In the last decade the role of Cyprus in
international tax planning has increased dramatically for a number of reasons.
Unlike many offshore centers Cyprus has made an effort to attract legitimate
companies to her shores and to open up bona fide offices rather than the
ubiquitous brass plate company which no longer stands up to fierce scrutiny
imposed by many of the world’s tax authorities. It is very important to
know that Cyprus in not considered a tax haven. An offshore company in Cyprus
benefits from a favorable tax rate of 4.25 per cent. In addition the double
tax treaty network that Cyprus has build up over the years has also been a
major factor in this effort. In particular its treaties with eastern European
end former Soviet union states which are second to none make it a very
attractive place for investing into these now liberated economies.
 Cyprus
has concluded double tax treaties with the following countries:
Armenia (CIS) Austria, Belarus, Belgium, Bulgaria, Canada,
China, Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India,
Ireland, Italy, Kuwait, Kyrgyzstan (CIS), Malta, Mauritius, Moldova (CIS),
Norway, Poland, Romania, Russia, Slovak Republic, Singapore, South Africa,
Sweden, Syria, Tajikistan (CIS), Turkmenistan (CIS), Thailand, United Kingdom,
U.S.A, Uzbekistan (CIS), Yugoslavia
Cyprus offers a variety of possibilities and opportunities to the international
businessman. Theses include the formation of offshore entities, the
registration of ships under the Cyprus flag, the creation of offshore banking
units, the carrying out of international commercial arbitration and the
establishment of offshore trusts.
Offshore entities now number more than 60,000. Offshore banks number 30. Only
banks which have an international reputation and have a track record of growth
and profitability are allowed to set up on the island. The offshore financial
services sector has also continued to expand as well as the establishment of
mutual funds.
 Some unique
benefits that Cyprus offers to businessmen are:
Free movements of profits derived from operation on non resident investments
No withholding tax is payable on dividends, interest and royalty payments
Full capital gains tax exemption is given on capital gains.
Salaries of foreign employees of offshore entities employed outside Cyprus are
completely tax exempt.
 Numerous
Double Taxation Treaties
Low Tax Rate
Location
Cyprus is an island located at the eastern end of the Mediterranean. It has a
population of 600,000, over three-quarters of which are Greek Cypriots, the
remainder being Turkish Cypriots.
Government
Cyprus gained its independence in 1960 and has a government based on Western
political systems. Its legal system very closely follows that of Britain with
many of the Cypriot lawyers being trained in Britain. Although Greek and
Turkish are the official languages, English is widely spoken, especially where
business is concerned. The Cypriot Pound is the official currency.
Types of Company
The main type of company of interest to international tax planers is that whose
shares are owned by foreigners and which do not trade in Cyprus.
Taxation /Accounts
Provided that shares are owned by foreigners and they do not trade in Cyprus companies are taxed at 10% of net profits.
Dividends paid to owners after profits are completely tax free. Accounts must be audited and filed yearly.
Advantages
Excellent
double taxation treaties
Excellent communications
Good banking facilities
No exchange controls
No disclosure necessary
Low annual tax rate of 10%
Particularly good for holding companies and import/export companies
Personal tax residency possible
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