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Cyprus is a highly compliant and attractive jurisdiction to foreign investors (both EU and non-EU Nationals) due to its tax system.
♦ General Advantages of Cyprus Tax System
• Taxation is based on residency status.
• 12,5% corporate tax on corporate trading profits.
• Profits from disposals of corporate “titles” are unconditionally exempt from corporate income tax. Whereas “titles” are defined as shares, bonds, debentures, founders’ shares, and other titles of companies or other legal persons incorporated in Cyprus or abroad and options thereon.
• Corporate tax on sale of securities; 100% exemption.
• No withholding tax on dividends, interests, and royalties paid to non-residents of Cyprus.
• Dividend income is exempt (subject to relaxed conditions).
• Intellectual Property (IP) Regime in line with OECD’s ‘’nexus’’ principle whereby for an intangible asset to qualify for the benefits of the regime, there needs to be a direct link between the qualifying income and the own qualifying expenses contributing to that income, most competitive rate in the EU, combined with reasonable wage burden for qualified personnel.
• Notional interest allowance (NID) for investments worldwide though Cyprus companies, for broad deduction against equity, with most competitive rates in the EU.
• Applicability of all EU directives.
• Foreign exchange differences are tax neutral for corporate income tax purposes (i.e. forex gains are not taxable and forex losses are not deductible); however forex differences arising from trading in foreign currencies and related derivatives are subject to corporate tax.
• Group relief availability (for 75% holdings); Companies of the same group to transfer tax losses from loss-making group companies to profitable group companies, extended to business units abroad, under conditions.
• Tax exempt re-organizations; reorganization relief is available to allow certain transactions to take place in a broadly tax-neutral manner, with exemption from corporate income tax and stamp duty.
• Advanced tax ruling practice offers safety and predictability for investments.
• Attractive and constantly expanding Double Tax Treaty network.
• Royalties earned on rights used within Cyprus are subject to withholding tax of 10% (5% in the case of cinematograph films); however these may be reduced or eliminated by Double Taxation Treaties entered into by Cyprus or by the EU Interest and Royalty Directive as transposed into the Cyprus tax legislation.
• Capital gains on Cyprus-situated immovable property (and on non-quoted shares directly or indirectly holding such Cyprus-situated immovable property) are taxed separately in Cyprus.
♦ The Cyprus Non-Domiciled Tax status – Tax Advantages – Minimizing Tax Exposure
The Cyprus Non-Domiciled tax regime was introduced in July 2015. The Cyprus Non-Domiciled Tax Status is a way for foreigners to minimize their tax exposure as it provides a number of tax advantages, mainly the exemption from investment tax in Cyprus (i.e. the Special Defence Contribution) on income from dividends, interests and rents.
♦When the Non-Domiciled rules for individuals apply?
When an individual who is a tax resident of Cyprus under the provisions of the Income Tax Law, is non-domiciled in the Republic of Cyprus.
An individual will be deemed to be domiciled in Cyprus for the purposes of the SDC Law, if (s)he has a domicile of origin in Cyprus as per the Wills and Succession Law (with certain exceptions) or if (s)he has been a tax resident in Cyprus for at least 17 out of the 20 tax years immediately prior to the tax year of assessment. Anti-avoidance provisions apply.
♦ When the Cyprus Non-Domiciled Tax status is granted?
When a person has not been a tax resident of Cyprus for the last twenty-one years, the Cyprus Non-Domiciled Tax Status is granted. Individuals may apply for exemption from the Deduction of Special Defence Contribution on Interest by submitting to the relevant Bank the declaration for exemption which is provided in the official website of the Tax Department of the Ministry of Finance (specific form). The said status must be confirmed by the Cyprus Tax Authorities every year.
♦ Our firm’s assistance
• All immigration-related matters (correspondence with relevant authorities) – Assisting with obtaining permanent and temporary residency permits and work permits (the pink slip is granted to non-EU citizens who desire to temporarily reside in the Republic of Cyprus for more than three months, while the yellow sleep is granted to EU citizens who desire to settle and work in the Republic of Cyprus).
• Obtaining the Cyprus Tax Residency with Non-Dom status.
• Formation and administration of a Cyprus company (providing a complete package of administration and/or nominee services for a Cyprus company such as director, secretary, nominee shareholder and registered address).
• Establishing a Cyprus International Trust (preparation of the required documents and registration of the trust with the relevant authorities, provision of trusteeship services).
• Assisting with the redomiciliation of companies in Cyprus (handling submissions and fillings of all relevant documents with the Registrar of Companies in Cyprus in order to obtain the temporary and continuance certificate from the Registrar of Companies).
• Assisting with the opening of bank accounts, by directly contacting the proposed bank institution and completing all the relevant documentation including but not limited to the bank application forms.
• Property and real estate matters.
• Providing accounting and bookkeeping services.
• Providing assistance to companies in relation to their tax obligations.
For further information on this topic please contact AMG Mylonas & Associates, LLC by telephone +357 25 101080 or by e-mail [email protected]
The information provided by Mylonas Law is for general informational purposes only. It does not constitute or should not be read as a legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.
We look forward to meeting you in person when in Cyprus next!