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Cyprus Tax

Cyprus Resident Companies

A company incorporated in Cyprus is considered to be a tax resident of Cyprus if it is managed and controlled in Cyprus. A company to be managed and controlled in Cyprus is expected to have the majority of directors to reside in Cyprus and to hold Board Meetings in Cyprus. It is for this reason that many companies appoint Cypriot resident directors and shareholders, even though the operations take place in other countries, in order to enjoy the Cyprus tax advantages.

Double Taxation Treaties

Cyprus has concluded tax treaties with more than 40 countries worldwide. A Cyprus company, being an EU based entity, is entitled to the benefits of the EU Parent Subsidiary directive and the EU Interest and Royalty directive, under circumstances providing for withholding tax exemption for interest and royalty payments made by companies in other EU member states to a Cyprus company.

Holding Companies

Cyprus IBCs are very popular for holding shares in internationally operating subsidiaries and associate companies. The advantages of a Cyprus Holding IBC are the following:

Tax Advantages

The existence of double tax treaties combined with the low tax paid by offshore entities offer tremendous possibilities for international tax planning through Cyprus in view of the fact that:

  • Any tax paid in a country with which Cyprus has a treaty is deducted from the Cyprus tax payable on the same income.
  • Cyprus does not impose any withholding tax on dividends, interest and royalties paid by Cyprus offshore companies.
  • Offshore entities are exempt from VAT on their trading activities. Furthermore they do not pay VAT on telecommunication services and on goods eligible to be purchased duty free.
  • No withholding tax is payable on dividends, interest and royalty payments.
  • Full tax exemption of income derived by way of interest on foreign capital imported into Cyprus and deposited with banks operating in Cyprus.
  • Offshore entities are full exempt from local social insurance schemes in respect of their foreign employees.
  • Housing and office accommodation are easily available at reasonable prices.
  • The professional and management services offered in Cyprus are of a very high standard.
  • Foreign employees of offshore entities and their family members can secure work and residence permits.
  • Offshore companies and their expatriate employees are allowed to purchase immovable property in Cyprus for their own use or their residence.