1. Introduction

The government of Cyprus began offering incentives in 1975, aiming to encourage the establishment of legal entities by foreigners in order to manage their overseas affairs or to render services abroad from the island. Since then, Cyprus has experienced a staggering increase for the demand of those entities, most commonly known as international business companies.

Unlike many offshore jurisdictions Cyprus is not a 'tax haven' and does not offer 'brass plate' companies. Instead, Cyprus offers great tax incentives due to its favourable tax regime and its wide network of double tax treaties. These tax incentives together with so many other incentives offered render Cyprus the ultimate international business centre.

Cyprus is probably the only country in the world that is considered a tax incentive country and at the same time offers important international tax planning opportunities and advantages through its wide double tax treaty network.

Given the tax incentives available in Cyprus, it makes sense in any international tax planning to direct profits out of high tax countries to a low tax jurisdiction and international business centre, thus taking advantages of the low tax rates and double tax treaties, where available. The favourable Cypriot tax regime and the extensive network of double-taxation treaties which Cyprus has concluded have created an ideal base for non-European Union companies seeking to exploit the EU market, as well as for EU companies seeking to expand their global horizons especially with regard to the CIS.

2. Why Incorporate in Cyprus?

Companies established in Cyprus and their foreign employees enjoy many privileges.  A summary of these is given below and details of the facilities and concessions extended to international companies and their expatriate employees are given towards the end of this section.

3. Benefits of Incorporating in Cyprus
 

• no withholding of tax on dividends;
• net profits of international business companies are subject to tax at the rate of 10 per cent only ;
• full tax exemption on profits of international business partnerships;
• full tax exemption on profits of international business branches if their management and control is outside Cyprus;
• net profits of international business branches are subject to tax at the rate of only 10 per cent if their management and control is in Cyprus;
• all expenses incurred for the earning of income, as well as annual allowances on fixed assets, are allowed as a tax deduction;
• full estate duty exemption on inheritance of shares in an international business company ;
• full capital gains tax exemption on capital gains, except on sale of immovable property situated in Cyprus;
• full exemption from local social insurance schemes in respect of foreign employees of international business entities;
  full stamp duty exemption on contracts entered into by international business entities;
• foreign employees of international business entities providing their service in Cyprus, are liable to Cyprus income tax at a rate equal to half the normal Cyprus rates.  Normal rates range from nil to 40 per cent and, therefore, the maximum tax rate of such employees is 20 per cent;
• foreign employees of international business companies living and working outside Cyprus are exempt from income tax if they are paid through a bank operating in Cyprus.  If such employees are paid directly abroad they are taxed at a rate equal to one-tenth of the standard rates and, therefore, their maximum tax rate is 4 per cent;
• full import duty exemption for the importation or purchase of cars, office and household equipment (except furniture and air-conditioning equipment) for the use of the of the international business entity and its foreign employees if the international business entity maintains a fully fledged office in Cyprus;
• residence and work permits for the foreign employees and residence permits for their families can be readily obtained if they maintain an office in Cyprus;
• freely transferable currency accounts (in any currency) can be kept both in Cyprus and abroad;
• no exchange control restrictions.

4. Further Advantages of Utilising a Cyprus Company 

The last two decades have witnessed the gradual transformation of Cyprus into a reputable international business and financial centre. Cyprus’ attractiveness as a business and investment location is based on the following advantages:

• Strategic geographical location at the crossroads of three continents;

• Stable business environment, based on the free market philosophy with emphasis on promoting private initiative;

• Macroeconomic stability, reflected in stable prices and currency;

• Favourable tax regime;

• Wide network of agreements for avoidance of double taxation;

• High educational level of manpower;

• Highly skilled and flexible labour force, conversant with the use of new technology;

• Competitive level of wages and other costs;

• Compliance with the European Union Code of Conduct for Business Taxation and with the commitment to OECD for the elimination of harmful tax practices;

• Simple administrative procedures;

• Well developed commercial infrastructure;

• Easy access to international markets;

5. To proceed with the incorporation of a Cyprus company download/print an application form.

We also keep a number of shelf companies and pre-approved company names. All of them are general trading, import - export companies. Please contact us for a list.

6. Further Information

Further information/e-leaflet's concerning Cyprus Companies is available in the Publications section. Including: 

• Cyprus Limited Liability Company Fact Sheet

• Cyprus International Business Companies

• Cyprus Holding Companies

• Using a Cypriot Company to Structure Acquisitions in Europe and Asia

• Cyprus in International Tax Planning

• Cyprus Double Tax Treaties

• Company Redomiciliation

If you have a query or wish to receive further information, please contact our Company Law  Department using company@cyadvocates.com.