Cyprus is a well known jurisdiction in Europe for doing business as it offers many benefits to Companies and Individuals, as outlined here.
One of the major benefits though is our tax system, which offers you a gateway to Europe and one of the most beneficial tax regimes in EU, both for Companies and for individuals. Below you can see a quick analysis from a Companies and Individuals perspective, on the benefits of the Cyprus Tax System. You can contact us any time you wish and we would be happy to provide more information, based on your specific needs. Cyprus Tax Benefits are as follows:
Cyprus Tax benefits for Companies:
How Tax residency is determined: Cyprus tax legislation uses the criterion of management and control to determine whether a company is or is not a tax resident. A company is considered as a tax resident of Cyprus if its management and control is exercised in Cyprus. The minimum test for this is on whether the Company’s Board of Directors are Cyprus residents and the decisions of the company are taken in Cyprus, then the company is considered to be a tax resident. The more you add on the Company (premises, employees etc), it strengthens the tax residency status of the Cyprus Company.
Cyprus is well known for its Holding Companies, as in most instances dividend income is tax exempt and there is no with-holding tax on dividends paid either (both under certain conditions). Corporate income tax rate is currently set at 12.5%.
There are also significant tax benefits for Companies with Intellectual Property (IP). Through the IP Box Regime a Cyprus registered entity can enjoy an effective tax rate as low as 2.5% (normally 12.5%), as qualified income/expenditure can be utilized against taxable profits and reduce the taxable income of the entity through a special formula. If you have an IP which may be a patent, computer software, utility models or any other IP Assets contact us for more information on this regime.
Cyprus is also a party to more than 60 double tax treaties that provide for nil or reduced withholding tax rates on dividends, interest, royalties and pensions received from abroad. Any lump sum received as a retirement gratuity is exempt from tax.
There is also another significant tax benefit in Cyprus, which is that the disposal of securities (shares, bonds, options, derivatives etc) is exempt.
In general, there are significant tax benefits for a Company in Cyprus, which we will analyze over a course of articles. But as a general note, Cyprus does offer excellent environment to either set-up headquarters here or for a holding Company.
Contact us for more information.
Cyprus Tax benefits for Individuals:
There are also great news for individuals who choose Cyprus to live and work. Provided that you are a tax resident in Cyprus, you may be able to enjoy some of the below tax benefits:
Taxable income up to €19,500 is effectively exempt from income tax. Taxable income exceeding this amount is subject to progressive income tax rates ranging from 20% to 35% (the highest rate applies to income exceeding €60,000).
Foreign Nationals who earn at least €55,000 per annum from employment in Cyprus, for a period of 17 years initiating from the first year of their employment contract, are eligible to a 50% tax exemption on their income (law pending approval as of the date of writing). For individuals not eligible to the above, 20% of the remuneration or €8,550 (whichever is the lower) from any employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of his/her employment in Cyprus is exempted from tax.
Disposal of securities (stocks, bonds, etc) are also tax exempt. Also, no Capital Gains Tax on the sale of immovable property located outside Cyprus.
In addition, lump sum from life insurance and other pension schemes, inheritance, tax wealth tax are tax exempt and there is no gift taxation.
One other very important aspect of personal income taxes in Cyprus is the concept of Special Defence Contribution (SDC), from which you can obtain a 17 years exemption if you are a non-domiciled person. For example, SDC applies to worldwide investment income of individuals who are resident and domiciled in Cyprus, at the following rates.
- Interest – 30% (reduced to 3% if your income is less than €12,000)
- Dividends 17%
- Rental income – 3% (on 75% of gross income)
Non-Cyprus domiciles are exempt from SDC, which practically means that if you are a non-dom you will not be paying any tax on dividend & interest income (except General Healthcare contributions if you reside in Cyprus). Generally, you will be considered Cyprus-domiciled if you were born here or you have been resident for 17 out of the last 20 years. Therefore if you do not fulfil any of the above most probably you will escape SDC for your first 17 years of residence. We usually perform a special test to ensure our clients are non-doms. More information on the tax residency for individuals and the services we offer can be found here.
*Please note that the above are applicable at the date of writing of this article and it is not an exhaustive list of Cyprus Tax matters, is shown for information purposes and shall not be taken as tax advise.
