Cyprus: Come to Cyprus to do business

Doing business in a tax efficient environment - Corporation tax 

Trading profits of a Cyprus tax resident company are taxed at the rate of twelve and a half percent (12.5%), one of the lowest corporate income tax rates in Europe. Income from trading securities (shares, bonds etc), whether on disposal or due to fair value gains is tax free. In addition, dividend income is exempted from the corporation tax provisions. There is also an eighty percent (80%) discount on tax for income derived from intangible assets registered under a Cyprus company (such as patents, trademarks). 

Additional incentive 

A deemed interest expense will be allowed in the tax computation of a Cyprus company on fresh funds introduced into the company on or after 1 January 2015 in the form of new capital. Hence, the taxable profits of any Cyprus company will be reduced by this notional interest expense. 

The deemed interest would be deductible according to the same rules as actual interest expense, i.e. the degree of tax deductibility would depend on the way the fresh equity/capital will be utilized. 

This incentive provides a significant tax incentive for existing companies to re-capitalize their operations. Furthermore, it aims to attract new companies to set up their operations in Cyprus and benefit from this tax incentive. 

Moving with your business to Cyprus – Withholding taxes 

Cyprus has introduced significant incentives to attract physical relocation of businesses and their owners in Cyprus. Until recently, withholding tax was payable on dividends, interest and rental income earned by all persons considered to be tax residents of Cyprus. Effective from July 2015 tax residents of Cyprus considered to be ‘non-domiciled’ in Cyprus will be exempt from payment of withholding tax on dividends, interest and rental income. In essence, a non-Cypriot moving to Cyprus to set up or continue business will only have to consider the 12.5% corporation tax since there will be no additional tax upon dividend distributions. 

The definition of ‘domiciled’ follows the Cyprus Wills and Succession Law provisions. The domicile of origin prevails the domicile of choice, which is acquired when an individual chooses to a place of permanent or indefinite residence to be somewhere other than the domicile of origin.

Moving your key personnel to Cyprus – Personal Income Tax 

Personal Income Tax Incentive A 

20% of income earned from employment in Cyprus by an individual who was not tax resident of Cyprus in the previous year is exempt for a period of 5 years, subject to maximum of €8.550 per annum. The exemption is allowed until the year 2020. 

Personal Income Tax Incentive B 

Any physical person who was not a Cyprus tax resident and comes to work in Cyprus is entitled to a 50% exemption on income from employment in Cyprus exceeding €100.000 per annum, for a period of 10 years. 

Note: The exemptions above (20% and 50%) cannot be claimed jointly. 

Thinking on investing in immovable property? 

Capital Gains Tax 

Whether you are considering an investment in immovable property or to acquire premises for relocating your business to Cyprus now is the time to do it. Property prices are at their lowest and gains arising from the disposal of immovable property acquired till 31 December 2016 will be exempt from capital gains tax. 

Permanent Residency Permit (P.R.P.) and EU Passport 

While the schemes for PRP and Cyprus Passport have already been in place http://www.reandacyprus.com/ eu-citizenship-by-investing it is worth noting that they can be combined with a number of the new incentives, such as the Capital Gains tax incentive mentioned above. Hence, a foreign investor could take advantage of reduced taxes and at the same time exploit the immigration schemes of the Cyprus government.

‍