Benefits of a Cyprus Company

The Cypriot tax legislation is known to be one of the most friendly and regulated tax regimes in the world and the lowest within the European Union. Offering a wide range of tax incentives, Cyprus’ corporate tax is set at a flat rate of 12.5% making it a top tax jurisdiction for offshore companies to integrate into their tax structures.

Double Tax Treaties

Cyprus is a party to nearly 50 double tax treaties with other countries for the Avoidance of Double Taxation. In regards to earnings generated in any of the countries with which Cyprus is under a double tax treaty, the taxpayer is only obligated to pay tax in the country where the company resides. In other words, by establishing substance in Cyprus, taxation will be exempt in the country in which the accumulation of income arises.

EU Parent Subsidiary, Interest & Royalties and EU Merger Directives

The EU Parent Subsidiary and the Interest & Royalties Directives eradicate withholding taxes on both incoming and outgoing payments of dividends, interest and royalties* between its EU Group Companies. Even further, the EU Merger Directive also caters to efficient tax planning by eliminating the tax effects of EU Group reorganisation.

*except from royalties earned on rights used within Cyprus.

Other Notable Tax Incentives

Tax Exemption of Titles

Profit from disposal of qualifying “titles” are tax exempt. “Titles” are defined as shares, bonds, debentures, founders’ securities and other securities of legal entities incorporated in Cyprus or abroad, including options thereon.

Lowest IP Box Regime in Europe

Cyprus’ new IP box scheme allows for an 80% deduction on taxation on gross incomes generated by royalties of intangible assets. The tax exemption comes into effect after the deduction of business and operating expenses. After the 80% tax deduction, the Cyprus corporate income tax rate of 12.5% is only applicable to 20% of the profits, which, in effect, lowers the income tax rate to 2.5%, making it the lowest tax rate IP box regime in Europe.

Tax Loss Solutions

i. Tax losses can be carried forward for the next five years against future taxable profits.
ii. Group relief provisions exist to assist in the case of tax losses. Companies eligible for group relief must be 75% of direct or indirect equity relationship between Cyprus tax resident companies.