Cyprus Company as Platform for Global Markets

Date of the article: 1 January 2014

Overview

With a flat tax rate of 12.5% (although the effective rate may in fact be less) and its continuously expanding network of double taxation treaties, Cyprus is ensuring that it will remain in its position as one of the most important domiciles for international companies for a long time to come.

Cyprus has managed to establish itself as a reputable, well developed and trust-worthy business centre complemented by an advanced legal and accounting system, highly skilled and multilingual workforce, excellent telecommunication systems and convenient year round flight connections.

Cyprus’ company register is continuously growing and now hosts more than 270,000 companies with shareholders from around the world. Cyprus, despite its small size, with its stable and secure operating environment and the fact that has the lowest corporate tax rate in Europe (for holding companies 0%), has managed to achieve and establish itself as one of the most competitive locations for corporate and tax planners and a Cyprus registered company is one of the most important vehicles for investing into growing markets across the world.

Below are some of the most important benefits of using Cyprus Company as a platform to global markets:

Reputational Advantage

As a European Union member state since 1 May 2004 and member of Eurozone since 2008, Cyprus’ tax system is fully harmonized with EU law and so are all the country’s laws and market policies. In addition, Cyprus has adopted the EU’s ‘Code of Conduct’ on ‘Harmful Tax Practices’ and has been included in the list of countries which meet international standards, the so-called ‘white list’ set out by the organization for Economic Cooperation and Development (OECD).

Cyprus as a fully harmonized member of European Union enjoys reputational advantage compared to many other international business centers; more specifically Cyprus companies are able to globally enjoy the status and the prestige as a European low tax (but a non-tax haven) jurisdiction.

Lowest EU Corporate Tax Rate

Cyprus’ companies enjoy corporate tax rate of 12.5% flat on trading profits which is the lowest in the European Union and in applying the available exceptions the effective tax can be even lower. Cyprus’ tax system is even more favorable for holding and finance companies which in many cases results in a zero tax liability.

In fact, holding and finance companies in Cyprus enjoy many benefits under Cypriot law. These include favorable withholding tax provisions through the network of Cypriot double taxation treaties, advantageous repatriation provisions and no withholding tax on the payment of dividends to non-tax residents’. Also dividend income and profits from disposal of shares and other investments are exempt from tax.

In view of the fact that under the Cyprus tax system dividend income and profits from overseas permanent establishments are exempt from tax in combination with the fact that there is no withholding tax on the payment of dividends, a Cyprus holding company is considered the ideal holding company vehicle all over the world.

Network of Double Taxation Treaties

With 47 Double Taxation Treaties (DTT’s) in place between the major Western ‘high-tax’ countries and a number of Central and Eastern European states, Cyprus is considered an ideal location for establishing holding and investment companies.

The strong network of DTT’s enables investors to invest into all the major markets through Cyprus and enjoy all the benefits that the Cyprus Government has achieved for Cyprus companies after many years of hard work and negotiations.

In combination with the island’s strong legal framework with regard to the formation and operation of Cyprus companies, these tax treaties effectively give Cyprus an overwhelming advantage as an international business centre.

One of the most important treaties entered into by Cyprus is the Cyprus-Russia DTT.

 

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