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Today with the squeezed global economic crisis, businesses try to maintain growth, and savings is one main solution.
Many international business companies use Cyprus as a base for international tax planning. Investors also use Cyprus as a tool in order to take full advantage of global investments after tax profit. The income that occurs from investment deeds through Cyprus, shall gain from the terms of Cyprus tax system and double taxation treaties network (DTT).
Investors and companies are offered numerous advantages in concert with a very low corporation tax (10%) through the Cyprus tax system which is one of the lowest corporate income tax rates in Europe.
Cyprus has achieved to become a trustworthy and most encouraging International Financial Centre during the past decades since Cyprus is broadly chosen by businessmen all over the world in order to maximize their corporate profits through an efficient exploitation of Cyprus tax system.
All dividends that are received by a Cyprus resident Company by another Cyprus resident Company are not liable to taxation.
Also dividends received by a Cyprus resident company are usually exempt from taxation in Cyprus if they are received from a foreign body.
The exemption does not apply where the foreign body gets more than 50% of its income from investment activities and when the foreign tax burden of the company paying the dividend is considerably lower than that of the Cyprus resident company.
The Cyprus Tax Authorities have acknowledged that foreign tax burden cover both the tax paid by the company paying the dividend and also the tax paid by lower level subsidiaries. In fact, dividends received from subsidiaries or associates are rarely taxed.
Where dividends do not meet the requirements for exemption from taxation then they are liable to defence tax at the rate of 20%. On the other hand, the taxes that are pending at source are allowed as a deduction from this tax even if it is made from a country that does not have a double tax treaty with Cyprus.
Interest earned as detailed below is considered to be closely related to that business and is also subject to corporation tax.
A credit is provided against the defence tax payable for any taxes withheld at source, irrespective of whether a double treaty exists or not.