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Cyprus fiscal advantages
Under the current tax legislation, Cyprus has the lowest tax regime in Europe and its role as an international financial centre is greatly enhanced. There is no longer a differentiation in the tax treatment of local companies and International Business Companies as a single corporation tax rate is applicable for all companies. Cyprus clearly stands as a prestigious tax - incentive EU country and is be free from suspicions usually associated with "tax-havens" which have zero tax.
The principal tax and other fiscal incentives may be outlined as follows:
- An International Business Company (IBC) will pay a tax of 10% on its net profits if it is a Cyprus resident. An IBC is resident if its management and control is in Cyprus. Management and control is usually determined by the place of residence of the majority of the directors and the place where board meetings take place. Full advantage of the Cyprus double-tax treaty network can be obtained by resident IBCs
- An IBC will pay zero tax if it is not considered to be resident in Cyprus. This will be the case when its management and control is outside Cyprus.
- A non-resident IBC will not be able to obtain a Cyprus Tax residence certificate and therefore cannot utilize the double-tax treaty network.
- There is no withholding tax on payment of dividends, interest and royalties by an IBC to non-resident individuals or companies.
- Dividend income received in Cyprus by an IBC is wholly exempt from tax in Cyprus (under certain conditions).
- Profits earned from a permanent establishment abroad are fully exempt from corporation tax.
- Profits from the disposal of shares are not taxable for all Cyprus tax residents.
- 50% of interest received is exempted unless the interest arises in the ordinary course of business (e.g. interest on overdue debtor balances).
- There is no restriction in the carry-forward of tax losses. They can be carried forward indefinitely to be set-off against future profits.
- Group relief is available whereby losses from a company can be set off against taxable profits of other companies in the same group.
- Reorganizations, amalgamations, mergers and acquisitions of companies can be effected without any tax implications.
- Exemption from capital gains tax (except on sale of immoveable property situated in Cyprus).
- No exchange control restrictions - an IBC can open a bank account in any currency in Cyprus and abroad.
- Cyprus has 32 Double Tax Treaty agreements which apply to 40 countries and which can be exploited to minimize tax.
- Confidentiality and anonymity of beneficial owners is safeguarded (true identity is only disclosed to local banks, if a local account is opened and information is not disclosed to any third party or to other countries, except in the case of properly authorized criminal investigation (drugs, terrorism, e.t.c.).