Cyprus is located in the north-eastern corner of the Mediterranean, at the crossroad of three continents, Europe, Asia and Africa.
Cyprus is a member of the European Union [EU] since 2004 and the European Monetary Union since 2008. The country has thus access to the vast EU market where there is free movement of goods, services, capital and citizens.
The country has a free-market, service oriented economy backed by an effective and transparent legal and regulatory framework based on the English Common Law principles. This familiar and reliable framework offers international businesses the much-needed comfort of an ideal system to operate and invest in.
The country’s culture of commitment to a high quality of service over the years has led to the development of a highly educated and skilled, multilingual workforce able to serve the needs of the most demanding businesses.
Moreover, the country provides residents an advanced and modern infrastructure, a suitable telecommunications network, a sophisticated road system, bustling port facilities and two international airports making Cyprus an ideal place for the highly demanding businesses choosing Cyprus as their primary location for their operations.
As regards the quality of life, Cyprus residents enjoy an enviable lifestyle in a safe, clean and healthy environment. The country’s low crime levels, year-round sunshine, centuries of art and culture, and delicious gastronomy all contribute to the high standard of living enjoyed on the island.
It is not an overstatement to say that the country has developed into a destination of choice for conducting business by international investors and multinational corporations operating in a diverse range of industries.
In addition to all the above, Cyprus has a very attractive tax regime. The tax regime is not only fully compliant with the EU, OEDC and international laws and regulations but is also widely recognized for its large network of double tax treaties with a total of over 50 countries. Some of the main characteristics of the Cyprus tax system are:
- Corporation tax rate at 12.5% – Trading companies residing in Cyprus are taxed at 12,5% on profits. Exemptions include holding companies and companies trading in shares or other titles (bonds, debentures etc.).
- 0% tax on the trading of titles – Cyprus companies engaged in the trading of shares or other securities as specified in the law are not taxed on the resulting profits from this trading. No capital gains tax is payable either.
- 0% tax on dividends received and paid – Dividends received from foreign companies by a Cyprus resident company are not subject to tax (subject to certain conditions). In addition, dividends paid by Cyprus holding companies to their non-resident or non-domicile shareholders are not subject to withholding tax in Cyprus.
- Tax Credit for Foreign Tax Paid – When foreign tax is paid on income that is subject to Cyprus income tax, a tax credit is granted against the Cyprus tax payable on that income irrespective of the existence of a tax treaty, thereby ensuring that income is only taxed once.
- Personal Income Tax exemptions for new residents:
- Salary income from employment exercised in the Republic by a person who was resident outside Cyprus before the commencement of the employment is subject to an exemption equal to the lower of 20% of the salary income or €8.550. The exemption applies for a period of 5 years starting from the tax year following the year of employment.
- Salary income from employment exercised in the Republic by an individual who was resident outside Cyprus before the commencement of the employment is subject to an exemption equal to 50% of the remuneration provided that the annual remuneration exceeds €100.000. The exemption applies for 10 years, although in cases of employment starting during 2015 and onwards, when an employee was Cyprus tax resident in the previous year or for at least 3 out of the last 5 years prior to commencement of employment, the exemption does not apply.
- Notional Interest Deduction (NID) on new equity – Cyprus tax resident companies and Cyprus permanent establishments of non-tax resident companies have the right to claim a notional interest deduction (NID) on new equity employed in the production of taxable income. The NID is equal to the new equity multiplied by the relevant reference rate and it is subject to a cap equal to 80% of the taxable profit, arising from the new equity.
- Attractive Intellectual Property (IP) Regime
- No Inheritance Tax