Cyprus is the third largest island in the Mediterranean Sea with an area of 9.251 km² and a population of around 840.000 people. Due to its strategic location, Cyprus has become a very popular tourist destination and an ideal location for attracting international business. The Island has an advanced economy and a high human development index (HDI) with regards to living and quality of life as it uniquely offers an enviable combination of climate, business and culture.
Cyprus is known as a safe and pleasant place to live, with one of the lowest crime rates in Europe. Hospitality is one of the most eminent and deeply engrained values of the Island and visitors immediately feel welcome and at home.
Furthermore, Cyprus offers generous tax incentives to expatriates relocating to Cyprus.
- Cyprus is a European member state since 1 May 2004 and adopted the euro as its official currency on 1 January 2008;
- The native language is Greek however, English is the predominant business language. Russian, French and German are also commonly spoken;
- British nationals comprise the largest expat community whilst Russians (especially in the city of Limassol) and other Eastern European nationals also constitute big expatriate groups;
- Cyprus offers a range of reputable public and private schools, all providing excellent levels of education. The local Colleges and Universities are recognised internationally;
- The principal economic activities of Cyprus are Professional Services, Tourism, Shipping, Real Estate and Energy (currently an emerging market);
- The tax year in Cyprus is the calendar year, 1 January to 31 December;
- An individual is considered to be a tax resident in Cyprus if he/she is present in Cyprus for a period exceeding 183 days in a tax year (183 days rule);
- All citizens of the EU who wish to reside and work in Cyprus, need to apply for an EU Registration Certificate. This is a simple, one-off procedure which does not need renewal;
- Non-EU nationals wishing to reside and work in Cyprus need to apply for a Temporary Employment and Residence Permit at the Civil Registry and Migration Department. These permits are usually issued for a period of 1 year and upon expiry they are renewed;
- The personal income tax rate for individuals starts from a Nil rate (for taxable income of up to €19.500) and is progressively increasing at a top marginal tax rate of 35% (for taxable income in excess of €60.000); and
- The latest personal tax incentive is 50% exemption from Cyprus personal income tax on the remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment. The exemption is available for five years where the annual remuneration exceeds €100.000.
International companies are able to enjoy the same low tax rates as local businesses, making the country one of the leading business destinations in Europe and an international financial center.
The benefits of establishing a base in Cyprus are numerous and a lot of international companies are taking advantage of the many business and taxation benefits the country has to offer.
- Cyprus registered companies pay tax on their world-wide income at the highly competitive rate of 12,5% - one of the lowest rates in the EU;
- To date, Cyprus has signed over 55 double tax treaties with other countries;
- No withholding taxes on the payment of dividends/ interest/ royalties (except when intellectual property (IP) is used in Cyprus);
- No tax on dividend income under certain conditions that generally are easily fulfilled. Also, there are no minimum holding periods and/ or ownership percentages;
- No tax on foreign exchange (“FX”) gains – either realized or unrealised, unless arising from FX transactions of a trading nature;
- No tax on profits arising from a permanent establishment (“PE”), under easily met conditions;
- No capital gains tax arising from the disposal of overseas immovable property
- No tax on profits and gains derived from the disposal of titles (including shares, bonds etc.), irrespective of whether the profits and gains are considered to be of a revenue or capital nature;
- No capital gains tax, income tax or any other taxes arise on the liquidation of a Cypriot company owned by non-resident shareholders, irrespective of the method of liquidation;
- Companies may carry forward their tax losses incurred during a tax year for the next five years, to be offset against taxable income.
- Under the Group Relief Provisions of the Cyprus tax system, a Cyprus resident group company may surrender its current-year tax losses to another group company – certain conditions exist which are generally easy to meet;
- Notional interest deduction (“NID”) upon the introduction of new equity:
- No inheritance tax or gift tax; and
- No net wealth tax.
Cyprus companies are entitled to NID upon the introduction of new equity (e.g. paid-up share capital and share premium) under the condition that the new equity is issued by a Cyprus company and is used in the business.
The NID is calculated by multiplying the new qualifying equity amount by a reference interest rate. The reference interest rate is equal to the yield of the 10-year Government bond of the country in which the funds are invested (as of 31 December of the prior year) plus 3% (or the yield of the 10 year Cyprus Government bond plus 3%, if higher).
The NID is a tax-allowable deduction limited to 80% of the taxable profit derived from assets financed by the new equity. Depending on the level of capitalization of a company, the NID could reduce the effective tax rate of the company to as low as 2,5%;
- Cyprus companies can have one shareholder who may also be the manager or an employee of the company (excess for public companies for which some restrictions apply);
- No minimum requirement for number of directors who may be either individuals or legal persons (excess for public companies for which some restrictions apply);
- No minimum capital is required to establish a private company in Cyprus;
- Normal trading activity does not incur stamp duty;
- Bank accounts offered in multiple currencies to suit you; and
- High-quality standard of professional services accommodated by the excellent commercial infrastructure, banking and workforce capabilities;
We can provide professional guidance on how to exploit and take advantage of the various aspects of the Cyprus tax regime, as well as, to undertake the set-up of your new Cyprus company and administer all of your corporate affairs.