified group of Cyprus companies belonging to a Cyprus holding company can set off Group relief for the utilisation of tax losses
• No minimum holding period